KCB GROUP — FULL INVESTOR ANALYSIS

Share Price: KSh 61

Dividend Yield: 6.23%

H1 EPS: 19.61 (annualized ≈ 38–40)

Q3 EPS: 0.83 (IFRS 17 quarterly valuation effect — explained later)

H1 Total Assets: 1.296T

Q3 Total Assets: 2.044T

ROE: ~22% (consistent)

Valuation: PE 3.18 | PB 0.62 → Deep Value

⭐ HIGH-LEVEL SUMMARY

• H1-2025 was extremely strong: PAT 31.5B, EPS 19.61.
• Q3-2025 confirms strong profitability: PAT 33.79B.
• EPS drops sharply in Q3 due to IFRS-17 accounting, not weak performance.
• Balance sheet expanded aggressively to KSh 2.044T.
• Deposits now 1.404T — largest in Kenya.
• Loan book above 808B, still growing.
• NPLs elevated (277B Group) but provisioning keeps risk controlled.
• Liquidity & capital extremely strong.

➡ KCB remains one of the strongest value + dividend banking stocks in East Africa.

1️⃣ PROFITABILITY UPDATE — H1 vs Q3 2025

H1-2025

• PBT: 32.3B
• PAT: 31.5B
• EPS: 19.61

Q3-2025

• PBT: 43.87B
• PAT: 33.79B
• EPS: 0.83 (Quarterly IFRS-17 effect)

⚠ Why EPS collapses from 19.61 (H1) to 0.83 (Q3)?

• IFRS 17 does not spread profits evenly per quarter.
• Insurance-like valuation adjustments apply to banking subsidiaries using the new standard.
• Q3 had heavy provisioning + discount rate changes + OCI movements, which reduce accounting EPS but not underlying cash profit.

Conclusion:

Q3 EPS is not a true indicator of performance — PAT remains strong.

2️⃣ INCOME PERFORMANCE (H1 vs Q3)

Net Interest Income

Strong due to:

• Higher loan yields
• Larger portfolio of government securities
• Deposit repricing

➡ Continues to be the biggest profit driver.

Non-Funded Income (NFI)

• Q3 Other Operating Income: KSh 31.49B (Group)
• Strong FX income
• Strong fees & commissions
• Merchant payments & mobile revenue expanding

NFI continues to grow faster than interest income, improving revenue mix and reducing risk.

3️⃣ OPERATING EXPENSES — Q3 2025

• Total Operating Expenses: KSh 54.94B
• Loan Loss Provisioning: 21.49B (Group), 15.67B (Kenya)

Costs remain under control despite expansion.

Provisioning reflects:

• High NPL environment
• Prudent risk management
• Cleaning up regional books

4️⃣ BALANCE SHEET — H1 vs Q3 2025

H1-2025

• Total Assets: 1.296T
• Deposits: 978B
• Loans: 710B

Q3-2025

• Total Assets: 2.044T
• Deposits: 1.404T
• Loans & Advances: 808.89B (Group), 850.34B (Kenya)
• NPLs: 277.18B (Group), 201.26B (Kenya)

➡ NPLs elevated but coverage has improved.

5️⃣ ASSET QUALITY — Q3 2025

Gross NPL ratio remains elevated, but:

• Provisioning increased
• Security coverage improved
• NPL trend stabilizing in 2025

Expected improvement in 2026 if:

• Regional economies stabilize
• Currency volatility reduces
• Subsidiaries continue recovery

6️⃣ CAPITAL ADEQUACY — Q3 2025

• Core Capital to RWA: 15.1% (min 8.0%)
• Total Capital to RWA: 19.6% (min 14.5%)

➡ Very safe, strong buffers for growth & dividends.

7️⃣ LIQUIDITY — Q3 2025

Liquidity Ratio: 41.4% (min 20%)

➡ Excellent liquidity buffer supporting continued growth.

8️⃣ DIVIDEND OUTLOOK

After Q3:

• PAT YTD strong
• Payout ratio very low (~12%)
• Capital buffers allow payments
• Cashflow remains strong

➡ Dividends remain highly sustainable.

Expected FY 2025 Dividend: 4.00–5.00 (regular + possible special)

9️⃣ IS KCB STILL CHEAP AT 61?

Based on full-year 2025 outlook:

• EPS: 30–36 expected
• PE: ≈ 2.0–2.3
• PB: 0.5–0.6
• ROE: ≈ 20%+

➡ Still extremely undervalued vs local & international banks.

Conclusion:

Price 61 is still cheap.

🔟 FINAL VERDICT — H1 + Q3 COMBINED

KCB remains a BUY for: (but in small portions not bulk buy)

• Dividend Investors: stable yield, low payout, strong capital
• Value Investors: deep undervaluation, high ROE
• Long-Term Investors: regional growth, digital expansion
• Growth Investors: improving subsidiaries, rising NFI

❗ Who should AVOID KCB?

• Short-term speculators
• Traders seeking high volatility
• Anyone expecting unrealistic targets (100 +)

WHY KCB IS A BUY

A. Deep Value — You Are Buying KCB at a Big Discount

PE ~2.0–3.2 → Extremely cheap vs global banks (normal PE 6–10).

PB ~0.50–0.62 → You are paying KSh 61 for a bank worth KSh 120+ per book value.

ROE ≈ 20%+ → High returns on equity, consistent strength.

👉 You’re buying a fundamentally strong bank at half price.

B. Massive Profitability — The Business Works

Strong PAT:

H1: 31.5B

Q3: 33.79B

Even during high interest rates, currency pressure, and regional issues, KCB remains one of the most profitable companies in East Africa.

C. Q3 EPS Drop Is Not a Real Drop

EPS fell due to IFRS-17 valuation, not business weakness.

KCB still generated strong cash profit — the accounting rules temporarily distort EPS.

👉 This is misunderstood by retail investors → Opportunity.

D. Biggest Balance Sheet in Kenya

Total Assets: KSh 2.044T → Largest banking group.

Deposits: 1.404T → Largest customer base.

Loans: 808B+ → Lending pipeline still growing.

NFI: FX, payments & fees rising fast → Higher-quality revenue.

A bigger balance sheet = bigger earnings potential.

E. Strong Capital + High Liquidity = Safe Bank

Liquidity: 41% (vs 20% minimum)

Capital ratios: Well above CBK requirements

Can lend more, pay dividends, and expand regionally without stress.

F. Dividends Are Secure

At the current price:

Dividend Yield: ≈ 6.2%

Payout ratio: only 12% → very low

Cashflow: supports future increases

Expected dividend: KSh 4–5 per share in 2025

👉 KCB is one of the most reliable dividend payers on the NSE.

G. The Market Overreacts to NPLs

Yes, NPLs are elevated.

But KCB has provisioned heavily and strengthened security.

Regional subsidiaries improving.

Expected improvement in 2026 with recovery in UG, TZ, RW.

👉 The market is punishing the stock more than necessary = value opportunity.

H. Price of 61 Is Still Cheap

Based on FY 2025 expected EPS of 30–36:

PE: 2.0–2.3 only

PB: 0.5–0.6

HOW TO GROW WEALTH USING KCB

Step 1: Buy Consistently (Not One Big Purchase)

Buy monthly or quarterly (DCA strategy).

Helps you avoid timing mistakes.

Step 2: Reinvest Your Dividends

Example:

If you hold 1,000 shares → dividend ~ KSh 4,000 yearly.

Reinvest it → more shares → compounding power.

Step 3: Hold Long Term (3–7+ Years)

Banks are wealth creators through:

• Dividends
• Book value growth
• Rising earnings
• Loan & branch expansion

Step 4: Add More on Dips

Good buy zones: 56–60 or below

Neutral: 61–65

High end: 66–70

Step 5: Use KCB as the “Stability Anchor”

It balances the volatility of other stocks.