Mid Tier Banks: Q1 Performance Review
1-Jul-11 | |||
Company | |||
Market Capitalization | Shs'000 | ||
Diamond Trust Bank | 19,401,416 | ||
NIC Bank | 17,276,768 | ||
CFC Stanbic Bank | 13,957,895 | ||
National Bank | 9,520,000 | ||
Q1 2010 | Q1 2011 | Change | |
Operating Income | Shs'000 | Shs'000 | |
Diamond Trust Bank | 1,468,001 | 2,032,158 | 38% |
NIC Bank | 1,115,301 | 1,430,642 | 28% |
CFC Stanbic Bank | 2,124,087 | 2,125,355 | 0% |
National Bank | 1,478,313 | 1,870,549 | 27% |
Operating Expenses | Shs'000 | Shs'000 | |
Diamond Trust Bank | 930,095 | 1,152,652 | 24% |
NIC Bank | 586,130 | 627,304 | 7% |
CFC Stanbic Bank | 1,260,696 | 1,619,058 | 28% |
National Bank | 992,144 | 1,403,386 | 41% |
Profit Before Tax | Shs'000 | Shs'000 | |
Diamond Trust Bank | 537,906 | 879,506 | 64% |
NIC Bank | 529,171 | 803,338 | 52% |
CFC Stanbic Bank | 863,391 | 506,297 | -41% |
National Bank | 486,169 | 467,163 | -4% |
Taxation | Shs'000 | Shs'000 | |
Diamond Trust Bank | 182,281 | 298,818 | 64% |
NIC Bank | 171,491 | 253,224 | 48% |
CFC Stanbic Bank | 299,723 | 158,958 | -47% |
National Bank | 155,574 | 235,687 | 51% |
Effective Tax Rate | |||
Diamond Trust Bank | 34% | 34% | 0% |
NIC Bank | 32% | 32% | -3% |
CFC Stanbic Bank | 35% | 31% | -10% |
National Bank | 32% | 50% | 58% |
Profit After Tax | Shs'000 | Shs'000 | |
Diamond Trust Bank | 355,625 | 580,688 | 63% |
NIC Bank | 357,680 | 550,114 | 54% |
CFC Stanbic Bank | 563,668 | 347,339 | -38% |
National Bank | 330,595 | 231,476 | -30% |
Cost to Income Ratio | |||
Diamond Trust Bank | 63.36% | 56.72% | -10% |
NIC Bank | 52.55% | 43.85% | -17% |
CFC Stanbic Bank | 59.35% | 76.18% | 28% |
National Bank | 67.11% | 75.03% | 12% |
Total Assets | Shs'000 | Shs'000 | |
Diamond Trust Bank | 72,097,527 | 88,492,884 | 23% |
NIC Bank | 52,377,518 | 63,775,492 | 22% |
CFC Stanbic Bank | 99,815,014 | 112,039,767 | 12% |
National Bank | 56,366,477 | 67,817,019 | 20% |
Total Equity | Shs'000 | Shs'000 | |
Diamond Trust Bank | 8,399,300 | 10,910,803 | 30% |
NIC Bank | 7,155,191 | 8,919,167 | 25% |
CFC Stanbic Bank | 9,109,389 | 10,112,409 | 11% |
National Bank | 8,238,285 | 10,161,084 | 23% |
Return on Equity (Annualized) | |||
Diamond Trust Bank | 16.94% | 21.29% | 26% |
NIC Bank | 20.00% | 24.67% | 23% |
CFC Stanbic Bank | 24.75% | 13.74% | -44% |
National Bank | 16.05% | 9.11% | -43% |
Price to Earnings Ratio (Q1 2011 Annualized) | |||
Diamond Trust Bank | 8.35 | ||
NIC Bank | 7.85 | ||
CFC Stanbic Bank | 10.05 | ||
National Bank | 10.28 | ||
Price to book value | |||
Diamond Trust Bank | 1.78 | ||
NIC Bank | 1.94 | ||
CFC Stanbic Bank | 1.38 | ||
National Bank | 0.94 | ||
Analytical Summary
Performance
Diamond Trust Bank and NIC Bank had a very strong first quarter in 2011. CFC Stanbic and National Bank of Kenya posted weak results over the same period. Diamond Trust Bank was the best performer, growing income much faster than expenses.
NIC Bank was the most effective in containing costs. NIC Bank's operating costs increased marginally; the cost income ratio fell to 43.85%, the lowest of the four by a wide margin.
NIC Bank was the most effective in containing costs. NIC Bank's operating costs increased marginally; the cost income ratio fell to 43.85%, the lowest of the four by a wide margin.
CFC Stanbic Bank costs increased while income stagnated. The higher costs have been attributed to a steep increase the number of expatriate staff. Income growth has been flat even after an increase in total assets. Income on commissions and gains on bond trading fell off compared to q1 2010.
Valuation
All the banks are cheap with PE ratios of 10 and below. NIC Bank is the cheapest on a pure PE basis, but Diamond Trust Bank has a greater growth momentum and is likely to offer better value in the medium term.
CFC Stanbic is potentially a great buy for long term value investors. CFC Stanbic Bank has a much lower Price to Book value compared to NIC and Diamond Trust. CFC Bank is still ahead of the pack by revenues and total assets. A fall in expenses (on redeployment of the expatriate staff) and a recovery in non-interest income will catapult the bank to the top in terms of profits.
While National Bank is cheap, there is uncertainty on the conversation rate of preference shares once a decision is made by the government to exit the bank. An unfavorable conversion rate will adversely affect the existing ordinary shareholders.
