This archive report was first published on 16 June 2020.
As the COVID-19 pandemic continues to affect the global economy, I&M Holdings stock has emerged as the most attractive of listed lenders for the three months ended March 2020, according to Cytonn Investments' latest banking report.
Published on June 16, 2020, the report, titled Deteriorating Asset Quality amid the COVID-19 Operating Environment, highlights I&M's strong franchise value and intrinsic value score as key factors in its ranking.
"We note that asset quality deteriorated in Q1'2020 with the gross NPLs (Non-Performing Loans) ratio increasing by 0.9 percent points to 11.3 percent from 10.4 percent in Q1'2019, this was high compared to the 5-year average of 8.5 percent," said David Gitau, an investment analyst at Cytonn Investments.
Gitau noted that during the period, banks in accordance with International Finance Reporting Standards 9 were expected to provide both for the incurred and expected credit losses, resulting in an increase in NPL coverage to 57.4 percent from 54.5 percent in Q1'2019.
Cytonn also ranked I&M favourably on future growth prospects, with the bank scoring highly on the different parameters used to gauge potential.
During the quarter, I&M's return on average equity stood at 17.5% while Core Earnings Per Share stood at 27%.
Co-operative Bank emerged top in the franchise ranking due to high-efficiency levels, as evidenced by a low Cost to Income ratio of 58.1% vs an industry average of 61.4%.
KCB Group came third and Equity Group fourth with franchise scores of 56 and 60 respectively.
Diamond Trust Bank Kenya took the top position from a future growth opportunity perspective, with Cytonn observing that the bank presents the highest upside with an expected total return of 149.3%.
Other lenders ranked in the report include Absa Bank, Stanbic, Standard Chartered, NCBA, and HF.
