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Market Report – 7th May 2021


Faida Research - May 10, 2021 - 0 comments

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Market Commentary:

  • The All Share Index (NASI) edged up by 1.1% w/w while the NSE 20 Share Index eased by 0.2% w/w to close the week at 171.09 and 1,862.50 respectively. The market was characterized by an increase in market turnover (9.0% to KES 2.7 billion) and a decline in volume of shares traded (-0.8% to 74.0 million shares). There were some notable price gains on large and medium cap counters; KCB (4.2% to KES 41.95), Equity (4.1% to KES 40.75), Britam (3.9% to KES 7.00), Co-op (3.3% to KES 12.60) and BAT (3.0% to KES 467.50). I&M was among the top movers this week. During the week, the company announced the completion of its acquisition of a 90.0% stake in Orient Bank Uganda, a transaction worth KES 3.6 billion. The company’s bonus books closure date is on Monday 10th May 2021. We expect price stability in the coming week.

 

News Highlights:

 Treasury Removes 20.0% Excise Tax on Bank Loan Fees

  • Company XYZ Treasury has withdrawn the 20.0% excise tax on fees charged in processing bank loans.
  • According to Treasury, the first schedule of the Excise Tax Act, 2015 has been amended, in the definition of “other fees” with the term “fees or commissions” earned in respect of a loan deleted.
  • The tax has however been maintained on other fees not linked to credit processing such as obtaining account statements and cheque clearance.
  • The 20.0% excise duty had been introduced in 2018 through the Finance Act, 2018. This saw the excise tax on other fees charged increase from 10.0% to 20.0%.
  • The introduction of the tax resulted in an increase in fees charged by commercial banks on counter transactions, ATMs and mobile banking.

Commentary

  • We opine that the removal of the excise tax on the fees charged will lower tax spending for banks and could translate into a reduction in the fees (associated with processing loans) charged to customers

 

Recommendations:

EABL – Long-term Buy

Equity – Hold

KCB – Neutral

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