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Cooperative Bank IPO: Comparative Analysis with Listed Peers
The cooperative Bank IPO will soon be coming to an end on November 13th and many investors (applicants) would like to know how the new bank at the NSE compares with others listed banks. After comparing the financial statements of five banks – Cooperative Bank, Barclays Bank of Kenya, Kenya Commercial Bank, Equity Bank and Standard Chartered Bank (Kenya) - analysts at Nairobist.com have come to the following conclusion regarding the financial comparability of Cooperative Bank with its listed peers on their 2007 end year audited results.
Profitability
In 2007 Barclays recorded the highest profit after tax of ksh.4.9 billion followed by Standard chartered with Ksh.3.47 billion, KCB with Ksh.2.97 billion, Equity with Ksh.1.89 and trailing the list is Cooperative with Ksh.1.55. however Equity and Cooperative registered the biggest growths in their profit before tax (PBT) by 114.5% and 84.6% respectively. Cooperative Bank expects a 50% growth in 2008. KCB and Standard Chartered also reported impressive growth levels of 33% and 29% in PBT compared to Barclays mere 9%.
Balance sheet reviews
Compared to other four banks, Standard chartered has a healthy balance sheet and recorded the lowest cost to income ratio of 46% followed by Equity at 53%, Barclays at 59% , Cooperative at 60% and KCB at 65%.This means that Standard chartered is able to generate more income at the lowest cost. Cooperative bank has one of the highest cost to income ratio after KCB.
Lending Capacity
In regards to the lending capacity of these banks, Standard chartered is able to lend more as its gross loans and advances to deposits ratio stood at 53% compared to Barclays whooping 96%,Cooperative – 70%, Equity – 69% and KCB - 68% .In essence Barclays has lend out most of the customer deposits. The lending capacity of Cooperative Bank also doe not look good with only 30% of their customer deposit available for lending.
Loan Interest Rates
Cooperative bank still has the highest loan interest rate at 19% while the other banks around 18%. Barclays has the lowest lending rates at 16%.
Comparison of Cooperative Bank 2007 financials with its Listed Peers
| |
Cooperative |
Barclays |
KCB |
Equity |
Stan Chart |
| |
Ksh.’000′ |
Ksh.’000′ |
Ksh.’000′ |
Ksh.’000′ |
Ksh.’000′ |
| Net Income |
1,549,606 |
4,910,494 |
2,974,572 |
1,890,283 |
3,469,877 |
| Interest Income |
5,519,826 |
13,634,325 |
9,373,389 |
3,254,638 |
7,122,651 |
| Interest Expense |
1,000,432 |
2,252,642 |
921,822 |
494,525 |
1,527,460 |
| Net Interest Income |
4,519,394 |
11,381,683 |
8,451,567 |
2,760,113 |
5,595,191 |
| Non-Interest Income |
3,756,462 |
7,478,752 |
6,392,567 |
3,062,488 |
3,998,438 |
| Operating Income |
8,275,856 |
18,860,435 |
14,844,134 |
5,822,601 |
9,593,629 |
| Operating Expenses |
5,257,440 |
11,781,635 |
10,618,152 |
3,458,783 |
4,983,441 |
| Customer Deposits |
54,775,390 |
109,096,951 |
94,392,361 |
31,535,515 |
73,840,563 |
| Loans and Advances |
38,074,772 |
105,345,597 |
64,278,123 |
21,836,435 |
39,468,522 |
| Total Assets |
65,354,205 |
157,655,668 |
120,479,553 |
53,129,246 |
91,121,942 |
| Cash |
2,405,929 |
3,699,195 |
3,217,132 |
3,015,005 |
3,214,132 |
| Total Liabilities |
58,893,924 |
140,092,014 |
107,274,893 |
38,212,578 |
80,205,934 |
| Total Shareholder Funds |
6,460,281 |
17,563,654 |
13,204,660 |
14,916,668 |
10,916,008 |
| Loan Loss Provisions |
699,891 |
686,690 |
1,213,653 |
25,341 |
250,249 |
Opinion on Cooperative Bank Financial Strength
Comparatively, apart from having one of the highest growth rate, Cooperative Bank does not bring anything new to the table. Some of the figures displayed by this bank are not fairing well compared to its listed industry peers. But its listing price is a big discount compared to the others and may, as anticipated, rise of about Ksh.15 when it start trading on the NSE. Analysts at Nairobist still hold a medium to long term buy on this IPO.
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