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NBK HY 2015 PAT up 123%

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Pesa Nane		#31 Posted : Wednesday, July 29, 2015 12:51:10 PM
Rank: Elder Joined: 5/25/2012 Posts: 4,105 Location: 08c		lochaz-index wrote: 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 difference between 13% and 15% is just 2%. Now factor in rent you have to pay going forward + The rents you pay are incremental + the foregone rent would have been incremental + your 15% is on a tightly fixed amount... Zero sense. Pesa Nane plans to be shilingi when he grows up.
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Cde Monomotapa		#32 Posted : Wednesday, July 29, 2015 1:03:50 PM
Rank: Chief Joined: 1/13/2011 Posts: 5,964		The Rights is delayed so the bank took to selling the real estate. Better than inaction. The rental yield quoted was 8%. Also, as @Angelica said leveraging on ICT delivery channels cuts the need of the brick & mortar bank model.
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lochaz-index		#33 Posted : Wednesday, July 29, 2015 2:21:55 PM
Rank: Veteran Joined: 9/18/2014 Posts: 1,127		Pesa Nane wrote: lochaz-index wrote: 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 difference between 13% and 15% is just 2%. Now factor in rent you have to pay going forward + The rents you pay are incremental + the foregone rent would have been incremental + your 15% is on a tightly fixed amount... Zero sense. Seems you are forgetting a couple of issues: 1. 13% rental yield is a best case scenario. Average is about 8-9% and it is even lower in most small towns. 2. If you don't sell the real estate assets(not that am advocating for it) you still have to source for funds either through more deposits, debt, rights issues etc and such come at a cost. So you need to factor in the costs associated with such in your trade off analysis. 3. The disadvantage suffered in future rent payments and escalations is negated if you are selling the whole property and leasing back only part of the premise. So technically it frees idle capital for a better ROI. The main purpose of the stock market is to make fools of as many people as possible.
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VituVingiSana		#34 Posted : Wednesday, July 29, 2015 2:50:12 PM
Rank: Chief Joined: 1/3/2007 Posts: 18,351 Location: Nairobi		xxxxx wrote: 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. Similar but not the same. The resurgence of BBK & SCBK which at the time were cutting back allowed for KCB to maintain a hold despite its problems. If BBK & SCBK had attacked KCB (& NBK) back then it would have been a different tale. Equity et al also gained from KCB's (& NBK) problems. For NBK to make it now will be much harder. There's also Family Bank, Jamii Bora, etc. Mid-market banks were small compared to NBK in the early 2000s. Not the likes of I&M and DTB are equal or larger than NBK. I shall follow NBK but I will not invest in NBK at the moment. Greedy when others are fearful. Very fearful when others are greedy - *to paraphrase Warren Buffett*
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VituVingiSana		#35 Posted : Wednesday, July 29, 2015 2:55:34 PM
Rank: Chief Joined: 1/3/2007 Posts: 18,351 Location: Nairobi		Ericsson wrote: 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" The opposition was NOT from the shareholders but the KCB Employee Pension Fund who thought Kencom House was over-priced. KCB owned the Pension Fund a lot of moolah so KCB (GG) tried to transfer Kencom Houseto the Fund in lieu of cash. That led to a disagreement over the value of Kencom House. Anyway, GG was fired, he went after GoK officials/cronies who owed money to KCB and that wasn't kosher in Moi's time. TD came in with a different philosophy and seeing what happened to GG decided to split the bank into the Good Bank and Bad Bank. NBK should follow that script. Emphasize/grow the Good Bank while have a dedicated team run the Bad Bank and finally close it out. Greedy when others are fearful. Very fearful when others are greedy - *to paraphrase Warren Buffett*
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