A stockbroker at AIB Capital said they no longer do any research on National Bank due to troubles related to governance and capital.
Cytonn Investments has valued National Bank’s stock at a lowly Sh1.70, which represents a downside of 70 per cent for investors.
Analysts have painted a bleak outlook for National Bank of Kenya (NBK) #ticker:NBK after the lender’s full-year results showed key capital ratios have slipped further below regulatory requirements.
Cytonn Investments has valued National Bank’s stock at a lowly Sh1.70, less than a third of the counter’s current price, which represents a downside of 70 per cent for investors.
“NBK is also limited in utilising its asset base to generate value to shareholders given that it is currently operating below the statutory capital limits, and there are no clear plans towards capitalising the bank,” said Maurice Oduor, investment manager at Cytonn.
National Bank’s total capital to total risk-weighted assets ratio stood at 11.9 per cent as at December 2016, which is 2.6 percentage points below the Central Bank of Kenya (CBK) legal minimum of 14.5 per cent. This ratio is key if the bank is to continue growing its loan book.
A stockbroker at AIB Capital said they no longer do any research on National Bank due to troubles related to governance and capital.
“We did not cover NBK in our report, as we view it as a distressed company,” said Abdulrahman Hussein, a research analyst at AIB Capital.
Standard Investment Bank previously told Business Daily that it had stopped coverage of National Bank due to an opaque management team and continued pussyfooting on raising capital.
“We currently do not cover NBK because of poor access to management and lack of capital structure clarity,” SIB had said in response to our queries. Mr Oduor said the negative outlook is further compounded by NBK cost-to-income ratio of 98 per cent, highlighting inefficiency, compared to I&M Bank’s #ticker:I&M 34.7 per cent efficiency ratio and StanChart’s #ticker:SCBK 52.5 per cent.
NBK is currently racing to secure a Sh4.4 billion loan from its top owners, National Social Security Fund (NSSF) and Treasury, to shore up its capital base. NSSF holds 58 per cent share, the Treasury 22 per cent while the balance is free float at the NSE #ticker:NSE.
The NBK counter has shed nearly 17 per cent of its value since January and closed on Thursday at Sh6 per share at the Nairobi bourse.
