Capital Markets

Calls for rate cap review lift investor confidence in bank stocks

Investment brokers at the Nairobi Securities Exchange. FILE PHOTO | NMG
Investment brokers at the Nairobi Securities Exchange. FILE PHOTO | NMG 

Calls for rate cap review is pushing bank stocks up on the Nairobi Securities Exchange (NSE), as investor’s confidence rebound.

The calls to repeal the Banking Amendment Act, which was effected in September 2016 by various stakeholders led by the International Monetary fund (IMF) has seen bank counters rally, placing investors in profit-taking positions.

“We are of the view that recent subdued level of trades on various stocks had a ripple effect on NSE’s total equity turnover and investors return as a result. Investors’ confidence has now rebounded, particularly on banking stocks whose dismal performance has mainly been driven by the introduction of the rate cap in late 2016,” said analysts from Kingdom Securities.

Due to the introduction of the legislation, investors sold off or scaled down their holding in banking stocks for fear of constrained margins.

This is after loan charges were capped at four percentage points above the Central Bank Rate – the benchmark rate – which stands at 10 per cent, and put a minimum deposit compensation at 70 per cent of the benchmark rate.

The National Treasury has also proposed a Consumer Protection Bill on plans to review the legislation to enhance access to credit.