NAIROBI: Equity Bank climbed from position four to top the latest ranking of Kenya’s listed commercial banks, even as Housing Finance maintained its spot at the bottom.
The Cytonn Banking Sector Report for the first half of this year, compiled by investment firm Cytonn, puts Equity in first position for its high return on capital, efficiency and revenue diversification. The lender also had the best return on average common equity (ROACE), meaning the bank used shareholders’ money optimally.
Housing Finance, however, came in last, which Cytonn said was a result of the mortgage financier’s poor profitability and liquidity issues. It also had the lowest ROACE score.
SIGNIFICANT ROLE
The report ranked Standard Chartered the second-best overall. The lender got high scores for its return on capital and deposit mobilisation, but was weighed down by low revenue diversification.
Third position went to KCB, which was followed by Barclays Bank, Co-operative Bank, NIC, I&M and Diamond Trust Bank, respectively.
Equity’s planned acquisition of ProCredit Bank (Congo) and its roll out of mobile money platform Equitel played a significant role in its improved performance, notes the report.
“The analysis was brought about by a need to be able to recommend to our investors which banks are the most stable from franchise value and from future growth opportunity perspectives,” said Maurice Oduor (pictured), Cytonn’s investment manager. The franchise value of a bank is the present value of the stream of profits that it is expected to earn in the near future.
On franchise value, Standard Chartered Bank emerged top, followed by Equity Bank. I&M and KCB were third and fourth, respectively.
CFC Stanbic, which was ranked the best in the first quarter of the year, went down to sit three places from the bottom at position eight. The report attributed the decline to the bank’s high cost to income ratio at 60 per cent, against an industry average of 48 per cent. The lender also had a low net interest margin of 5.3 per cent against an industry average of 8.3 per cent.
National Bank of Kenya was ranked second to last on the back of low cost containment and low-quality assets in its loan portfolio, with non-performing loans standing at about 10 per cent of its total loan book.
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