Equity Bank shares yesterday hit a 38-month high, overtaking East Africa Breweries Limited (EABL) as the second most valued firm at the Nairobi bourse.
The bank’s stock closed trading at Sh56, up from Sh54.50 on Monday, pushing its market value to Sh211.3 billion at the Nairobi Securities Exchange. The share is trading at the highest level since February 25, 2015, and has added Sh31 billion to owners over the past month.
Analysts have linked the rise in Equity Bank shares to its performance and dividends payout as bank stocks continue to benefit from news of plans to review the cap on lending rates — which has slowed the lenders’ profits.
“The upward trend for banks is generally driven by a talk by the Treasury of repealing the interest rate cap,” Genghis Capital research analyst Eric Munywoki said on phone.
“For Equity Bank, if you look at their performance for 2017, it was one of the best performers which recorded positive growth and there’s also the aspect of dividend payout. So there are investors holding their positions because of dividend payout.”
Equity dividend pay was unchanged at Sh2 per share.
Fewer loan defaulters, lower employee costs, and increased earnings from processing loans helped Equity Bank shrug off effects of the legal cap on lending rates to beat rivals in the profit growth rate.
The Kenyan unit of the lender posted a 7.2 per cent growth in net profit to Sh16.3 billion in the year to December, compared to Cooperative Bank whose earnings dropped 10.7 per cent to Sh11.6 billion while KCB was 2.5 per cent down to Sh19.2 billion.
In 2016, Kenya capped commercial lending rates at four percentage points above the central bank rate and set a minimum deposit rate, crimping profit margins for banks which have become more cautious in their lending.
The government has announced plans to review the rate cap law, giving a lift to banking stocks.
Equity Bank’s share rose the most among the top listed lenders, gaining 36.5 per cent over the past three months.
Barclays gained 32.8 per cent in the same period, KCB (25.3 per cent), Cooperative Bank (20.4 per cent) and Standard Chartered (11.9 per cent).
This saw Equity Bank overtake EABL as the second most valued firm at the NSE and opening a gap against KCB —which is Kenya’s largest bank in assets with a market value is Sh165.5 billion.
Safaricom is number one with a market value of Sh1.27 trillion.