Corporate News
KCB Group chief executive Joshua Oigara at a past function. KCB’s recent
share price rally has lifted its valuation above top rival Equity Bank,
making it Kenya’s highest priced lender. FILE PHOTO | NATION
By VICTOR JUMA
In Summary
- KCB’s recent share price rally has lifted its valuation above top rival Equity Bank, making it Kenya’s highest priced lender with a market capitalisation of Sh174.5 billion.
- Equity Bank, which has held the position of highest valued bank in recent months, has been relegated to the second position with a market capitalisation of Sh171.2 billion.
- The two banks have been locked in a battle for supremacy, with investors assessing which institution offers the highest returns and a more efficient operation in the fiercely competitive banking sector.
KCB’s recent share price rally has lifted its valuation above top rival Equity Bank, making it Kenya’s highest priced lender with a market capitalisation of Sh174.5 billion.
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Equity Bank, which has held the position of highest valued
bank in recent months, has been relegated to the second position with a
market capitalisation of Sh171.2 billion.
KCB’s rapid rise has seen its price tag jump by
14.71 per cent in the past five days, following the release of its
first-half results.
“Being the only bank with loans-to-risk-weighted
assets greater than 100 per cent, KCB stands out as the leading bank
able to generate higher return on average equity without growing its
total (loans) book,” said Standard Investment Bank (SIB) in a research
note prior to release of the half-year performance.
KCB’s net profit in the first six months of the year rose 13.6 per cent to Sh8.1 billion, staying ahead of Equity’s which had jumped 21.4 per cent to Sh7.6 billion as both lenders benefited from higher interest and transaction-based income.
The two banks have been locked in a battle for
supremacy, with investors assessing which institution offers the highest
returns and a more efficient operation in the fiercely competitive
banking sector.
While KCB has a head start in the form of a larger
asset base and loan book, various metrics have painted a mixed picture
for investors seeking to choose one institution over the other.
SIB noted that KCB could record growth by simply
changing its mix of loan assets and correctly pricing additional risks,
noting that the bank has signalled an intention to increase the share of
credit to the more lucrative SME borrowers.
KCB’s loan book stood at Sh186.5 billion in June,
raising its total assets to Sh439.7 billion while Equity’s loans and
total assets are Sh186.5 billion and Sh302.9 billion respectively.
Equity runs a more efficient operation based on the
cost-to-income ratio standing at 52 per cent, compared to KCB’s 57.5
per cent. This means that KCB is spending more to generate earnings than
Equity.
KCB has in the past few years moved to cut down its
expenses, including retrenchment of its large workforce to keep a lid
on staff costs. This has seen an improvement in its cost to income ratio
that peaked at 69 per cent in 2009.
Equity’s lower costs have been linked to its
economies of scale, with the lender controlling the largest share of the
retail banking segment with an estimated eight million customers.
The bank’s relatively higher efficiency has also
seen it beat KCB in terms of return on equity (RoE), a measure of an
institution’s payback to shareholders. Equity’s RoE in June stood at
14.3 per cent, leading KCB by 1.7 percentage points.
vjuma@ke.nationmedia.com
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