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Thursday, April 02, 2009

I&M Bank has a very profitable 2008 - but 2009?

This is for MainaT (http://mjengakenya.blogspot.com)

For those who wonder about I&M Bank & the NSE... well, it turns out that City Trust Ltd (AIMS on the NSE) owns 8.93% of I&M Bank. Talk of a diamond in the rough.

Anyway, a lot of this has been filched (erm, borrowed) from the I&M Bank Press Release on 31st March 2009.

On a personal note... I think the bank is a great bank for those who want real customer service. Not the cheapest (but reasonable vis-a-vis other Kenyan banks) bank but great staff who work with their customers. I doubt they will grow to be a 'big bank' but that does not seem to be their aim. Niche banking.

"Following the acquisition of 50% of Bank One Ltd., Mauritius, I&M Bank Consolidated Group Accounts have been published for the first time, reflecting group asset size of Kshs 42.8 billion which depicts a 46% increase in the Group’s assets.

The Bank has increased its customer advances portfolio by Kshs 6.67 billion reflecting a growth of 35% over the year. On customer deposits, the Bank’s portfolio has grown by Kshs 4.73 billion (20% growth).

Profit Before Taxes are at Kshs 1.62 billion, which surpasses its 2007 bottom-line performance by 25%.

Significantly contributing to this profitability is the efficiency ratio (operating expenses /total income) of the Bank which, at 44.4%, is impressive by international standards. The Bank won the ‘Most Efficient Bank’ award in the Banking Survey Awards 2008 for the second year running.

During the year 2008, I&M Bank successfully issued Kshs 600 million floating rate notes, thus bolstering the Tier II capital of the Bank. The Bank also received a Kshs 537 million long term foreign currency line of credit from PROPARCO, the French Development Financial Institution. PROPARCO is a shareholder of the Bank.

I&M Bank continued its strategy of technology driven product innovation with the introduction of two new Visa pre-paid card products and expansion of its ATM network. It increased its footprint in Kenya by opening two new branches in Nairobi’s Wilson Airport and Ongata Rongai. During the year, the Bank also upgraded its core banking software to the state-of-art Finacle system.

I&M Bank has also recently expanded its Board of Directors with the induction of three new eminent independent directors, Mr Evans Kidero, Mr. Mugo Kibati and Mr. M. Soundrarajan."


Comments/Opinions

1) All 3 new directors are/were MDs/CEOs of publicly listed firms. Kidero - current MD of Mumias Sugar. Kibati - former CEO of EA Cables. Soundarajan - former MD of CFC Bank
2) So is I&M Bank thinking of a listing?
3) PROPARCO has given a huge loan to Mumias for the co-generation plant. Could Kidero be a representative of PROPARCO?
4) They took a huge NPL charge in 4Q 2008 (vs 3Q 2008 or 4Q 2007). Conservative or a ticking bomb?
(My understanding of NPLs is that the loans are downgraded i.e. not 'bad loans' but potentially bad. With time the loans can be restructured or recovered through sales of assets/collateral).
5) Dividend payout of 398mn (36% - payout ratio). Wow, quite an increase on FY 2007's dividend but doesn't make sense coz they raised Kes 600mn about 5 months ago in a Rights Issue. Why go through all the hassle of raising Kes 600mn then pay out 400mn a few months later?

11 comments:

MainaT said...

CT. Tx. I got hold of the one pager annual report. The banks is performing ok. The cost income ratio is awesome, but then I think it has invested in the IT.
Issues:
What is its strategy? Who are its customers? We have 45 banks and too many are doing the same as the rest. How is it different from DTB as an example apart from the Mauritius connection?
Its capital is thin especially when you look at the NPLs. Note that if you have NPLs going up by that much especially if the economy is worsening, some will almost certainly go bad and have to be written off. Most banks consider any loans where the customer has defaulted 2 or more consecutive payments as being suspect. The LLP is not covering a sufficient amount of this. Imagine if it took a ksh0.5bn hit from loan losses, that would pretty much below the minimum 8%.
The DPS policy doesn't make sense unless that is how its paying Proparco.
My preference would be for DTB to buy I&M or for I&M to list then we can see some of these shares.

coldtusker said...

I will say... they are focused on their core market... the mid-sized businesses. Not quite into SMEs or very large corporates e.g. EABL, etc.

Customers: 80% of their business is corporate (according to a very senior manager. The rest are mainly 'related' to the corporate customers e.g. high-level employees.

Same customer base as DTB & NIC for the most part.

DTB to buy I&M seems remote at this point. I think DTB will merge with Habib Kenya in the next 3-5 years.

coldtusker said...

BTW... on DTB

AKFED bought 51% of Habib Bank Pakistan (parent of Habib Bank Kenya). Thus HBL(K) is a sister firm of DTBK. HBL owns shares in DTBK as well.

I think HBL & DTBK will merge in the next 3-5 years.

And the subsidiaries in Uganda & Tanzania will also be 100% owned by DTBK (change of name coming???) in 3-5 years.

coldtusker said...

I&M Bank's dividend should be a nice paycheck for City Trust. The payout of 35% was decent. Also helps CT pay off any loans it has as well as a decent dividend.

MainaT said...

I'd only be interested if I&M if I could buy its shares directly pre any NSE IPO. Unlikely to happen so I guess thats that.

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coldtusker said...

MainaT: I am NOT aware of I&M Bank shares being traded OTC. I tried to ask but it is closely held. Oh well, the next best way... CT

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