Analysts have advised investors in Equity and Standard Chartered banks to sell their shares as profits in the banking sector shrink.
Standard Investment Bank (SIB) analysts in their latest brief to investors said banks were falling behind in terms of dividend payments to keep their counters attractive after the first three local lenders to release their results saw a decline in profits.
Feel the pinch
Kenya Commercial Bank (KCB) has offered shareholders Sh3 per share while Barclays and Stanbic Bank have offered Sh1 and Sh5.25 share respectively amid shrinking profits.
“On average, banks are maintaining their dividends despite dips in earnings. We, however, expect a drop of at least 4.4 per cent in dividends for StanChart driven by a projected 28.1 per cent decrease in earnings per share,” said SIB. It projects Equity Bank to have the highest cost-to-income ratio at 52.1 per cent, which will narrow its profits that are expected at six per cent in earnings per share.
Banks are feeling the pinch of the disruptions occasioned by last year’s prolonged electioneering period, made worse by the rate cap, with initial results suggesting an industrywide profit squeeze.
The country’s biggest lender by assets, KCB, saw the profits in its Kenyan business shrink three per cent from Sh19.7 billion in 2016 to Sh19.2 billion last year. Regional subsidiaries helped prop the group’s profits back to Sh19.7 billion.