KCB overtakes Equity Bank in valuation at bourse

KCB has grabbed back its position as the most valuable listed lender at the NSE ahead of Equity Group for the first time in seven months with its share price rallying to an all-time high and Equity slipping.

KCB’s closing price of Sh63 a share in Friday trading took the its valuation at the NSE to Sh188 billion ahead of Equity that is now valued at Sh178.6 billion at a price of Sh48.25.

In the past one month, Equity’s share has shed 6.7 per cent in value on profit taking, as KCB gained 8.6 per cent.

The two lenders have exchanged the position of top lender at the bourse several times over the years.

The latest valuations make KCB the third largest company at the bourse behind Safaricom and East Africa Breweries Limited (EABL), which have market valuations of Sh637 billion and Sh257 billion respectively.

Equity is trading ex-dividend having announced a payout of Sh1.80 on March 10 and closed its register March 20, while KCB in still trading cum-dividend with its books set to close on May 11 for a Sh2 per share dividend.

“For Equity, we see a price correction of sorts. Last year, the positive sentiment around the company due to expectations of good results, the MVNO, and agency banking growth pushed the share price up,” said Old Mutual Securities analyst Eric Munywoki.

While KCB has overtaken Equity in valuation, the latter on the other hand took over top spot in full-year profitability for 2014 after reporting a 27.8 per cent growth in net profit to Sh17.15 billion, compared to KCB’s net profit of Sh16.8 billion that represented a 17.4 per cent growth from 2013.

Equity’s performance was boosted by increased lending, higher transaction income and the sale of a stake in Housing Finance to Britam, while KCB’s profit growth was also boosted by higher interest and other income in addition to a return to profitability of its Ugandan subsidiary.

Mr Munywoki said that part of Equity share erosion could be attributed to selloffs by foreign investors, with KCB simultaneously seeing increased demand from the same class of investors.

Market data from Standard Investment Bank covering the first quarter of the year shows that KCB led the market in net foreign inflows, at Sh545 million.

On the other hand, Equity led in net outflows at Sh1.58 billion. According to Genghis Capital analyst Silha Rasugu, the bigger banks that leverage well on their regional businesses are the most likely to see an upside in share price going forward.

“Tier one bank stocks are hovering around fair value, with a few still bearing upside potential. The slowing growth would be tied to changing dynamics in the Kenyan banking industry evolving from a high growth phase driven by innovation and low financial inclusion into a more mature sector, thus banks aggressively targeting or operating in new growing markets are in a position to warrant upward revaluation going forward,” said Mr Rasugu.

Equity, which has operations in five countries, has recently announced a Sh200 billion plan to expand into a further five countries, creating new shares in the process.

“The planned creation of new shares ideally should not push down the existing share prices. There will be dilution in earnings per share, return on investment and other shareholder equity ratios however once those shares come into the picture,” said Mr Rasugu.