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Equity Group Holdings has been ranked as the most attractive bank in Kenya in the Cytonn H1’2022 banking sector report, backed by a strong franchise value and intrinsic value score.
The franchise score measures the broad and comprehensive business strength of a bank across 13 different metrics, while the intrinsic score measures the investment return potential.
Co-operative bank improved to position two in the half year 2022 from position four in Q1 2022 backed by an improvement in its net interest margin to 8.4 per cent from the 8.3 per cent it recorded in the first quarter of 2022.
Absa bank took the third position while KCB Group declined to position four in H1 2022 from position two in Q1 2022 due to an increase in its Non-Performing Loans (NPL) ratio to 21.4 per cent from 16.9 per cent in the first quarter of 2022.
From the report themed ‘Earnings Growth Signify Banking Sector Resilience’, Core Earnings Per Share (EPS) for the listed banks recorded a weighted growth of 34.0 per cent in H1 2022 from a weighted growth of 136.0 per cent recorded in H1 2021 whereas the Asset Quality deteriorated as the gross NPL ratio increased marginally by 0.3 per cent points to 13.0 per cent in H1 2022 from 12.7 per cent in H1 2021.
“The listed banks’ management quality on the other hand improved, with the Cost to Income ratio increasing by 3.5 per cent points to 53.6 per cent, from 57.1 per cent recorded in H1 2021 as banks continued to reduce their provisioning levels,” said Stellah Swakei, Investment analyst at Cytonn Investments.
During the period under review, the listed banks continued to borrow from international institutions to strengthen their capital position and to boost their capacity to lend to Micro Small and Medium Sized Enterprises (MSMEs).
Equity group received Sh18.6billion from the International Finance Corporation (IFC) in January 2022.
Moreover, IFC disclosed an arrangement of extending Sh18.0billion to KCB Group in form of a senior unsecured loan in August 2022.
Commenting on the report, Cytonn Investments analyst Kevin Karobia noted that only one activity in terms of mergers and acquisitions was recorded during the review period as the Kenyan banks look forward to distributing their risks and reducing their reliance on the Kenyan market by diversifying to other regions in the continent.
“In light of the above, KCB Group PLC announced that it had entered into a final agreement with shareholders of Trust Merchant Bank (TMB) to acquire an 85.0 per cent stake in the Democratic Republic of Congo (DRC) based lender,” said Karobia.
The listed banks recorded a weighted average deposit growth of 11.3 per cent slower than the 18.4 per cent growth recorded in H1 2021 indicating a reduced investment risk in the business environment.
Non-Funded Income grew by 24.4 per cent compared to the 19.2 per cent growth recorded in H1 2021 attributed to the faster growth in the fees and commission by 18.0 per cent compared to the 16.6 per cent growth in H1 2021.
The performance of the Banking sector in H1 2022 was shaped by regulation, regional expansion through mergers and acquisitions, asset quality and capital raising.
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