Co-operative Bank of Kenya Earnings Expectations FY-2018
• We recommend a BUY on CO-OP Bank based on a fair value estimate of KES.16.04 a10.2% upside from the current market price of KES.14.55.
• The bank trades on a forward P/E of 7.3x and a P/B of 1.2x against sector average P/E of 6.2x and P/B of 1.3x
• We forecast EPS growth of 15.8% FY2018 to KES.2.20.
• Our ROaE and ROaA forecast FY2018 are 17.9% and 3.3% respectively.
• CO-OP has a diversified mix of income with the growth of digital banking expected to grow its Non-Funded Income by 8.1% to KES.14.6Bn.
• Emphasis on operating expense management should see the bank reduce its cost-to-income (CTI) ratio to 50.8%.
• Aggressive investment in Government securities (23.4%) will have a positive impact on total interest income growth +6.7% to KES.43.1Bn.
• The bank’s asset quality is expected to deteriorate with the NPLs ratio worsening to 11.0% FY2018 compared to 7.0% FY2017.
• We expect the dividend per share to be maintained at KES.0.80. Download Report