Kenya Commercial Bank Group is the most attractive bank in Kenya, a new investment report launched Monday states.
According to Cytonn Investments FY’2017, since 2015 to date, KCB is the smartest bank in the country following a progress supported by a strong franchise value and intrinsic value score.
During the launch of the report in Nairobi Cytonn’s Investment Manager Maurice Oduor said that KCB Group was ranked top on the back of a high return on average equality of 19.5 percent compared to an industry average of 13.8 percent.
In addition, the bank also scored on optimal loan to deposit ratio of 84.6 percent compared to an industry average of 83percent.
Equity Group was ranked position two after recording the highest return on equity at 21.6 percent and the best asset quality with the lowest Non-performing loans ratio of 6.2 percent compared to the 12.4 percent industry rate.
Mr. Odour explained that the franchise score measures the broad and comprehensive business across 13 different metrics, while the intrinsic score measures the investment return potential.
He said the Kenya banking sector has witnessed a challenging operating environment following the capping of interests rates, coupled with tighter regulation.
Banks will put more emphasis on alternative revenue streams to boost their Non-Funded income and adopt an efficient operating model through alternative banking channels and digitizing in order to remain profitable under the tough operating environment, said Odour.
He added, We have looked at four focus areas which the regulations, diversification, efficiency and asset in this report.
We expect the relatively challenging operating environment for the banking sector to persist in 2018, especially with the coming into effect of IFRS 9, said Caleb Mugendi, Investment Analyst at Cytonn Investment.
Mugendi said the Central Bank of Kenya stated that banks will have to take a full hit in the provisions for loans issued from onwards, which will reduce capital positions for banks.
With the deteriorating asset quality, we expect loan disbursement in order to address the concerns around asset quality and enhance cost rationalization measures, in a bid to protect their profitability, added Mugendi.
Source: Kenya News Agency