The Kenya Commercial Bank (KCB) share price closed the week ended October 19, 2023, at Ksh.19.90 – a 79-month low.
KCB’s market capitalization has almost halved from Ksh.121.9 billion a year ago to Ksh.64.4 billion at the close of last week.
The stock has been on a downtrend, which could be a result of investor and market sentiment on some of the group’s fundamentals including its stock of non-performing loans (NPLs) and the Kenyan subsidiary’s thin capital ratios.
Deteriorating Asset Quality: In H1 2023, KCB Group’s stock of NPLs grew by 34.8% year-on-year to reach Ksh.182 billion, equivalent to 18.9% of the loan book [H1 2022: 23.7%]. The Kenyan banking unit closed H1 2023 with Ksh.141.5 billion in gross NPLs, equivalent to just over 21.2% of the loan book.
The sticky NPLs are among the factors that keep investors worrying about the impact on the quality of earnings, and part of this is transmitting through to the market and the continued depreciation of the stock.
Looking Ahead: In H1 2023, KCB recorded Ksh.16.1 billion and Ksh.13.9 billion in net income at the Group and Kenya subsidiary levels, down 18.3% and 15.6% year-on-year, respectively.
Excluding the impact of COVID-19 in 2020, this was the first time the Group recorded a decline in net income in H1 since 2017 when it fell by 0.2%. KCB Group did not pay a dividend in H1 2023, with earnings per share coming in at KES 9.71 [2022: 12.15], and investors will be looking to see whether the bank will pay out a dividend.
Market Cap Shape-Up: Over the last year, there has been a shake-up in the top 5 most valued banking companies at the NSE.
While Equity Group remains the leading stock, it has shed value, losing 17.20% in share price and market capitalization in the period.
Among the major listed lenders, KCB Group has lost the most value over the last year.
Source: Mwango Capital, NSE
