In my opinion, Kenya Commercial Bank (KCB), is one of the most undervalued banking stocks trading at the Nairobi Stock Exchange. After announcing a 50% jump in Earnings per Share (KES 2.76 versus 1.84) for the year ending 31st December, the audited results indicated that total assets had hit KES 251,356,200,000 making it the largest bank in the region in terms of assets. The bank’s cost to income ratio also came down from 69 to 63 in a high inflation environment and rampant operational costs of doing business.
The Company
- Kenya Commercial Bank’s vision is “To be the preferred Financial Solutions Provider in Africa with a Global Reach”
- KCB’s Mission is “To grow our existing business whilst building the platform to be the preferred Financial Solutions Provider in Africa with Global Reach”
- The KCB group offers an array of financial services from banking, mortgage financing, investment banking and very recently agency banking dubbed; KCB mtaani that will extend it’s reach via 2500 agents spread across Kenya.
- KCB just raised KES 12 billion from the Nairobi Stock Exchange which raised their capital to an amount of KES 47 billion to invest this year. On top of that, KCB group is planning to raise KES 37 billion via a corporate bond that will be channeled to its fully-owned mortgage-lending Subsidiary, Savings & Loans Ltd (S&L).
Management & leadership
Harvard educated, Martin Oduor-Otieno has been the man at the helm of Kenya Commercial Bank and has offered nothing short of vision and leadership to the company with a strong emphasis on human resource management and technology. Under his leadership the bank returned t profitability and continues to grow as it expands across the greater East African region.
Martin has led the firm into winning several prestigious awards like
- IT-Networks Innovation Award from CISCO Systems Euromoney Awards – The best bank in Kenya
- Banking Innovation of the year 2009 for the KCB Connect Innovation
- Africa Investor Awards
- Martin has also bagged the Chief of the Order of the Burning Spear (C.B.S)
Going Forward
During a recent investor briefing, KCB group chairman revealed that the investments made across the region are beginning to break even and that they were also planning to invest KES 31 billion in Uganda to support expansion and growth.
Apart from their ongoing plan to further Invest in Kenya they are also eyeing DRC Congo, Angola and further west as they follow their vision of being a Pan African Bank.
At home KCB plans to tap the hugely untapped mortgage market and the beauty of this bank is that it can afford to lend more at lower interest rates and assume more risk due to its high capital capacity.
Total customer deposit were below their loan book value (1.2 Trillion v 980 billion) meaning there is more room to accommodate more interest income from loans which they plan to do.
The share price has gained close to 18% in the first quarter of 2011 – the Nairobi Stock Exchange is the worst performing bourse in Sub-Saharan Africa in the first three months of 2011 shedding over 600 points.
Of course before buying any stock an intelligent investor should do his/her research and I would strongly recommend reading the 10 commandments of stock picking.
With all the capital KCB group is holding in its war chest I strongly believe at a Price-Earnings Ratio of 9.4, the KCB stock is significantly undervalued i.e. cheap, what do you think?
Anthony Kahonge Mwangi is An Investment Researcher, Blogger and Freelancer. He blogs at Invest in Kenya