Renaissance Capital has advised investors to continue buying shares Equity Group, Cooperative Bank of Kenya and KCB Group shares saying their prices are expected to rise.
A projection by Renaissance Capital, a day after the National Assembly removed the interest rate cap, indicates that Equity Group share price will rise to Sh58.3 per share, KCB Sh56.5 per share while Coop Bank will rise to Sh21.4 per share.
Renaissance Capital said following the deletion of Section 33 of the Banking Amendment Act, they revised the transaction processing system (TPs) of the three banks which they expect to increase across the board by 20 to 50 per cent.
“Following the development, we revise our TPs higher by 32 per cent. We think Equity Bank remains best positioned in a higher rate environment because it has excess liquidity,” it said.
According to Equity’s first half report, the loans to assets and loans to deposits ratios stood at 50 per cent and 70 per cent, respectively, compared to KCB‘s 64 and 85 per cent respectively.
AcquisitionsThe report said Co-op Bank, compared to the three banks, has relatively cleaner exposure to the Kenyan banks’ earnings recovery as there are no mergers and acquisitions in sight.
“We now see Net interest margin (NIM) improving 50 to 60 basis points per annum over the next three years, and credit growth and return on equity improving to 15 to 16 per cent and 20-25 per cent, respectively. Let investors maintain buy because it will improve by 36 per cent,” the report said.
It said Equity has been shortening the duration of its loan and bond books over the past year, which not only gives it ammunition to quickly increase credit flows, but ensures its loan book reprices relatively more quickly.
