NBK out of the Woods at Last!

No longer at the edge

The results released yersterday by the National Bank of Kenya board/management show that the company has reported a 35% increase in pre-tax profit to Sh617 million for the half year ended June 30, a proof that the repayment of a Sh2o billion debt by the Government is bearing fruits and has helped to pull the company from the edge.

Bonds issued

The debt repayment by the government was effected after it issued bonds worth Sh20 billion as a repayment of Government guaranteed debts advanced by the bank to state corporations. The government has further promised to pay the remaining Sh1 billion by March next year thus clearing its bad debt portfolio with the bank and hopefully enabling the company to significantly reduce its bad debts provision which had significantly reduced its profitability margins over the years.
It was evident that the bank’s investments in government securities shot up by a whooping 743 % from Sh2.8 billion to Sh23.6 billion (The 20B increase in the balance sheet) reflects the loans that were converted into government bonds.

National Bank of Kenya has reported an after tax profit of Ksh.432million compared to Ksh.320 million during the same period last year. This translates into an increase of 35% over the same period last year.

The company's financials summary is as presented below:
1.Interest income on loans & advances:
This reduced from Ksh.2.3billion to Ksh.1.8billion.

2.Interest expense:

This reduced from Ksh.439million to Ksh.375million due to the general decline in interest rates.
3.Provision for bad & doubtful debts:

This reduced from Ksh.1billion to Ksh.350million marking the end of the bank‘s provisioning for all historical bad debts.

4.Commission income:

This improved from Ksh.600million to Ksh.725million.

5.Total deposits:

Deposits increased from Ksh.27billion to Ksh.33billion.
6.Gross Non Performing Loan’s portfolio:

The level not fully provided for and therefore to be managed in NBK balance sheet is Ksh.5.5billion against which a total provision of Ksh.4.3billion is held leaving a net of Ksh.1.2billion. This is covered three times over by securities hence the zero exposure shown.Fully provided for NPL’s which therefore cannot negatively affect operations are being managed by the bank separately outside its balance sheet.
7. Core capital:

This stands at Ksh.3.6billion against the current statutory requirement Ksh.250million and the extended limit of Ksh.1billion. Following the restructuring of the GOK debt (20billion) and full provision of NPL’s, the asset quality of the bank as measured against the core capital has improved significantly.

New Branches:

New branches to be opened are at Moi’s Bridge and at Egerton University.

ATM network:

This continues to expand after the partnership with PESAPOINT last year that saw NBK customers access an additional 110 ATMs. The bank will soon double the existing ATMs in the branch network.
Asset Financing:
The bank recently introduced asset finance and unsecured business loans to meet the changing needs of our customers. Our existing products are currently being reviewed and repackaged with a view to making them up to date with the market dynamics and the ever evolving customer needs.
Mortgage Financing:

The company is working on a mortgage product which is set to be launched soon. The bank will continue to introduce new products that provide solutions to the financial needs of our customers and Kenyans in general.

From the foregoing, the bank is likely to have come out of the woods at last...

Right Time to buy ICDCI

After looking through all the companies listed at the bourse, i though it would be wise to share with you this verdict on the ICDCI counter listed in the financials and investment sector of the Nairobi Stock Exchange.
Facts:
1. Earnings: ICDCI invest in companies that are expected to shows significant increase in earnings.
2. Strategic: The company in its strategy identifies companies that are strategic and require substantial cpaital outlays.
3. Partnerships: In its investment strategy, the company normally partners with like minded companies with expertise and essential business skills. This enables the company get the requisite board advice as well as avoid 100% risk in its investments portfolio that would have far reaching implications in the long run if deals go sour.
Prudence: The company undertake due diligence and stick to prudential allocation of assets to continuously create and enhance shareholders value.
Passion: The company has a passion for excellence and integrity through proactively managing a well diversified portfolio.

Shareholders % Shareholding
Government of Kenya (ICDC) 24%
Institutions 27%
Public 49%
Associated Companies Portfolio (%) Sector
1. Nairobi Bottlers 27% Beverage
2. Kisii Bottlers 17% Beverage
2. Rift Valley Bottlers 47% Beverage
3. Mount Kenya Bottlers 28% Beverage
4. Kenya Wines Holdings Beverage
5. Kenya National properties Property
6. General Motors 17.8% Industrial-Automotive
7. Eveready Batteries EA Ltd Industrial
8. Mather and Platt (K) Ltd 35% Industrial
9. AON Minet Insurance Brokers Financial and Services
10. UAP Provincial Insurance 24% Financial and Services
11. NAS Airport Services Services
12. Wildlife Works Industria- Textile
13. Uchumi Supermarkets Retail
14. Public Equiy Investments
15. Fixed Income Securities
16. Rift valley railways

Portfolio Percentage
1. Beverage 42%
2. Property 5%
3. Industrial 16%
4. Financial/Services 21%
5. Public Equity
6. Fixed Income Securities 5%
7. Transport

Note:
ICDCI is keen on expanding its private equity portfolio and is interested in companies not listed but have a robust business model in whatever sector they operate so as to provide equity capital and prefer companies looking to expand.
Verdict:
From the foregoing and the price movements at the NSE after the split which shows a 12 months high of Kshs80 and an average price of Kshs30 the price is likely to shoot up come the new calendar year.

Just invest and watch this space for more...