During the last 3 weeks of the month of August, bank share prices at the NSE have been on a steady rise as they come back from one of the deepest dive in share price history in the last decade. This includes top performing banks such as Standard Chartered (KES 162.25), ABSA Bank (KES 9.70), Equity Group (KES 35.65) and Co-operative Bank (KES 11.60).
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The sudden gradual gain in bank stocks can point out that cash is flowing freely in and out of various lenders and business ventures in the country amidst the banking sector being caught up with reduced profitability owing to the COVID-19 pandemic.
This places them in a very tight situation leaving most banking institutions to place their bets on government securities in a bid to increase risk management and manage optimal financial gain from the current economic strain.
The National Bank Of Kenya (KES 4.12) posted KES 675 million in profit before tax and exceptional items for the period ending September 30, 2019, representing a 45% increase over a similar period in 2018. The bank weathered a difficult operating environment to deliver such impressive results. The rise in profitability is attributed to growth in operating income during the period under review, with the MD Paul Russo adding that the future looks even more promising, since it is now part of a bigger stronger family, the KCB Group PLC (KES 36.75) as a subsidiary.
Recently, the Government of Kenya has made it quite impossible for banks to up their respective loan interest rates by freezing a bid by majority banks to raise the cost of loans following the scrapping of the loan rate controls on November 7, 2019.
Multiple bank executives told Business Daily that the CBK has not approved their submissions, forcing them to operate as if they are still under lending rate controls to avoid falling in trouble with the regulator. ~ Patrick Alushula, Business Daily.
This has made a number of banks to focus more of their participation back to government securities with the latest offering being a 3-year Treasury Bond in September seeking to collect KES 50 Billion for budgetary support, while the government reopens up a 15-year bond sold in 2010 and a 20-year paper sold in 2011. With the current rise in various banks ad their respective share price, this banks will definitely make a return before the end of the year. Invest in them!
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