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Daily Market Report – 18th May 2020


Faida Research - May 18, 2020 - 0 comments

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Market Commentary:

  • The All Share Index was up by 2.9% to close the day at 139.28 driven by price gains in large cap counters; Equity (+5.3%), KCB (+1.1%) and Safaricom (+4.5%) of which Equity and Safaricom also emerged top movers of the day.
  • Overall, foreigners remained net sellers with foreign sales at 87.5% with foreign buys at 50.1%. EABL was unchanged despite issuing a profit warning this past weekend.

 

News Highlights:

 KCB to Inject More Capital into NBK

 KCB could end up injecting up to KES 3.0 billion more into NBK to meet statutory capital requirements.
 At the end of the FY2019 NBK’s unadjusted (i.e. without adding back expected credit provisions) core capital to total deposit liabilities, core capital to total risk weighted assets and total capital to total risk weighted assets stood at 7.2%, 9.8% and 11.5% respectively, an improvement from the previous year (after KCB injected KES 5.0 billion), but still below the statutory minimum (8.0%, 10.5% and 14.5% respectively).
 According to KCB management, the amount initially planned was between KES 7.5 and KES 8.0 billion.
 Management added that the actual amount will depend on a number of factors including recoveries made on impaired loans (more recoveries will likely mean less capital has to be injected by KCB).

Commentary:

 In our view, in the short term, recoveries are likely to be low due to the distressed economic environment.
 However, we are cautiously optimistic on the recovery efforts and we expect a pick up in recoveries once the economy stabilizes.
 In the meantime, we may see more measures around improving efficiencies (IT integration improvements, staff costs rationalization within permissible limits) and income enhancements (more products).

 

Recommendations:

Long Term Buy- KCB, Equity, Absa, Stanbic, NCBA

Hold- Safaricom

Sell- Stanchart, Bamburi, KQ

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