Barclays Bank released their 3Q18 results this morning before market open. EPS increased by 2.0% y/y to KES 1.00.

Key Highlights

  • PAT – KES 5.4bn, +2.0% y/y.
  • Deposits – KES 220bn, +10.0% y/y – slight slowdown in deposit accumulation between 1H18 and 3Q18 to 6.3% p.a.
  • Net Loans – KES 178bn, +6.7% y/y – again, BBK saw a slight slowdown in net loan growth.
  • Net interest income – KES 16.5bn, + 2.1% y/y – of particular note was the sharp increase in cost of funding – although Barclays’ cost of funding still continues to be low relative to the rest of the market.
  • Non-funded income – KES 7.4bn, +14.0% y/y – notably driven by increase in fees and commissions on loans (+52.2% y/y), FX trading income (+16.6% y/y) and other income (+114% y/y). We think Barclays’ Timiza loans are starting to positively impact NFI growth.
  • NIMs – 7.7%, -70bps y/y as both lower loan yields and higher funding costs ate into margins.
  • NPL ratio – 7.5%, relatively unchanged q/q.
  • PBT – KES 7.7bn, relatively unchanged y/y.

Observations;

  • Operating expenses – we continue to be worried about the operational and rebranding costs of Barclays into ABSA, with other operating expenses up 61.1% y/y.
  •  We highlight that compared to KCB, Equity and Co-op, Barclays continue to grow deposits at a faster rate, albeit at a higher cost of funding. For example, in 3Q18, cost of deposits increased to 3.2% (ann.) – the highest quarterly cost of funding since 4Q15, and this was despite a slowdown in quarterly deposit growth from 1H18 – suggesting increased competition or customer concerns on rebranding.
  •  Should Barclays begin accumulating loan and deposits at a faster pace, we believe it would have to lower its pay-out ratio in order to ensure capital ratios remain within prudential guidelines.

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