Equity Bank races ahead of EABL in investor wealth at the NSE

Equity Bank #ticker:EQTY has overtaken East African Breweries Limited #ticker:EABL as the second largest company by market capitalisation or investor wealth on the Nairobi Securities Exchange (NSE) #ticker:NSE.

The bank was worth Sh186 billion as at August 16, 2018, compared to EABL’s Sh168.4 billion on the same date. For a long time, EABL has been the second largest firm after telecoms giant Safaricom which is valued Sh1.15 trillion as of last Thursday. But the brewing giant has lost 14.5 per cent of its market value in the past six months and 20.8 per cent in the past 12 months. During the same time, the bank has gained 17.06 and 13.7 per cent respectively.

Equity’s share has benefited from rising profitability despite the implementation of the rate cap from September 2016. Last week, the lender reported a 17.52 per cent growth in net profit to Sh11 billion for the six months to June.

Genghis Capital said that Equity Bank has been leveraging on keeping expenses on check, muted staff costs and investment in government securities to raise its net profit.

“The cost-to-Income ratio declined to 50.4 per cent (compared to 51.0 per cent in first half 2017) on account of the increased use of digital platforms. Currently, 97 per cent of transactions (55 per cent transaction value) as well as 93 per cent of loans disbursed (22 per cent value of loans disbursed) are being transacted outside the branch,” said Genghis Capital.

EABL’s net sales grew by 4.6 per cent but the profit after tax fell by 14.7 per cent to Sh7.3 billion for the financial year ending June 2018 – showing the struggle the firm is undergoing converting sales into profit.

Earlier this year, analysts at Citi Global Markets projected the lower net income citing challenges the brewer was facing in the region, ranging from excise tax increases to high debt levels.