- Kenyan bank stocks are poised for a surge with higher dividend prospects and earnings anticipation.
- AIB-AXYS Africa advises buying six key Nairobi Securities Exchange-listed banking stocks.
- Regional expansion, innovative customer offerings, and digital channels are expected to boost Kenya's banking sector.
6 banking stocks to watch for higher dividends and earnings in Kenya
Kenyan bank stocks are expected to surge in anticipation of the full-year reporting season that begins in February, thanks to higher dividend prospects and higher earnings.
6 banking stocks to watch for higher dividends and earnings in Kenya
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According to a report by The East African, an East African-centric news publication, “Listed banking sector stocks lead the way as early 2024 stock picks on the back of a stable full-year earnings momentum through the first three quarters of last year.”
AIB-AXYS Africa, a research outfit, put a buy recommendation on six of 11 Nairobi Securities Exchange (NSE) listed banking stocks, these banks include, Absa Bank Kenya, Co-operative Bank of Kenya, Equity Group, DTB Group, NCBA Group, and I&M Group.
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“We anticipate the lender’s growth to be driven by fast-growing regional subsidiaries, especially DRC and Rwanda units, as well as insurance cross-selling. We expect digital lending channels to enhance economies of scale and support cost rationalization,” the analysts stated.
Equity Group should realize an increase in interest income from the constant repricing of loans under its current risk-based pricing model and organic credit demand.
“I&M’s growth is meanwhile pegged on innovative customer value propositions including unsecured personal lending and waivers of bank-to-mobile transaction fees,” the report notes.
“The roll-out of risk-based pricing and widening traction of digital channels is expected to set up Absa Bank Kenya for improved earnings while resilience in asset quality is seen anchoring growth for Cooperative Bank,” it adds.
Factors such as declining asset quality, growing funding costs, and weakening forex trading profits are considered to be obstructing the observed growth momentum for equities in Kenya's banking sector.
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With Equity Group Holdings' share price growing by 6.2 percent to Ksh35.75 ($0.22) as of Tuesday from Ksh33.65 ($0.21) at the close of 2022, the performance of the banking sector's stocks so far this year has been uneven.
“I&M share price meanwhile stands unchanged at Ksh17.50 ($0.11) from the close of 2022.
CIC Insurance Group and Jubilee Holdings make up non-banking stocks with a buy recommendation based on their earnings momentum and growth in long-term insurance respectively.
Jubilee’s stable dividend payment record is also expected to be an attraction to investors.
Standard Chartered Bank Kenya closed last year with the highest dividend yield among bank counters at 13.58 percent,” the report notes.
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