@jammo & kularaha.

KCB may not have bought CDSs but the question asked was returns over 18 months...

Now... the issue is that if KCB is hit by a few more Tritons then its profits (& div) gets wiped out. For 'safety' GoK bonds beat KCB hands down.

If you want a guarantee then GoK bonds. If you want growth (divs + capital) over 2-5 years then KCB shares.

I am a little leery about KCB's loan loss provision. I think it is too low. Could they have adjusted the terms to bring NPLs down? Or not used the strictest definitions?

Nevertheless,I am confident that KCB will recover the Triton cash. Why? Coz the GoK will cover the loss whether giving KCB the cash or giving them special bonds (like NBK got).

On the last point I am relying on a blogger who made a great argument at www.coldtusker.blogspot.com

Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB

KCB is solid! Simba anytime it goes below 20!

@Vituvingisana; I totally beg to differ. African banks r conservative (but,I am not too sure EB is conservative enough) and do not engage in speculations such as sub-prime morgages and debt swaps,commodities,currencies and off-shore securities. Moreover,Kenyan home/house values cannot fall to levels witnessed in the West due to massive under-supply - thus they are reliably valuable collatteral.

@MainaT; historically,Kenyan banks deal with liquidity issues by cutting back on loans and investing primarily in govt papers,which they are doing - esp KCB n BBK. Kenyans deal with liquidity issues by saving instead of investing - a plus for banks - coz jobs become unsecure.
KCB regional expansion into regional Economies that can only look up from years of war,will hedge against local decline in profits.

Someone said Triton was brought down by the liquidity issues; no,quite the opposite,they had open credit lines but speculated in oil buying at peak prices and then oil prices crushed = bust!

MainaT is right,a few companies with KCB huge loans going bust can mess the bank in 6 months! That is why I have been wondering just which manufacturers and exporters owe KCB big money.

But this should not worry investors too much as KCB cannot be allowed to collapse. There would definitely be a govt bail-out in case of big trouble - like they did with NBK.

In sum,

1. risk on KCB is minimal.
2. speculation on anything other than land can be high-risk!







When buying shares,ask yourself,would you buy the whole company?

My risk taking was duly rewarded. Sold KCB at a profit of 26% net of commissions in just 3 months as compared to waiting for 10 months to receive the 12.5% guaranteed return the Infrustructure Bond would have given me after 6 months.

A 4% profit on 2009 Q1 is not something I invested with KCB for in the short-mid term. I've duly invested with AccessKenya and its price is already headed North.

Nice formulae,I'll check it up thank you!

But...in just 3 months...(for stocks) and 6 months (for the bond)......

KCB: 26% return vs Bond: 6.25% return
AccessKenya :50% return vs Bond: 6.25% return
Equity Bank 51% return vs Bond: 6.25% return

How will these figures comparatively be in December? ...I'll hold save for KCB which I've since cashed out in favor of SK and sitting on an aggregate 50% return.

Boss,I'm satisfied with the stock gains whichever formula you apply.