Subsidiaries play a bigger role in DTB Group's 12% growth in profits
Increased customer reach, digital transformation, and sustainability excellence - the pillars in DTB's strategy that are driving growth. HY profits are up 11.5% to KES 4.9B, this was driven partly by an increase in interest income. In line with the practice adopted in recent years, the directors do not propose the payment of an interim dividend - a statement from the board on matters dividend. On a brighter note, the EPS1 increased by 8.6% to KES 15.54-showing investors the firm's improved profitability and potential for higher dividends. Here's how the firm performed for HY24.
We'll start with the good news; the customer base recently surpassed the 2M mark, growing by a significant 75% over the past year. This strangely translated to only a 3.3% increase in customer deposits to KES 431.9B in the Kenya business, I'm assuming that the subsidiaries in the E.Africa region saw tremendous growth and accounted for most of the new customers. The firm's interest income was up 17.9% YOY2 to KES 29.3B, the high interest rate environment played a role in these gains, we see these gains even with a loan book that shrank. Operating income increased by 10% to 20.6B on the back of better funded and non-funded income. Subsidiaries are performing well, contributing 35% of pre-tax profit for DTB, the investments made are starting to bear fruit. The firm recorded a dividend income of KES 11.5M from investments they'd made.
The growth we see came at a cost, the staffing costs went up by 11.5% to KES 4.5B - this doesn't come as a surprise, the firm's efforts to expand in the country and region more broadly requires new staff. Interest expense increased by 29% to KES 15.2B, again, driven primarily by the high interest rate environment, which led to higher cost of funds for DTB and peers. The gross NPLs3 went up by 5.5% to KES 38.6B, loan loss provisions followed suit, going up by KES 3.6B. Income from one non-funded revenue stream-foreign exchange trading-dropped by 5.3% to KES 2.6B, other players in the sector experienced the same since the shilling has stabilized against other major currencies. The loan book shrank by 4.4% YOY2 to KES 267.3B. Finally, the operating income went up by 12% to KES 14.2B.
Conclusion
Nasim Devji and her team posted good numbers for the HY24, their efforts to expand are definitely paying off with the subsidiaries contributing 35% to pre-tax profits. The firm is diversifying and expanding its focus onto new sectors such as agriculture, education, technology, and the public sector - more opportunity for growth and better returns. We should first off be the go-to bank for trade, manufacturing, real estate, or construction, then we can start thinking of new areas to expand. The firm appears to be heavily exposed to government securities; rating agencies might target them next for downgrades. The stock is currently priced at KES 45.25, are you buying, holding or selling at this price?
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Resources
DTB Kenya's Financial results , DTB Kenya's HY earnings press realease
Footnotes
NOTE : These are personal opinions and aren't shared by the firm, our shareholders and/or associates