KCB ranked most attractive bank with long-term growth prospects

September 18, 2017
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Cytonn Investment’s Half-year banking sector report places KCB ahead of Co-operative Bank, Diamond Trust Bank and NIC Bank/COURTESY

NAIROBI, Kenya, Sept 13 – KCB Group is Kenya’s most attractive bank based on its strong franchise value and the intrinsic value score.

Cytonn Investment’s Half-year banking sector report places KCB ahead of Co-operative Bank, Diamond Trust Bank and NIC Bank.

National Bank of Kenya, HF Group and Standard Chartered Bank ranked the lowest respectively among the 11 listed banks.

“The franchise score measures the broad and comprehensive business strength of the company across 13 different metrics, and the intrinsic score measures the investment return potential,” said Investment Analyst Caleb Mugendi.

Equity Group improved to Position 5 from Position 6 due to impressive Net Interest Margin at 9.7 percent, above industry average of 8.6 percent, and a Return on average Equity of 19.7 percent, above the industry average of 18.1 percent, with the bank adequately diversified with Non-Funded income at 42.0 percent of the total operating income, higher than the industry average of 31.3 percent.

On the other hand, Standard Chartered dropped from position 8 in the previous year due to a low intrinsic valuation, with a potential return of -12. The bank has been weighed down by high non-performing loans at 13.1 percent, versus an industry average of 11.5 percent, which affected it’s  Franchise Value ranking.

The report also analyzed the results of the listed banks in the period so as to determine which banks are the most attractive and stable for investment from a franchise value and from a future growth opportunity perspective.

There has also been a consolidation in the sector, where smaller, uncompetitive banks are being acquired, and the entrance of large flobal banks such as Dubai Islamic Bank.

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