Cytonn Investments has listed KCB Group as the most attractive bank in Kenya in its Financial Year 2019 Banking Sector Report. This is supported by the group’s strong franchise value and intrinsic value score. The franchise score measures the broad and comprehensive business strength of a bank across 13 different metrics, while the intrinsic score measures the investment return potential. I&M Holdings was rated second followed by Co-operative Bank of Kenya, Equity Bank Holdings Limited was fourth. Others in that order were Stanbic Bank Holdings Limited, Absa Bank, NCBA Group, Standard Chartered Bank of Kenya and Housing Finance Group. KCB Group Plc took the top position from the future of growth opportunity perspective having a better capacity to generate profits from its core business. Diamond Trust Bank Kenya took the top position from a future growth opportunity perspective; however, it had a weak franchise score moving it to position 5 on the weighted score. Housing Finance came in 10th position on the back of weak franchise rankings scores as well as a non-promising future growth opportunity perspective as a result of lack of proper cost efficiency structure. The report, themed “Increased Consolidation in the Banking Sector”, states that the banking sector has witnessed a number of consolidation activities in the Financial Year of 2019 as players in the sector were either acquired or merged. The report also shows that Kenya remains overbanked as the number of banks is relatively high compared to the population. “Increased consolidation will reduce the number of banks in the country which currently stand at 38, thus reducing the commercial banks to population ratio from the current 0.8x. We expect an increase in consolidation activities going forward which will lead to the formation of relatively larger, well-capitalized and possibly more stable entities,” says the report. There has been a continued revenue diversification drive by Banks through growing of the Non-Funded Income (NFI) segment, which has seen the average revenue mix of Funded to NFI for listed banks in FY’19 coming in at 63:37 compared to 67:33 recorded in FY’2018. “We however believe the higher growth was due to a correction from the decline in 2018 which was a one-off adjustment as a result of the implementation of the effective interest rate which required banks to amortize fees and commissions on loans over the tenor of the loans”, said Maryanne Ng’ang’a, Investment Analyst at Cytonn Investments. […]
Report: Top 10 most attractive banks in Kenya
Cytonn Investments has listed KCB Group as the most attractive bank in Kenya in its Financial Year 2019 Banking Sector Report. This is supported by the group’s strong franchise value and intrinsic value score. The franchise score measures the broad and comprehensive business strength of a bank across 13 different metrics, while the intrinsic score measures the investment return potential. I&M Holdings was rated second followed by Co-operative Bank of Kenya, Equity Bank Holdings Limited was fourth. Others in that order were Stanbic Bank Holdings Limited, Absa Bank, NCBA Group, Standard Chartered Bank of Kenya and Housing Finance Group. KCB Group Plc took the top position from the future of growth opportunity perspective having a better capacity to generate profits from its core business. Diamond Trust Bank Kenya took the top position from a future growth opportunity perspective; however, it had a weak franchise score moving it to position 5 on the weighted score. Housing Finance came in 10th position on the back of weak franchise rankings scores as well as a non-promising future growth opportunity perspective as a result of lack of proper cost efficiency structure. The report, themed “Increased Consolidation in the Banking Sector”, states that the banking sector has witnessed a number of consolidation activities in the Financial Year of 2019 as players in the sector were either acquired or merged. The report also shows that Kenya remains overbanked as the number of banks is relatively high compared to the population. “Increased consolidation will reduce the number of banks in the country which currently stand at 38, thus reducing the commercial banks to population ratio from the current 0.8x. We expect an increase in consolidation activities going forward which will lead to the formation of relatively larger, well-capitalized and possibly more stable entities,” says the report. There has been a continued revenue diversification drive by Banks through growing of the Non-Funded Income (NFI) segment, which has seen the average revenue mix of Funded to NFI for listed banks in FY’19 coming in at 63:37 compared to 67:33 recorded in FY’2018. “We however believe the higher growth was due to a correction from the decline in 2018 which was a one-off adjustment as a result of the implementation of the effective interest rate which required banks to amortize fees and commissions on loans over the tenor of the loans”, said Maryanne Ng’ang’a, Investment Analyst at Cytonn Investments. […]
