KCB Group Plc is set to release 3Q18 financial results on Wednesday, 14th November
As at 1H18, Group PAT grew 18.1 percent on a year-to-year basis mainly due to 58.9 percent decline in loan loss provision charges.
For 3Q18, market analysts expect an EPS of 5.30 shillings (7.9 percent growth) mainly from stable net interest margin (NIM) of 8.8 percent similar to 1H18.
Loan book is expected to grow by circa 2 percent q/q with the bank taking a cautious lending approach this year (loan book grew 0.7 percent q/q as at 1H18).
Given the private sector, manufacturing and real estate sectors are yet to fully recover, analysts expect NPL ratio to adjust upwards to 8.7 percent from 8.4 percent as at 1H18, with loan loss provisions expected to increase by 37.5 percent q/q. This is expected to depress the 18.1 percent y/y PAT growth in 1H18 to 7.9 percent in 3Q18.
Current market price (37.75 shillings) implies a P/B 1.3x (below a 2-year historical average of 1.4x) and a dividend yield of 7.9 percent.
Against the current market prices, we maintain our BUY recommendation on KCB with a target price of 55.99 shillings.
Markets on Monday
Activity on Monday was relatively quiet with turnover closing at 770 million shillings. Trading was mostly on the short to medium term papers.
The market is expected to be quite slow this week with most people concentrating on the IFB 1/2018/20 auction which closes on Tuesday.
Market analysts from Genghis Capital expect the cut-off to be at the range of between 12.1 percent and 12.2 percent.
Due to excess liquidity in the market, the regulator mopped 9 billion shillings in repos at an average of 2.987 percent as the KES dropped further to average at 102.45 shillings.