Half of bank stocks touch 52-week low as investors lose Sh84.7b in two days

Investors in bank stocks are crossing their fingers that as the next trading session at the Nairobi Securities Exchange begins tomorrow, there will be no repeat of the last two sessions.

On Thursday and Friday, six banking stocks succumbed to 52-week low prices, while three others survived the dismal record by mere cents as investors reacted to news that the cost of credit has been capped.

Thursday’s bear run saw all 11 banking stocks sink into the red as Sh46.98 billion of investors’ money was wiped out and a further Sh37.76 lost on Friday. The trading floor was so harsh for bank stocks that they took the first five slots of top losers for the week.

NSE data for the two trading sessions shows that the NSE 20 index, which tracks the performance of 20 stocks, closed the week 10.1 per cent down compared to previous week.

Data compiled by Standard Investment Bank (SIB) analysts shows that turnover slumped 30.3 per cent week-on-week as foreign investor trading declined by 10.2 per cent to 57.9 per cent.

Heaviest beating

News that President Uhuru Kenyatta had assented into law the Bill to cap interest rates caused shockwaves in the banking sector, which has now shed 24.3 per cent of its market capitalisation since January.

“Investors are pricing in the worst possible scenario. The reality is that we have a prudent Central Bank of Kenya (CBK) and even application of the law may not go for worst,” said SIB on the performance of bank stocks.

Share prices of Equity Bank, Kenya Commercial Bank, Housing Finance and NIC Bank touched their lowest levels in 52 weeks of trading, as did Co-operative Bank and I&M.

I&M Bank took the heaviest beating. In just two days, its share dropped by 18.69 per cent, from Sh107 on Thursday to Sh87 on Friday. In the five days of trading, foreign investors sold off shares to retreat with Sh19.1 million, with most of it happening in the last two days of the trading week.

Equity Bank’s share dropped by 18.06 per cent in two days of trading to close the week at Sh29.50 per share. It took the second spot on the bourse in terms of foreign net outflows. Investors got out Sh6.98 million.

Equity’s market capitalisation shrunk, costing investors Sh24 billion. Its CEO James Mwangi had warned the NSE would be in for tough times if the President assents the Bill into law.

“About 50 per cent of investors at Equity are foreigners – 70 per cent of the NSE is controlled by foreigners. The stocks will cease to be attractive and foreigners will retreat,” he told journalists two days before Uhuru’s decision.

Co-operative Bank and NIC Bank closed the top four stocks on the bourse that had the highest net foreign outflows. The battering of bank stocks saw Sh12 billion of investors’ wealth wiped out of Co-operative as foreign investors retreated with Sh5.1 billion. In just two days, its share price was down 18.49 per cent, its lowest in 52 weeks.

NIC Bank stock succumbed to a low of Sh24 per share in a week that saw investors suffer unrealised losses of Sh2.9 billion. Foreign investors made panic sales of Sh4.8 billion as anxiety gripped the market. In the two sessions, KCB share lost value by 17.56 per cent to cost investors Sh17.6 billion. Its strong performance in the first three days of the week supported it to remain among top five stocks with net foreign inflows.

“Most of its performance, together with Stanchart, was before President’s decision. After that, volumes traded were small since demand was almost non-existent,” Faith Waitherero, an SIB analyst told Weekend Business. She added that KCB and Equity were the hardest-hit stocks as volumes traded reduced significantly compared to normal days of the week.

Barclays Bank, Diamond Trust Bank (DTB) and National Bank of Kenya escaped touching the 52-week low mark by just cents.

Barclays’ share shed 11.9 per cent of its value as investors lost Sh6.2 billion in just two days. It is the banking stock with the highest number of issued shares- at 5.43 billion followed by Co-operative Bank (4.89 billion) and Equity with 3.77 billion shares.

DTB, which suffered the highest beating on Thursday forcing the market to remove the rule that stops stocks from losing more than 10 per cent in a single trading session, saw its share drop to Sh140 on Friday from 159 it had on Thursday morning.

This beating of DTB shares translated to over Sh5 billion of investors’ money getting wiped out. Housing Finance was defiant on Thursday, dropping by just 3.4 per cent, but on Friday, it went into a free fall. It shed 12.8 per cent to wipe Sh722.4 million of investor wealth.

The survivors

CfC Stanbic, National Bank and Standard Chartered Bank were the only stocks that survived double-digit per cent drop. In fact, having lost 8.1 per cent and 2.8 per cent respectively, CfC and NBK were the only banking stocks that rebounded on Friday.

But even so, cumulatively, the three stocks cost investors Sh7.8 billion in just two trading sessions. Even though Kenya Bankers Association boss Habil Olaka said the poor performance of the stocks was a “normal reaction” and that stocks will rebound very soon, SIB’s analysts differ.

“All the way to the end of this year, I don’t think the market will recover. By the time CBK starts sorting quite a number of issues in the new law, it will also take time for investors to understand how the banks will operate with it,” said Ms Waitherero.

Since the rest of the sectors are interlinked with banks through trade or financing, Waithereo says the market will feel the trickle-down effects. She added that it may be the reason a counter like Safaricom recorded a drop.