This archive report was first published on 17 November 2019.
On November 17, 2019, Standard Investment Bank (SIB) stated that the Cooperative Bank of Kenya's stock was fairly priced, citing the possibility of regulators reining in banks not to raise loan rates by larger margins post-interest rate caps.
Co-op's stock had gained 16.5 percent since President Uhuru Kenyatta's mid-October memorandum to Parliament seeking the removal of the rate cap. The bank's counter averaged Sh15 on Friday.
The rally across most banking stocks was driven by investor optimism on increased return on average equity.
According to SIB, their opinion was based on the assumption that the regulator would have a hand in how banks 'behave' in a non-cap space, thus dampening a vast upsurge in net interest margin (NIMs). On that background, they viewed the counter as fairly priced.
However, Renaissance Capital disagreed, seeing more upside potential as NIMs surged. They recently placed Co-op's stock in the 'buy' category, alongside KCB and Equity, signalling that it was still the best time for investors to buy more despite the rally.
Renaissance tipped Co-op to surge the most by 36.1 percent to Sh21.40 with NIMs improving 50 to 60 basis points per year over the next three years.
Moody's, a credit rating agency, also stated that it expected Co-op and Equity's loan book to rise most given their strong focus on small and medium enterprises as opposed to KCB.
