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Banks trigger shifts in most valuable NSE firms
For investors at the bourse, profit growth is a key metric to consider when picking stocks, with eyes on dividends, especially in times when bear runs constrain capital gains.
Listed banks have risen to the top of the most valuable companies at the Nairobi Securities Exchange (NSE) over the past decade, riding on their higher profitability as industrial stocks struggle to keep pace amid flat growth in a tough economy.
An analysis of the largest firms at the Nairobi bourse shows that eight banks sit among the top 10 firms by market capitalisation, up from six in August 2015.
All 11 listed banks also feature among the 20 largest firms at the NSE, accounting for 38 percent of the market’s total valuation of Sh2.62 trillion.
The growing dominance of banks at the bourse reflects a decade of steady profit growth and handsome dividends that have sparked a rally in their share prices and valuation.
This happened amid a prolonged bear run at the bourse that saw the NSE 20 Share Index fall from 5,500 points in March 2015 to lows of 1,500 points in late 2023.
It also reflects the woes facing other sectors of the economy, notably manufacturing and services, that rely on consumer spending to drive profits.
Consumer spending power has been eroded in recent years in the wake of higher taxes, stagnant salaries and job losses that followed the Covid-19 economic hardships.
“Banks have been better at defending their profitability and earnings growth by diversifying their revenue streams through new products and regional expansion, managing costs by adopting technology and capital flexibility, for instance, taking up bonds when customer lending slows down,” said Melody Ndanu, an analyst at Standard Investment Bank.
“For manufacturing firms, higher operating costs have been a long-term issue, primarily growing power costs, VAT and excise duty. Constrained consumer wallets have also affected their ability to grow sales, causing their declining contribution to GDP.”
Equity Group, with a valuation of Sh207.6 billion, and KCB Group (Sh173.5 billion) are now the second and third most valuable listed firms behind Safaricom (Sh1.13 trillion). EABL, which ranked second in market capitalisation a decade ago, is now down to fourth after seeing its valuation drop to Sh172.4 billion from Sh236.4 billion 10 years ago.
BAT Kenya and Bamburi Cement, which featured on the top 10 list in 2015, have now fallen to 12th and 19th respectively with valuations of Sh44.1 billion and Sh19.6 billion—even as the latter nears delisting after being bought out by Tanzanian conglomerate Amsons Group in December 2024.
Other banks featuring in the list of 10 largest firms are Standard Chartered Bank Kenya (Sh119.1 billion), Absa Bank Kenya (Sh108.4 billion), NCBA Group (Sh102.6 billion), Co-operative Bank of Kenya (Sh101.8 billion), Stanbic Holdings (Sh72.6 billion) and I&M Group at Sh66.4 billion).
For investors at the bourse, profit growth is a key metric to consider when picking stocks, with eyes on dividends, especially in times when bear runs constrain capital gains.
In the last decade, the largest listed banks at the NSE have grown their profits multiple times, widening the gap over manufacturers, whose growth remains in the single digits.
Equity Group and KCB Group, whose regional footprint now includes countries like the Democratic Republic of Congo and Rwanda, for instance grew their full year net profits to Sh46.5 billion and Sh60 billion respectively in 2024, from Sh17.3 billion and Sh19.6 billion in 2015.
In contrast, EABL and BAT Kenya—the most prominent listed manufacturers at the NSE— reported latest annual net earnings of Sh12.2 billion and Sh4.48 billion respectively, compared to Sh9.58 billion and Sh4.98 billion a decade ago.
Cement firms Bamburi and the collapsed ARM Cement, which featured among the more valuable blue chips at the market in 2015, saw their profitability negatively affected by increased competition in the sector.
ARM Cement went into administration in August 2018 after failing to meet debt obligations running into billions of shillings, and its assets were subsequently acquired in 2020 by National Cement, a subsidiary of Devki Group.
Bamburi has itself been recently acquired by Tanzanian conglomerate Amsons Group in a Sh23.6 billion deal, which was largely driven by the NSE firm’s Swiss majority shareholder Holcim as part of a wider exit strategy from African markets.
Other firms which have fallen lower in the top companies ranking over the past decade are Britam, Centum Investment Company and cross-listed Ugandan power firm Umeme.
Power producer KenGen has in the meantime risen in market cap prominence, thanks largely to a sharp share price rally over the past year, as have HF Group and Rwandese lender BK Group, which is also a cross-listed firm.
KenGen’s current valuation of Sh49.8 billion makes it the NSE’s 11th largest firm by market cap, having added Sh34 billion in value over the past one year courtesy of a 218 percent appreciation of its share price to Sh7.56.
BK Group’s valuation of Sh35.2 billion places it as the NSE’s 13th most valuable firm, while HF Group closes out the top 20 with a valuation of Sh17.6 billion.
