This archive report was first published on 31 July 2020.
Published on July 31, 2020, a report by Genghis Capital highlighted a decline in bank stock valuations below their historical average.
The Covid-19 pandemic has taken a significant hit on bank shares, with prices dropping by between 18 and 42 percent since the beginning of the year.
According to the Central Bank of Kenya, by the end of June, banks had restructured Sh844.4 billion loans for customers affected by the pandemic, equivalent to 29 percent of the total banking sector loan book of Sh2.9 trillion.
Genghis Capital analysts expect earnings for the year to drop by an average of 11.9 percent, mainly due to increased provisioning and depressed income growth from risk-off asset strategies and restructured loan books.
However, the analysts are optimistic about a long-term recovery as the quality of loan books improves with the return to normalcy of the economy.
“While Return on Equity (RoE) will remain depressed in 2020, our long-term RoEs are expected to recover substantially in the years post-pandemic from the growth in the balance sheets and subsiding provisioning levels,” said Genghis analyst Gerald Muriuki.
