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Thursday, November 09, 2006

Banks' profits rise 3Q 2006 vs 3Q 2005

So far most banks are reporting greatly increased profits over the same period in 2005. This could be attributed to larger deposits that Banks have been able to garner.

Barclays (+44%) profit announcement, and subsequent share bonus & split, has boosted the share price to over 600/- on 9 Nov 2006.

KCB & SCBK profits & share prices are at record levels even though they did not announce a bonus or split.

Even laggards like NBK have shown a modest but commendable growth in profitability.

It seems the banks have a better handle on bad debts especially KCB & NBK which suffered from poor loan quality due to political lending.

Bankelele normally does a summary of Banks' profits. Since all banks are required by law to publish quarterly results within 60 days, we can expect other banks to report within the next 3 weeks.

I expect most private & listed banks to continue reporting good profits through 3Q 2006. The elections are in 2007 & it will be an interesting time for banks to competitively grow their asset base.

Competition is heating up for banks as more banks (notably Barclays) targets the "underbanked" population. This puts the larger banks (BBK & KCB) in direct competition with Equity Bank & Family Finance.

Furthmore, there are numerous smaller credit firms that will bear the brunt of the big boys as competition intensifies.

I think the increased competition will benefit Kenyans in the next few years as there will be:
  • Increased credit availability
  • More locations
  • Better deposit rates
  • Credit availability to a larger part of the population

5 comments:

pesa tu said...

Just see how competition has turned personal loans into commodities like toothpaste.
Nowadays, loans are 'hawked'

Kudrinketh said...

What do y'all think of the issue of non-performing loans at these banks.I've heard repeated reports that net noon-performing loans exposure is huge,partly because of the runaway political loans of the 90s(govt owned banks) and also because realisable value of of loan securities is miniscule.Being a banker,i know how banks can cook books, even here in states.i hope i'm wrong.any thoughts?

coldtusker said...

pesa: Can't leave comments on your blog. Check your settings.

kudri: I think BBK & SCBK have probably provided for their bad loans. They have their "parent" bank to report to so a lie will be caught out.

KCB has provided for the bad loans. Since they have become aggressive lenders, it is prudent to monitor the "new" loans for defaults.

Defaults are a lagging indicator but an economic downturn will start showing an increase in defaults esp in the unsecured & mortgage loans.

NBK is a whole different story. Technically insolvent!

The "smaller" banks e.g. Equity will have "hidden" bad debts i.e. the gurantors will have to come up with the funds to cover bad loans.

If there is a LARGER loan, then what happens?

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