This archive report was first published on 16 June 2020.
Published on June 16, 2020, Cytonn's latest banking report reveals that Co-operative Bank of Kenya has emerged top in franchise ranking among all banks in Kenya during Q1 2020.
The bank's high-efficiency levels, evidenced by a low Cost to Income ratio of 58.1 per cent, contributed to its top position. This is in contrast to the industry average of 61.4 per cent.
According to the report, I&M Holdings emerged as the most attractive bank, supported by a strong franchise value and intrinsic value score, with Co-operative Bank coming in second.
David Gitau, Investment Analyst at Cytonn Investments, noted that asset quality deteriorated in Q1'2020, with the gross NPL ratio increasing by 0.9 per cent points to 11.3 per cent from 10.4 per cent in Q1'2019.
Gitau also highlighted that banks adopted a cautious stance on the back of the expected impact of the COVID-19 pandemic, resulting in an increase in NPL coverage to 57.4 per cent from 54.5 per cent in Q1'2019.
The report ranked KCB Group third and Equity Group fourth, with a total expected return of 68.9 per cent and 44.5 per cent respectively.
Regulation, consolidation, asset quality, and capital conservation shaped the banking sector in Q1'2020, with the Central Bank of Kenya providing guidelines on loan reclassification and provisioning of extended and restructured loans.
According to the report, banks recorded a 7.4 per cent average decline in core earnings per share compared to a growth of 12.2 per cent in Q1'2019, partly attributed to the tough operating environment occasioned by the ongoing Coronavirus pandemic.
