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Market Report – 5th February 2021


Faida Research - February 8, 2021 - 0 comments

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Market Commentary:

  • The All Share Index gained by 1.0% w-o-w to 157.11. NSE 20 however eased by 0.8% w-o-w to 1,865.93 as the constituent counters witnessed price dips. Market turnover increased by 24.3% w-o-w to KES 3.1 billion as the volume of shares traded increased by 23.8% w-o-w to 109.3 million.
  • The overall market was characterized by price gains in large cap counters driven by increased investor demand: EABL (+10.4% to KES 165.25), BAT (+3.6% to KES 420.75), KCB (+3.3% to KES 37.05), Equity (+2.1% to KES 37.25) and Safaricom (+1.0% to KES 36.20; touching an all-time high of KES 37.20 during the week). In the coming week, we expect price stability.

News Highlights:

KCB Provides Recovery Loans to SMEs

  • KCB is offering credit facilities to small and medium sized enterprises (SMEs) to provide support as they have been greatly affected by the pandemic.
  • The loans will be worth between KES 100,000 and KES 5.0 million and will be payable in 36 months.
  • Only businesses that have been running accounts with the bank for 6 months and who qualify for the loans will access the credit facilities.
  • According to management, the facility would enable the MSMEs to restart and rebuild as the pandemic-related restrictions continue to be lifted and recovery persists.
  • Further, the bank has been working with county governments to provide credit facilities to enterprises and cooperative societies whose businesses have been affected by the slowdown in business operations.

Commentary

  • We note that SME lending remains relatively high risk. The bank’s SME loan book (includes micro lending) had the second highest NPL ratio at 13.5%, an improvement from 14.7% in 3Q2019. We opine that the bank will cautiously lend, focusing on SMEs in the less risky segments to ease asset quality pressures.
  • In December the government launched the Credit Guarantee Scheme (of which KCB is a member), through which banks can offer government banked loans to support the SMEs. We expect this to further de-risk lending to SMEs.

 

Recommendations:

Kenya Re – Hold

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