The Kenyatta family has gained Sh3.12 billion in one year from their ownership of NCBA Group after the top tier lender defied the stock market crash to emerge the best stock at the Nairobi Securities Exchange (NSE).
NCBA Group share jumped 57.94 percent in 2022, making it the top performer at the Nairobi bourse that shed Sh650.1 billion last year following rate hikes in the developed world and the Russian invasion of Ukraine.
The Kenyattas, who control 13.2 percent of the bank, saw the worth of their stake close the year at Sh8.66 billion from Sh5.5 billion on the first trading day of January.
The increase has been attributed to investors reacting positively to NCBA’s market beating half-year financial performance, which lifted the bank’s shares 66.74 percent over the past six months to close the year at Sh39.35 a piece — valuing the bank at Sh64.8 billion.
The bank’s net profits for the nine months to September grew fastest at 96.2 percent, with the lender overtaking Absa Kenya as the country’s fourth most profitable lender.
Equity, Kenya’s most profitable lender, posted a 27.9 percent profit growth in the period while KCB Group was up 21.4 percent.
NCBA owners include tycoons and formerly powerful political families in the era of Jomo Kenyatta and Daniel arap Moi including the ex-Central Bank Governor, Philip Ndegwa, and former head of Civil Service, Simeon Nyanchae.
All three are deceased, leaving their families to reap outsized capital gains at the NSE and steady dividend payouts.
The wealthy Kenyatta and Ndegwa families shepherded the merger of listed NIC Bank and the private CBA bank to form NCBA in 2019.
The Ndegwas’ 13.13 percent stake is worth Sh8.5 billion —making them among Kenya’s wealthiest families. The NCBA share rally has seen the Ndegwa’s gain Sh2.96 billion, with their recent decision to increase their stake through an additional purchase of 10 million shares in the bank paying off.
Analysts say NCBA’s surge at the NSE is the product of the profit growth that has seen its return on equity (ROE) rise to above 16.9 per cent, making the counter attractive to investors who prefer to put their money in risk-free Government when a company’s ROE is below 10 per cent.
A higher return on equity (ROE)—a measure of financial performance which offers owners and investors insight into a business’s profitability—is the main reason that has attracted investors to this counter.
ROE is the percentage of a company’s net income to its shareholder value and shows how much they are likely to get for every shilling they have pumped into the business.
Rival top lenders like Equity, KCB and Cooperative Bank saw their market value dip 15.6 percent, 16.1 percent and 5.02 percent last year in line with share erosion at the NSE.
The market capitalisation stood at Sh1.98 trillion at the close of trading last week, down from Sh2.59 trillion on the first day of trading this year, translating to a loss of Sh597 billion.
The loss of Sh597 billion is the worst annual slide the market has recorded since its inception in 1954 and topples the Sh203 billion that was wiped out in 2020 due to Covid-19 economic hardships.
The market is being weighed down by a reduced appetite for emerging markets after a jump in interest rates in developed countries such as the US.
The developed markets are currently battling high inflation that has forced their central banks to adjust rates upwards, attracting foreign investors who have been fleeing emerging markets like the NSE.
The benchmark US 10-year bond rate — a closely watched gauge of market inflation expectations over the next decade — has climbed to 3.68 per cent, up from 1.63 per cent at the start of the year.
The Kenyatta family’s vast business empire is associated with well-known commercial brands and blue-chip companies.
Nigeria-based financial magazine, Ventures, in 2013 estimated the Kenyatta family fortune, including thousands of acres of land and commercial buildings to be worth $1 billion (Sh100 billion).
But the full extent of the business dynasty, however, is still a closely guarded secret known only to the family, top lawyers and the elite investors with whom they do business.
Besides NCBA, Kenyatta’s other investments are Brookside Dairy—where the President’s younger brother, Muhoho Kenyatta, sits as executive chairman, and the upmarket and chic hotel chain, Heritage Hotels East Africa.
The family is also linked to Media Max Company, which owns K24 TV, Kameme Radio and The People Daily newspaper.
It also owns thousands of acres of prime land across Kenya that was acquired by the late President Kenyatta in the ‘60s and ‘70s under a settlement transfer fund scheme that allowed government officials to acquire land from the British.
Uhuru Kenyatta’s assumption of the presidency has injected fresh energy into his family’s commercial empire with expansion plans, buyouts and mergers taking centre stage.
In 2021, Mr Kenyatta failed to respond fully to a huge leak of financial papers dubbed the Pandora Papers that showed his family secretly owned a network of offshore companies for decades.
