NIC Bank released their 3Q18 results this morning before market open. EPS came in at KES 4.56 (-13% y/y) against our estimate of KES 4.24, 7% above our forecasts. Noteworthy, loan loss provisions and effective tax were lower than expected.
- EPS: -13% y/y to KES 4.56; adjusting for new bonus shares in 2018 y/y change is -3.4% from adjusted 3Q17 EPS of KES 4.72.
- Net interest income: -5% y/y to KES 7.6bn, lower than expectations.
- Non-funded income: +7% y/y to KES 3.4bn, in line with expectations.
- Operating costs: +8% y/y to KES 5.0bn, in line with expectations.
- Loan loss provision: -25% y/y to KES 1.6bn, significantly lower than expectations.
- PBT: -2% y/y to KES 4.3bn, in line with expectations.
- PAT: -3% y/y to KES 3.2bn.
- Annualized RoE: -80bps y/y to 15.0%.
- Annualized RoA: -30bps y/y to 2.4%.
- Customer Deposits: +10% y/y to KES 145bn.
- Loan book: -3% y/y to KES 115bn.
- GNPLs: +12% y/y (+1% ytd) to KES 16.4bn, NPL ratio of c. 12.5%.
What Stood Out For Us
- In 2018, on a q/q basis, the bank has continued to cut down on lending. Earlier, management stated that they would focus more on loan recoveries. Despite declining cost of deposits, interest expenses grew 22% y/y, reflecting the expensive deposits they picked up in 2017.
Impact on Investment Thesis
- We expect to slightly reduce our deposit growth estimates and NIMs given the decline in loan yields.
- Incorporating the changes, our FV could slightly adjust downwards from the current KES 28.34.
Credit: Kestrel Research