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NBK HY 2015 PAT up 123%
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lochaz-index
#21 Posted : Wednesday, July 29, 2015 12:02:13 AM
Rank: Veteran

Joined: 9/18/2014
Posts: 1,127
Bad call by the honchos at Nbk. To me this is more of a qualitative issue than a quantitative one.

The expensed LLP is 2.5 times the previous year which is in line with the market fundies at the moment and I guess they wouldn't want to cross the line here.

However, an NPL spike calls for a corresponding increase in LLP in the loan book(must be a grey area in the cbk rules for them to have the guts to flout this). Given the impressive set of results, why goose the numbers in a non-income statement metric? This especially coming from an institution that has fallen short of some capital ratios.

Or is it a case of trying to look good now (considering all the slack that's been thrown their way) at all costs..... Imprudence is what it is and will catch up with them soon enough.
The main purpose of the stock market is to make fools of as many people as possible.
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obiero
#22 Posted : Wednesday, July 29, 2015 12:08:45 AM
Rank: Elder

Joined: 6/23/2009
Posts: 14,232
Location: nairobi
do not touch
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kimugaman
#23 Posted : Wednesday, July 29, 2015 9:06:36 AM
Rank: New-farer

Joined: 5/15/2015
Posts: 26
lochaz-index wrote:
Bad call by the honchos at Nbk. To me this is more of a qualitative issue than a quantitative one.

The expensed LLP is 2.5 times the previous year which is in line with the market fundies at the moment and I guess they wouldn't want to cross the line here.

However, an NPL spike calls for a corresponding increase in LLP in the loan book(must be a grey area in the cbk rules for them to have the guts to flout this). Given the impressive set of results, why goose the numbers in a non-income statement metric? This especially coming from an institution that has fallen short of some capital ratios.

Or is it a case of trying to look good now (considering all the slack that's been thrown their way) at all costs..... Imprudence is what it is and will catch up with them soon enough.


I don't understand all this terms and acronyms. Can you please tell us in plain english. Assume I am in standard seven.

Also, in plain english, is NBK cooking the books?
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researchfirst
#24 Posted : Wednesday, July 29, 2015 9:13:11 AM
Rank: Member

Joined: 2/24/2015
Posts: 154
Location: Nairobi
kimugaman wrote:
lochaz-index wrote:
Bad call by the honchos at Nbk. To me this is more of a qualitative issue than a quantitative one.

The expensed LLP is 2.5 times the previous year which is in line with the market fundies at the moment and I guess they wouldn't want to cross the line here.

However, an NPL spike calls for a corresponding increase in LLP in the loan book(must be a grey area in the cbk rules for them to have the guts to flout this). Given the impressive set of results, why goose the numbers in a non-income statement metric? This especially coming from an institution that has fallen short of some capital ratios.

Or is it a case of trying to look good now (considering all the slack that's been thrown their way) at all costs..... Imprudence is what it is and will catch up with them soon enough.


I don't understand all this terms and acronyms. Can you please tell us in plain english. Assume I am in standard seven.

Also, in plain english, is NBK cooking the books?


NPLs = non-performing loans
LLPs = loan loss provisions

lochaz-index is saying that if the NPLs are climbing, the provisions must also be pumped up to cover. The coverage ratios are in the "other disclosures" portion of the announcement. You can look at the historical ratios to see trend at http://kenyainvestor.com...k-of-kenya/financials/. They haven't posted the Q2 #s there yet, but assume they will soon.

I don't think they are cooking the books, just not being as prudential as they could be.
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Ericsson
#25 Posted : Wednesday, July 29, 2015 10:04:07 AM
Rank: Elder

Joined: 12/4/2009
Posts: 10,809
Location: NAIROBI
The big rise in profit is due to booking a Sh600 million gain from the sale of its buildings.
This is where trouble starts;once they are done with selling all the buildings they can where will profit growth come from.
Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
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Ericsson
#26 Posted : Wednesday, July 29, 2015 10:10:09 AM
Rank: Elder

Joined: 12/4/2009
Posts: 10,809
Location: NAIROBI
Well managed banks like KCB own more buildings than NBK and haven't heard them selling them to shore up capital or say they will get higher returns than renting the buildings.
How sure is he that he will get the customers to take the loan.
This banks will soon become a dead bank like Barclays which underwent similar strategies in trying to boost profit.
Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
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VituVingiSana
#27 Posted : Wednesday, July 29, 2015 10:28:13 AM
Rank: Chief

Joined: 1/3/2007
Posts: 18,353
Location: Nairobi
Ericsson wrote:
Well managed banks like KCB own more buildings than NBK and haven't heard them selling them to shore up capital or say they will get higher returns than renting the buildings.
How sure is he that he will get the customers to take the loan.
This banks will soon become a dead bank like Barclays which underwent similar strategies in trying to boost profit.

KCB did sell (or tried to) properties to boost the capital during the post-Moi era when Gareth George, Terry Davidson and Martin Oduor-Otieno were brought in to clean up the mess. Ultimately, there were Rights Issues and management changes [& reduced GoK ownership and influence] that boosted KCB.

Unless similar strategies are employed at NBK, this bank will not grow as fast as its peers. Currently, it gets a lot of GoK business but that isn't real or sustainable growth.
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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xxxxx
#28 Posted : Wednesday, July 29, 2015 10:49:19 AM
Rank: Member

Joined: 3/20/2008
Posts: 503
VituVingiSana wrote:


KCB did sell (or tried to) properties to boost the capital during the post-Moi era when Gareth George, Terry Davidson and Martin Oduor-Otieno were brought in to clean up the mess. Ultimately, there were Rights Issues and management changes [& reduced GoK ownership and influence] that boosted KCB.

Unless similar strategies are employed at NBK, this bank will not grow as fast as its peers. Currently, it gets a lot of GoK business but that isn't real or sustainable growth.


@vvs, I guess NBK is just going through the kind of cycle that formerly run down institutions go through. The question then should be whether the execution can be done successfully and by extension whether investors should buy into that story.
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Ericsson
#29 Posted : Wednesday, July 29, 2015 10:50:25 AM
Rank: Elder

Joined: 12/4/2009
Posts: 10,809
Location: NAIROBI
Gareth George tried selling KENCOM but met stiff resistance from shareholders as the building was being sold for a song.
When Narc came into power and Terry Davidson appointed as MD sale of properties or buildings was halted and a number of rights issues done even during Martin Oduor-Otieno reign that boosted KCB.
@VituVingiSana like u said "unless similar strategies are employed at NBK, this bank will not grow as fast as its peers"
Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
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lochaz-index
#30 Posted : Wednesday, July 29, 2015 11:04:09 AM
Rank: Veteran

Joined: 9/18/2014
Posts: 1,127
Ericsson wrote:
Well managed banks like KCB own more buildings than NBK and haven't heard them selling them to shore up capital or say they will get higher returns than renting the buildings.
How sure is he that he will get the customers to take the loan.
This banks will soon become a dead bank like Barclays which underwent similar strategies in trying to boost profit.


Can't remember whether it was munir or hassan who said that they were trading real estate assets for financial assets which have a better return.

Looking at the numbers it made economic sense since the best annual rental yield for commercial property is about 13%orlower in less prime locations whereas loans from those proceeds would yield upwards of 15% net.

Since they don't have an infinite inventory of real estate this is a short term measure for a ceo and board who may not be looking for long term tenures at Nbk.
@kimuga I believe @research has answered your question.
The main purpose of the stock market is to make fools of as many people as possible.
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