PriyaPatelTLDR:
Kenyan bank stocks are expected to surge in anticipation of the full-year reporting season that begins in February, thanks to higher dividend prospects and higher earnings. AIB-AXYS Africa advises buying six key Nairobi Securities Exchange-listed banking stocks.
Key Points:
- Kenyan bank stocks are poised for a surge with higher dividend prospects and earnings anticipation.
- AIB-AXYS Africa advises buying six key Nairobi Securities Exchange-listed banking stocks.
- Regional expansion, innovative customer offerings, and digital channels are expected to boost Kenya’s banking sector.
Kenyan bank stocks are expected to see a surge leading up to the full-year reporting season in February. A report by The East African highlighted that the banking sector stocks are early 2024 stock picks due to their stable earnings momentum in the first three quarters of the previous year.
AIB-AXYS Africa, a research outfit, has recommended purchasing six of the 11 Nairobi Securities Exchange (NSE) listed banking stocks. These banks include Absa Bank Kenya, Co-operative Bank of Kenya, Equity Group, DTB Group, NCBA Group, and I&M Group. The growth of these banks is expected to be driven by regional expansion, innovative customer offerings, and the adoption of digital channels.
Equity Group is expected to experience an increase in interest income from the repricing of loans under its risk-based pricing model and organic credit demand. I&M’s growth will be driven by innovative customer value propositions, such as unsecured personal lending and waived bank-to-mobile transaction fees.
Absa Bank Kenya is expected to see improved earnings due to the roll-out of risk-based pricing and increasing traction of its digital channels. Cooperative Bank’s growth will be anchored by resilience in asset quality. However, the growth potential of Kenya’s banking sector is hindered by factors such as declining asset quality, increasing funding costs, and weakening forex trading profits.
The performance of banking sector stocks in 2024 has been uneven. Equity Group Holdings’ share price has grown by 6.2% this year, while I&M’s share price remains unchanged. Non-banking stocks, such as CIC Insurance Group and Jubilee Holdings, also have a buy recommendation based on their earnings momentum and growth in long-term insurance.
Overall, the anticipated surge in Kenyan bank stocks is driven by higher dividend prospects and the expectation of improved earnings, supported by factors such as regional expansion and the adoption of digital channels.
