Share prices of top banks have hit fresh peak on the Nairobi bourse on increased demand largely from foreign investors following commitment by the Treasury to repeal the interest rates cap law.
The September 2016 Banking Amendment Act saw investors sell off or scale down their holding in banking stocks on fears of constrained margins after loan charges were capped at four percentage points above the Central Bank Rate.
The share prices of 10 out of 11 lenders (the exception being Housing Finance #ticker:HFCK) have since soared to levels seen before the interest control law was enforced, with some of them zooming to nearly two years’ high.
Co-operative #ticker:COOP, Equity #ticker:EQTY and KCB Group #ticker:KCB have gained 16.25 per cent, 15.72 per cent and 11.7 per cent, respectively, on their share prices since the beginning of the year through last Friday.
Most of the gains have been recorded in recent days after the International Monetary Fund (IMF) issued fresh calls for repeal of the 18-month rate cap law, a demand welcome by Treasury secretary Henry Rotich.
The IMF last week demanded the Treasury commit to scrap the caps on loan charges before it inks another currency cushion facility with Kenya to replace the existing $1.5 billion (Sh152.07 billion) which expires this month.
“The banks have strengthened markedly over the last few sessions and after the IMF specifically called on the Government to repeal the rate cap Act,” said CEO of investment advisory firm, Rich Management, Aly-Khan Satchu, via email.
“The rate cap has staunched private sector credit growth and investors are calculating a repeal will encourage banks to lend again and increase their profitability.”
Analysts at Standard Investment Bank said KCB and Co-op are trading at prices last seen in September 2015 and May 2016, respectively.
Equity Group, the largest lender by deposit accounts, on Friday gained a further 1.66 per cent to close at Sh45.25 per share, while Co-op Bank rallied 1.09 per cent to close at Sh18.40 per unit.
KCB, the biggest by market share, closed trade at a flat rate of Sh47.75 per share compared to Thursday.
The shares of Barclays Bank #ticker:BBK traded 1.33 per cent lower at Sh11.25 per unit at the close on Friday after strengthening 2.27 per cent a day earlier.