Announcements

GCR affirms Diamond Trust Bank Kenya Limited’s rating of A+(KE); Outlook Positive.

Johannesburg, 30 June 2014 — Global Credit Ratings has affirmed the national scale ratings assigned to Diamond Trust Bank Kenya Limited of A+(KE) and A1(KE) in the long term and short term respectively; with the outlook accorded as Positive. The rating(s) are valid until 06/2015.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to Diamond Trust Bank Kenya Limited based on the following key criteria:

The ratings of Diamond Trust Bank Kenya Limited (“DTB” or “the group”) incorporate its acceptable asset quality, strong capital cushion, solid earnings stream, as well as its strong and growing regional franchise value.

Fuelled by high earnings generation and long-term subordinated debt, DTB’s consolidated total regulatory capital rose by 32.9% y/y in F13 to KShs25bn (well above the regulatory capital requirements of all the respective markets of operation), thus the group is well capitalised.

Despite the high loan book growth rate, DTB has been able to contain the growth of non-performing loans (“NPLs”), supported by a stringent underwriting policy and rigorous post-disbursement monitoring of its credit portfolio. As such, its gross NPL ratio at FYE13 was only 1.1% (FYE12: 1.1%; FYE11: 0.9%), remaining well below the industry average of 5.2%.

Earnings have followed a high growth trend since F09, growing at a compounded annual growth rate of 40.2% in the period F09-F13. The group’s strong earnings generation has been a function of its strongly growing loan book, steadily increasing fee & commission income, a fairly low cost structure, and steady asset quality which has minimised provisioning costs.

Liquidity risk is managed on a short and medium-term basis, through the continuous monitoring of developments in the money market, while ensuring that the group operates within its set limits. In this respect, the group maintains its liquidity ratio above both the statutory minimum and Board approved minimum, albeit lagging the industry average. However, while a structural industry feature, an area of concern is the group’s maturity mismatches in its asset/liability profile.

DTB’s ratings could benefit from its ability to consolidate and potentially further grow its market share gains, broaden and diversify both its funding base and revenue sources (primarily its transactional banking fee income), and maintain current sound financial fundamentals. Negative rating implications could arise from aggressive balance sheet growth giving rise to credit and liquidity risk management concerns and major structural problems in DTB’s markets of operation.

For a detailed glossary of terms utilised in this announcement please click here

NATIONAL SCALE RATINGS HISTORY

Initial rating (Sep/2011)
Long term: A+(KE); Short term: A1(KE);
Outlook: Stable

Last rating (Aug/2013)
Long term: A+(KE); Short term: A1(KE);
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Dirk Greeff
Head: Financial Institution Ratings
(011) 784-1771
dgreeff@globalratings.net

Secondary Analyst
Kuzivakwashe Murigo
Junior Credit Analyst
(011) 784-1771
murigo@globalratings.net

Committee Chairperson
Eyal Sheval
Head: Corporate Ratings
(011) 784-1771
shevel@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Banking Criteria (updated April 2014)
Kenyan Bank Bulletin (November 2013)
Glossary of Terms/Ratios (February 2014)
Previous Rating Reports (up to 2013)

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.NET.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

Diamond Trust Bank Kenya Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit rating/s has been disclosed to Diamond Trust Bank Kenya Limited with no contestation of the rating.

The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.

The information received from Diamond Trust Bank Kenya Limited and other reliable third parties to accord the credit rating included the December 2013 audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, March 2014 management accounts, corporate governance and enterprise risk framework, Industry comparative data and regulatory framework and a breakdown of facilities available.

GCR affirms Diamond Trust Bank Kenya Limited’s rating of A+(KE); Outlook Positive.

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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