Diamond Trust Bank Kenya Limited accorded first time ratings
Diamond Trust Bank Kenya Ltd (“DTB” or “the group”) has been accorded a first time national scale KShs currency rating of A1 (single A one)in theshort-term and A+ (A plus) in the long term. DTB was established in 1997 following the attainment of a commercial banking license by the then Diamond Trust of Kenya (“DTK”), a non-bank financial institution. DTB group encompasses banking subsidiaries in Uganda, Burundi and Tanzania, with results consolidated under the Kenyan operations. DTB has been listed on the Nairobi Stock Exchange since 1972. The group offers a wide range of corporate, retail, and commercial banking products to all market segments.
The accorded ratings reflect the group’s established domestic and regional franchise value. Further, DTB displays a strong balance sheet, reflecting a sound capital base and high asset quality. These are, however, partly offset by the variability of earnings across operating jurisdictions. The market as a whole is also vulnerable to further shocks – mainly: public and/or political unrest, weather changes impacting on food security and setbacks in the global recovery. Total capital & reserves grew by 27% to Kshs10.1bn in F10, on the back of retained earnings. The total risk weighted capital adequacy ratio of 17.5% (FYE09: 16.6%), was well above the statutory minimum of 12%. Asset quality is considered strong with gross non-performing loans (“NPLs”) equating to 1.3% (FYE09: 1.4%) of gross loans as at FYE10, which is at favourable levels in relation to industry averages. Furthermore, comfort is provided by the group’s prudent provisioning policies and the large amount of security held against non-performing exposures. A NPBT of KShs3.5bn was recorded for the period ended 31 December 2010, being a 79% (F09: 20%) increase over the previous period. The strong earnings performance was achieved on the back of an expanded loan book, lower funding costs, growth in fee & commission income and a significant contribution (13%) from non-recurrent income. Although DTB displays significant contractual asset/liability mismatches, this is more a reflection of the local money market structure as the majority of DTB’s loans are linked to the base rate, whereas liabilities are linked to short term deposit rates. This is in line with the market in general, with 10% of advances maturing within 1 month, compared to 50% of deposits. In terms of behavioral maturity, however, the bulk of deposits are rolled over and are relatively stable. Liquidity risk is further mitigated through maintaining a liquid balance sheet (liquid assets amounted to 30% of deposits against a prudential minimum of 20%). Customer deposits contributed roughly 82% of total funding as at FYE10, followed by equity (12%), interbank borrowings (3.5%) and long-term borrowings (2.6%).
Jennifer Mwerenga https://globalratings.net/uploads/files/December_2011.pdf
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