Equity regains top slot on share rally

Money Markets

Equity Bank said this week it plans to sell its stake in Housing Finance. Photo/FILE 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

In Summary

• Equity Bank becomes third-largest firm after Safaricom and EABL on NSE at Sh175 billion.
• The lenders’ share gained 10 per cent over the last month to Sh47, which is a 50 per cent gain year-to-date.
• The latest boost to Equity stock is this week’s announcement of sale of its 24.76 per cent stake in Housing Finance to Britam.

Equity Bank has regained the position of Kenya’s largest lender by market capitalisation following a rally at the bourse that saw the stock gain 10 per cent in June alone.

 

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Equity’s valuation stands at Sh175 billion, making it the third-largest listed company after Safaricom and East African Breweries Ltd. The lenders’ share gained 10 per cent over the last month to Sh47, which is a 50 per cent gain year-to-date.

KCB, which for the first five months of the year was the largest lender by capitalisation, has slipped to second with a value of Sh155.2 billion despite own rally that has lifted the stock to a one-year high of Sh52 per share.

“Corporate actions have been a big driver for bank stocks, such as Equity with the MVNO licence and others like Co-operative, DTB and Housing Finance have made bonus and rights issue announcements. For KCB it has been more from the better than expected financial performance,” said Kestrel Capital analyst Kuria Kamau.

The latest boost to Equity stock is this week’s announcement of sale of its 24.76 per cent stake in Housing Finance to Britam, with investors taking positive views to the intended transaction that pushed the three counters higher.

“We expect Equity to become more aggressive in growing its own mortgage loan book now, especially at the low-end market which has high potential due to housing shortage,” said Old Mutual Securities analyst Geoffrey Maina.

READ: Equity keeps rivals guessing as it exits Housing Finance

The deal will see Equity book profit of up to 500 per cent on its HF stake given the rise in the mortgage lender’s share price over the past one year.

Equity is also banking on its MVNO licence to make inroads into the money transfer business, although the move has elicited resistance from the country’s biggest telco Safaricom.

KCB on the other hand is seen by analysts as continuing to benefit from positive investor sentiment after quarter one performance where it cemented its position as Kenya’s most profitable bank.

The two lenders attracted the most foreign inflows in June at the bourse.

Foreign inflows to KCB stood at Sh1.4 billion, with Equity at Sh1.2 billion ahead of KenolKobil which attracted net foreign inflows of Sh248 million.

While Equity has overtaken KCB in valuation, the latter maintained its lead in profitability for the first quarter after reporting a 28.7 per cent growth in net profit to Sh3.9 billion, compared to Equity’s Sh3.87 billion.

KCB’s performance was boosted by an 11 per cent growth in interest income to Sh10.8 billion, as non-interest revenue rose 19 per cent to Sh4.8 billion.

Equity’s growth in net profit in the first quarter was helped by rise in income from fees and commissions.