This archive report was first published on 8 November 2019.
On November 8, 2019, Moody's released a report stating that Co-operative Bank and Equity are poised to gain the most from the removal of the lending rate cap in the banking sector.
The credit rating agency expects the loan book of these two banks to rise faster than that of KCB, driven by their strong focus on lending to small and medium-sized enterprises (SMEs).
According to Moody's, the removal of the rate cap will result in higher overall loan growth over the next 12-18 months, with a tilt towards small enterprises in sectors like trade and real estate.
Co-op Bank and Equity are expected to benefit most from this trend, as their lending has been constrained the most under the lending rate caps.
However, KCB is participating in SME-focused Stawi loans, which may give it some room to grow its SME loan book.
Between March 2019 and December 2016, Co-op's net loans grew by eight percent, while Equity's expanded by seven percent in the same period.
Moody's analysis shows that net interest rate spreads for Equity Bank dropped by 3.34 percent, KCB by 1.71 percent, and Co-op by 1.65 percent between March 2019 and year-end 2016.
