CRDB Bank records modest performance

CRDB Bank's share price that started the year on a bullish-trend experienced an abrupt fall after second quarter financial results were out.

Market analysts had the view that the CRDB's shares, which rallied by over 130 per cent to a lifetime high of 320/- in the last seven months up to July, would either continue or discontinue its marathon after the results.

However, the share of one of the largest bank plummeted by almost 20 per cent to 260/- immediately after the second quarter results were out.

Zan Securities Chief Executive Officer Raphael Masumbuko told the Business Standard over the phone that depending on the results the share price may appreciate or depreciate or stagnate. "The CRDB's results this time around were crucial on the stock's price directions," Mr Masumbuko said.

The banks mid-year financial results saw CRDB come on the second spot on profitability level after generating 20.09bn/-. The first was National Microfinance Bank (NMB) made 33.14bn/-, which is also listed on the Dar es Salaam Stock Exchange (DSE).

However, for speculator and portfolio investors profit is one thing while debt level, expansion drive and earnings per shares, among others, is another thing.

After the results were out, Orbit Securities Head of Dealings and Operations, Juventus Simon predicted that the rally might come to an end and either slightly going down or stagnated at 270/-. The share opened the year at 140/- and closed the last week at 270/-.

"I think the 270/- might be a new CRDB's share benchmark," Mr Simon said, "NPLs (non performing loans) have descended slightly by one percentage point to discourage further rally."

He added that the share depreciation could be linked to the bank's second quarter which was not as impressive as previous thus pushing speculators to sell fearing further fall.

"They (CRDB) make a good profit, but the NPLs rose slightly by one per cent, earning per share went up by 1/- to 9/-...this discouraged further demand from speculators," Mr Simon said.

The market, he said, was glutted by the bank shares, an experience that was not there some weeks ago to fuel price climbing up especially for short term investors who are banking on appreciation and dividends.

"(However), long term investors who look for bank's expansionary trend are comfortable with the CRDB performance, these would not rush to sell," Mr Simon said.

Earlier, Dhow Financial Managing Director Prof Mohamed Warsame described stocks as "strange animals" saying they could fluctuate to either direction by a fraction of a minute despite good financial results. "Pointing the price direction is too speculative," Prof Warsame said.

"The prices can climb to entice others to sell, in return glutting the market to crash the same stock price tomorrow." Stockbrokers were of the view that share prices could rally further if posted a good performance in this year's first half to map out new market equilibrium.

This was due to the fact that a recent share-buying trend shows most investors were returns and not dividend focused, a situation that has pushed up demand amid limited supply.

"The era of investors buying to cash on dividends is slowly disappearing and earning per shares focus is emerging," Mr Raphael Masumbuko said. The head of operations and dealings said that CRDB's share demand was pushed up by first quarter good results while speculation of the same in the second half is envisaged.

CRDB has generated a net profit of 20.09bn/- from 16.51bn/-in three months ending June. Total assets growth slowed down slightly to 3.128tri/- in June from 3.175tri/-. Deposits also shrunk to 2.629tri/- from 2.636tri/-.

On expansion drive the number of branches increased to 93 in June from 82 in March this year, so was the number of employees that went up to 2,012 from 1,817 staff-this is minus Burundi branch. The bank's share is the most fluctuating equity on the bourse.

Between 2011 and 2012 the CRDB share fluctuated up and down to 110/- which was below public offer period of 150/-, but made a dramatic twist in the turn of this year. The share depreciation puzzled a number of stock analysts to compel the bank to stage several bank, investors and stockbrokers meeting to engage on the matter.

A study, conducted by Dhow Financial in 2012, shows that the bank shares are trading below book value and its actual value stands at 260/-, a level it had overtaken by 70/- before slipping back again to the same rank.

The regional expansion to Burundi has been perceived as "a good move by investors" to drive up share price as well. 

"Despite dividend yield of between 5 and 6 per cent to be regarded low by locals, it is still a good return to foreigners as their markets pay less than that," a stock analyst told Businesss Standard.

He added that the demand was mainly pushed by foreigners' who still get a good investment yield compared to their markets. 

The bank that its stellar operations and financial performance last year envisages to continue in the next five years on the back of good economy and expansion in the region.

"The group's focus next year is on expanding delivery channels through to both traditional and e-channels to provide convenient services," CDRB's Managing Director Dr Charles Kimei said.

The MD said the Burundi outlet is projected to contribute between 3 and 5 per cent of net income in this year as at just one month of operation it has attracted 1.12b/- in terms of deposits.

The goals, according to the bank, include cost management, optimized ICT investment expanding outreach locally and regionally and cutting down non-performance loans ratio to less than 5.0 per cent. NPLs current stands at 8 per cent. 
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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