Diamond Trust Bank Q1 Profit Jumps But Non-Performing Loans Worsen

Diamond Trust Bank Kenya Receives KSh500 million Covid-19 SME Support Loan from IFC

DTB’s group chief executive, Nasim Devji

Diamond Trust Bank’s (DTB) net profit in the first quarter of 2020 increased by 4 percent to KSh1.91 billion from KSh1.83 billion in the first quarter of 2019.

The performance was driven by the 3.0 percent increase in total operating income to Kshs 6.3 billion  from Kshs 6.1 billion in Q1’2019 despite the 5.2 percent rise in total expenses,

Total interest income for the period amounted to KSh7.95 billion largely driven by interest income from loans KSh4.82 billion and interest income from government securities KSh3.11 billion. Net interest incomes for the quarter hit KSh4.67 billion.

In the quarter, total non-interest income amounted to KSh1.59 billion.

Operating expenses during the quarter to March increased to KSh3.32 billion driven by staff costs KSh1.2 billion, loan loss provision KSh408.1 million, and depreciation charge on property and equipment KSh361.12 million.

The Group’s total assets grew to KSh384.98 billion from KSh370.09 billion as of March 2019.  The bank witnessed a drop in customer deposits from KSh275.33 billion in Q1 2019 to KSh272.8 billion at the end of March this year.

Gross non-performing loans and advances grew to KSh16.6 billion for the first quarter from KSh14.36 billion under a similar period in 2019.

*****

“The bank’s asset quality deteriorated, with the NPL ratio increasing to 8.0 percent from 7.3 percent in Q1’2019 owing to slower growth in gross loans by 6.4 percent outpacing the 15.7 percent growth in gross non-performing loans. The decline in asset quality is attributable to a 15.7 percent increase in the gross NPLs to Kshs 16.6 billion in Q1’2020 from Kshs 14.4 billion in Q1’2019,” Cytonn Investments in the bank’s Earnings Note.

Shareholders’ funds increased by 10.1 percent to Kshs 61.0 bn in Q1’2020 from Kshs 55.5 bn in Q1’2019, largely due to the 11.9 percent increase in the retained earnings to Kshs 49.1 billion, from Kshs 43.9 billion in Q1’2019,

“The bank’s forays into other markets such as Tanzania, Uganda, and Burundi, may aid the bank’s growth, given the lack of loan pricing controls in those markets. Continued focus on those markets would aid in alleviating the compressed interest income regime in the Kenyan market.”

On the other hand, Genghis Capital maintains a BUY rating on DTK against a fair value estimate of Ksh 127.11. 

“The bank is currently trading at a 0.3x P/B multiple, presenting an attractive entry point for long-term value investors. Despite this, the low yield and Return on equity (ROE) remain key points of concern,” they add in their DTK 1Q20 Earnings Note.