Capital Markets
KCB, Co-op Bank fight for second place in market value rankings
Monday September 18 2023
Kenya Commercial Bank branch along Mama Ngina Street in Nairobi County on March 15, 2023. PHOTO | DENNIS ONSONGO | NMG
Co-operative Bank of Kenya and KCB Group are now nearly tied in market capitalisation, with the outcome reflecting the major share price fall that has hit the latter.
Co-op Bank’s market value stood at Sh70.1 billion on Friday, having dropped marginally since the first trading day of the year when it closed at Sh70.9 billion.
KCB Group’s market capitalisation meanwhile fell from Sh123.2 billion to Sh71.6 billion over the same period. This represents a decline of 41.8 percent that gained pace in recent weeks after the country’s second-largest bank reported lower earnings and a surge in provisions for loan defaults in the half year ended June.
Read: KCB market value falls below Sh100bn as bear run deepens
At the start of the year, KCB’s market value was ahead of Co-op Bank by Sh52.2 billion, a gap that has since narrowed to leave the two lenders fighting for the second rank in paper wealth.
Equity Group, the country’s largest bank, has meanwhile expanded its market value lead over its rivals despite a fall in its share price.
The bank’s capitalisation dropped from Sh170 billion to Sh141.1 billion, equivalent to a decline of 16.98 percent.
At current levels, Equity is valued at almost exactly KCB and Co-op Bank combined. At the beginning of the year, Equity was ahead of KCB by Sh46.7 billion. This lead has now expanded to Sh69.4 billion.
The rivalry between KCB and Co-op Bank for second place is among the upheavals in the league table of Kenya’s listed banks.
Standard Chartered Bank Kenya has also closed in on NCBA Group with their market capitalisation standing at Sh60.2 billion and Sh61.6 billion respectively as of Friday.
StanChart has grown its market value by Sh5.4 billion since the start of the year while NCBA has lost Sh2.5 billion over the same period, leading to the convergence.
The biggest change in shareholder paper wealth was seen at KCB whose chief executive Paul Russo, now in his second year at the helm, is taking measures to address the legacy bad debt at the lender.
KCB reported a 20 percent net profit drop in the six months to June, nearly tripling its provisioning for loan defaults. Its net profit fell to Sh15.5 billion from Sh19.5 billion posted in the preceding similar period.
KCB’s operating expenses increased by 60 percent to Sh50.61 billion while provisions for non-performing loans jumped 2.4 times to Sh10.2 billion from Sh4.32 billion.
Analysts say investors have overreacted to the bank’s spike in provisions, placing a buy recommendation on the stock.
“We retain our BUY recommendation on the lender’s share price with an implied value of Sh36.60. Our recommendation is based on the company’s strong growth in revenues,” analysts at Kingdom Securities said.
Read: Co-op Bank’s half-year earnings rise to Sh12bn
All the listed banks remain undervalued by historical standards, with the lenders having previously traded at multiples of their net assets before the onset of the bear run.
