The Markets: I&M Holdings Limited Records 0.9% Year-to-Year Growth

I&M Holding Limited released 1Q18 financial results reporting 0.9 percent on a year-to-year growth in PAT to 1.7 billion shillings.

In spite of a 43.9 percent on a year-to-year growth in non-interest revenue (NIR) to 1.9 billion shillings, Net Interest Income (NII) declined by 2.7 percent year-to-year to 3.3 billion shillings.

Loan loss provisions rose by 104.6 percent year-to-year to 578 million shillings pushing the operating expenses up by 18.4 percent year-to-year to 2.7 billion shillings.

Non-interest revenue up by 43.9 percent year-to-year. Non-Interest Revenue (NIR) grew by 43.9 percent y/y to 1.9 billion shillings driven by a 45.9 percent y/y growth in fees and commissions to 1.0 billion shillings. The growth was supported by enhanced service delivery on digital channels.

The contribution of the non-funded income to total income improved by 850bps y/y to 36.5 percent in 1Q18. In line with the bank’s strategy to push most of their transactions through the alternate banking channels, we expect NIR contribution to outperform our FY18E of 22.8 percent.

The bank witnessed a balance sheet growth. The bank’s loan book grew by 7.6 percent y/y to 152.7 billion shillings driven by strong credit demand across all the business segments.

In 2H17, the loan book grew at a slower pace (5.9 percent h/h) compared to a growth of 7.3 percent in 1H17. In FY18E.

Customer deposits grew by 3.5 percent y/y to 171.7 billion shillings driven by aggressive marketing.  The bank continues to mobilize expensive deposits hence the NIMs will remain suppressed in FY18E.

However, net interest income down by 2.7 percent. The bank’s net interest income fell by 2.7 percent y/y to 3.3 billion shillings. This was attributed to a 10.9 percent y/y growth in interest expense to 2.3 billion shillings despite a 2.5 percent y/y growth in interest income to 5.6 billion shillings.

The bank’s cost to income (CTI) ratio worsened to 52.8 percent in 1Q18 from 49.2 percent in 1Q17. The deterioration was largely impacted by an 18.6 percent y/y growth in operating expenses to 2.7 billion shillings.

Total operating income was up 10.4 percent y/y to 5.2 billion shillings despite the rate caps. Excluding provisions, CTI improved to 41.6 percent from 43.1 percent in 1Q17.