Top bank owners booked billions of shillings in capital gains at the Nairobi Securities Exchange (NSE) in the past one year, defying the difficult operating environment that has been subdued by the coming into force of a law capping interest rates and the politics-driven slowdown of the economy.
Latest NSE data shows that the market capitalisation or investor wealth in the 11 listed lenders rallied by 48 per cent or Sh229 billion in the last 12 months to Sh704 billion – significantly increasing paper wealth of top owners.
Billionaire bank chief executives James Mwangi of Equity Bank and Gideon Muriuki of Co-operative Bank , the Ndegwa family of NIC Bank and other high net worth investors such as Baloobhai Patel, who has a stake in Co-operative, Barclays and DTB , have been the big beneficiaries of the share price rally.
Mr Mwangi, who holds a direct stake of 3.4 per cent in Equity as per the latest available data dated December 2016, has seen the value of his stake rise Sh2.06 billion to Sh5.52 billion, in line with the Equity share’s 59 per cent rally to Sh43 a share.
Mr Muriuki’s 110.3 million shares in Co-operative, equivalent to 1.88 per cent of the lender’s issued shares, are now worth Sh1.91 billion having gained Sh700 million above its worth a year earlier.
In February last year, the Co-op Bank CEO held 100.2 million shares, then equivalent to 2.05 per cent of the lenders stock.
The bank approved 977 million new shares in a one-for-five bonus last May, giving Mr Muriuki an additional 20.1 million units, meaning he has sold some 9.9 million shares since the bonus was issued. Co-operative’s stock has gained 44 per cent to Sh17.30 in the past 12 months.
Meanwhile, the Ndegwa family, which owns a quarter of NIC Bank, has seen the value of their 160 million shares rise by Sh1.44 billion to Sh5.72 billion. The bank’s stock is up 34 per cent to Sh35.75 since February 2017.
Tough business environment
The gains in bank stocks came in spite of a difficult operating environment that has seen the lenders’ interest income fall due to the rate cap and demand for loans plummet, slowing down profitability.
Analysts said that the sharp dip in share prices that followed the coming into effect of the rate cap law in August 2016 meant that bank stocks offered very attractive entry points in February last year.
Ms Muriungi said that the rally has been sustained this year because investors are seeing the possibility of the rate cap law being repealed, sparking a possible revival of the outsized bank profits of the pre rate caps levels.