Stanbic Kenya share price up 6.3% this week as they announce their FY24 earnings

There's been a lot of activity in the market leading up to Stanbic's earnings report, investors who bought a couple shares on Monday have already seen a 6% gain on their position(without factoring in the dividend). Things get even better when we add the dividend of KES 18.9 which represents a 35% increase YOY; the dividend yield for investors who bought shares on Monday stands at 11.94%. For all fund managers who bought in at what I thought was a fair price in late Jan. of KES 139, your Q1 numbers are looking pretty good—20% gain in a month! I hope you had a target price before buying, unless ofcourse you're in it for the long haul like I am.

The numbers

Here's an overview of the numbers. Earnings per share(EPS) increased by 12.8% and stood at KES 34.7. Revenue decreased by 3.8% and stood at KES 39.7B. Profit after tax increased by 12.8% and stood at KES 13.7B. Return on equity(ROE) increased by .7% and stood at 19.3%. Their Non performing loans(NPLs) represented 16.4% of the loan book. We saw a decrease in assets on the balance sheet, nothing significant though—.97%.

The story behind the numbers

FY24 was a rollercoaster for Stanbic, the first half was full of uncertainty with key events such as the natural disasters that hit the country and severely affected the agriculture sector, the mid-year nation-wide protests and the government's debt crisis early in the year. The firm's other market—South Sudan saw disruptions in their oil supply, which had ripple effects on the nation's economy. These macroeconomic challenges affected the firm's business as we'll discover shortly.

Challenges

Economic uncertainty adversely affects lenders like Stanbic, as people and businesses hold on to cash and cut costs. The mid-year protests in Kenya greatly affected business and the economy overall, with businesses being forced to stay closed in order to avoid loss of inventory and to keep their employees safe. These precautionary measures couldn't prevent loss for some business owners who had their stores vandalized.

The agriculture sector represents 9% of the firm's loan book. Unlike most other sectors that only get affected by bad government policy, there's another risk associated with lending to farmers—natural disasters. Natural disasters are a unique risk, unlike other risks which are man-made, there's very little that can be done to prevent them. The firm's exposure to the agriculture sector definitely affected their performance; the floods of early 2024 affected farmers in key agricultural parts of the country.

Stanbic played a role in sorting out the government's debt crisis in 2024 through the €1.5B eurobond. There was a lot of uncertainty at the time and securing the loan helped stabilized the country.

The bright side

The customer base grew by 9.4% to 291k, this is good news and highlights the bank's strong brand. However, we seem to be walking the line between opposites here, we see the growth in the customer base and at the same time there was a decrease of 2.4% in the customer deposits and a 17.3% decrease in loans and advances on the assets side of the balance sheet. Such a strange phenomenon, you can share your insights on this with me through my email me@kenjunior.com, I'll also look into it and share my findings.

The group CEO, Patrick Mweheire, is optimistic for FY25. There were a few things that he mentioned on why he's optimistic that caught my attention. He talked about growth in the continent, highlighting how the region's(East Africa) growth rate of ~6% far outpaces the continent average of 3%. There is a lot of interest in the region from international investors, our markets and integration through the EAC offer great value for investors looking for exposure to the emerging markets and being the fastest growing region on the continent strenghtens the case for East Africa. He also mentioned that 40% of the region's trade is between member states; with all the talk of a trade war and tariffs, the region will be insulated(to a certain extent) from the effects of a trade war & tariffs.

Bottom line

Investors looking to invest in the country's banking sector should definitely consider SBIC, the bank has built a great brand and business in the markets that it serves. With a dividend yield of roughly 12% for FY24, the firm offers good value for long-term investors. They've got a great captain steering the ship in Joshua Oigara, which is something we really pay attention to. For short-term oriented firms, you might have missed the train, atleast in my opinion.

As investors we are happy with the returns from SBIC, and believe that the team has what it takes to build on FY24's great performance to make FY25 yet another great year for us all.

Stanbic Holdings FY24 Results Stanbic's investor relations page