Bank stocks yet to recover after interest capping

Banking stocks at Nairobi Securities Exchange (NSE) are yet to recover from the market shock that hit them following a decision by the government to cap interest rates.

Of the 11 counters on the bourse, only Housing Finance has managed to rebound to Sh16.

This is the price it was trading at 24 days ago when President Uhuru Kenyatta signed into law the Banking (amendment) Act to cap the price of loans at a maximum of 4 per cent above Central Bank rate (CBR).

Despite some green shoots on the bourse from banking counters, the recovery has been slow, with analysts attributing it to the uncertainty that surrounded the interpretation of the amended laws.

Central Bank of Kenya Governor Patrick Njoroge left the sector guessing until the last day to the operationalisation of the law when he issued a circular on way forward.

The biggest casualty has been Equity bank, Kenya’s largest bank by customer base and also the lender with highest number of issued shares on the bourse. In just 24 days, its share has dropped by more than 29 per cent.

On Friday, which was 37th week of trading since January, Equity wrapped up the week at an average of Sh25.50. On Wednesday, 24, 2016, the day the amendment to the law was passed, it was priced at Sh36. That means that selling its share now would cause investors a loss of Sh39.6 billion.

However, a weekly market wrap by Standard Investment Bank analysts showed the share closed the week as most attractive for foreign investors.

Net foreign inflows hit Sh210.8 million on a week that saw the share emerge as top mover on the bourse displacing Safaricom for the first time in two months. Among banking stocks, only Standard Chartered bank came closer with net inflows of Sh21.6 million.

Kenya Commercial Bank has also seen its share take a beating. Its share has lost 19.85 per cent of its value since the new regime of interest rate set in. it closed the week at Sh26.25.

I&M bank, which had suffered the highest beating in the first two days of trading after the cap, has recovered a bit. It is however, still among the top three losers in the 24 days.

Its share price has shed Sh21 and was trading at Sh138 by close of market last Friday. Other stocks that have lost by more than 10 per cent include Diamond Trust bank (13.21 per cent), Cooperative bank (10.57 per cent) and Barclays bank Kenya (10.31 per cent).

CfC Stanbic has seen its share lose just 1.25 per cent.