The Late Bird: NSE ends winning streak, CFC Stanbic Q3 2012 Earnings Impress
The NSE20 closed lower in today’s session as turnover declined to KES547mn down 7.7% compared to the previous session, the benchmark measure of the Kenyan bourse lost 9 points to close at 4162 ending a 2 day winning streak in the process, the charts point to 4200 as the next point of resistance. If the 4200 mark is breached the market points to 4500. Safaricom closed at KES4.95 and touched a 2 year high of KES5.05 during today’s session. The Telco moved 13Mn shares in todays session.
Commodities, Forex and Fixed Income Market
In the currency markets the Kenyan Shilling traded in the 85.4 to 85.8 range against the green back while yields on the 6 month T-Bill fell to 9.77% at an oversubscribed offer yesterday, falling yields in the fixed income market could put pressure on the Shilling in the coming session as investors pull out of the fixed income market.
CFC Stanbic (CFCB:KN) reported fantastic Q3 2012 earnings during the session. PAT rose 51.5% y/y to stand at KES2.1bn while the banks net profit accelerated by 19.8% q/q on the back of an expansion in net interest margin (NIM), cost containment and a strong recovery in Non Interest Revenues (NIR)-bond trading and fees income. The bank’s total interest expenses dropped by 22.7% q/q to stand at KES4.2Bn an event which offset a 13.6% q/q drop in total interest income as the lenders loan book shrunk by 4.68% q/q to stand at KES62Bn. On the liabilities side the bank grew its deposits by 2.3% q/q to stand at KES85.7bn.
The banks cost to income ratio improved by 3.19% to 68.3% q/q as the bank contained costs. On asset quality the banks Gross Non Preforming Loans (NPL) to advance ratio edged up by 10.4bps q/q to stand at 2.69%, despite Gross NPL dropping by 0.65% q/q to KES1.67bn mainly due to the drop in the lenders loan book.
I expect FY 2012 earnings to rise by 77.7% y/y to stand at Ksh3.2bn driven by NIM expansion, NIR and efficiency gains since I expect the expense ratio to fall to 61% from 68% in 2011. The bank has also been aggressively rolling out its mobile banking platform an event which should see the bank reduce costs at its loss making personal banking division while the bank expects its South Sudan branch to break even by year end where its planning to add more branches. The stock at the NSE is highly undervalued, I have a Target Price of KES60 from the current price of KES39.25.
Disclaimer: I hold CFC Stanbic Shares.