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Banks rally ahead of dividend season

Stockbrokers at the Nairobi Securities Exchange.
Stockbrokers at the Nairobi Securities Exchange. Lenders are due to release full-year results by end of March. FILE PHOTO | NMG 

Bank stocks have been on an upward trend at the NSE this year on higher investor demand driven by cheap valuations and an eye on dividend yields ahead of full-year reporting.

Ten out of the 12 listed lenders have recorded a price gain this year, led by the large-cap stocks of Equity Holdings #ticker:EQTY and KCB #ticker:KCB. This has given investors in the segment a gain of Sh39.4 billion in market capitalisation in the last three weeks, bringing their total market value to Sh664.4 billion.

In contrast, the lenders ended 2018 on a negative footing, where nine had a negative price movement—eight by double digits in percentage terms — as they were swept down by the bear run that gripped the market for most of the year.

The resulting lower prices have been touted as attractive for entry by investors looking to make a capital gain in the future, as well as promising a higher dividend yield on the stocks once results are announced since banks are expected to keep growing profits.

“We have observed the uptick in share prices for a number of banks, which has led to investors making some gains. Attractive valuations is one of the key drivers that investors are looking out for in the market,” said Kingdom Securities senior research analyst Mercyline Kyalo.

“With the reporting season coming up, it could also be an indication that investors may be wanting to lock in low prices ahead of the dividends, as this translates to a higher dividend yield.” Listed lenders reported a 13.2 percent rise in cumulative net earnings for the nine months to September 2018, at Sh73.8 billion, indicating that full-year earnings could top those of 2017.

Lenders are due to release full-year results by end of March with share prices generally tending to rise ahead of the reportage as investors jostle for positions with an eye on dividends.

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