Foreign investors have pushed Equity Bank past KCB to become the most valuable lender listed at the Nairobi Securities Exchange (NSE).
Equity’s market capitalisation has risen to Sh150 billion compared to KCB’s Sh120 billion. A year ago KCB’s market valuation stood at Sh185 billion and exceeded Equity’s by about Sh4 billion.
Foreign investors have been buying into Equity for the last four months while exiting KCB.
In April Equity was the preferred destination for foreign buyers with a net inflow of Sh252 million while KCB had the highest outflow of Sh320 million.
“Since 2013 KCB was accounting for more than half of the foreign inflows in the banking sector so they are now rebalancing their positions,” said the head of research at Standard Investment Bank Francis Mwangi.
Mr Mwangi noted Equity also had a higher upside from its current price making it more attractive. Both counters are currently trading at new lows in terms of price to earnings ratio.
Technical investors were said to prefer buying the cheaper of the two counters given they offered similar return levels with exposure to same risks.
KCB has been trading at a higher price than Equity touching a high of 65.50 per unit compared to Equity’s Sh51.
Equity is currently trading at Sh40 while KCB is Sh39 per share.
Equity Bank is expected to release its first quarter results Tuesday morning. KCB is yet to announce when it will be releasing its quarterly financials.
The two have been aggressive in the regional front with KCB setting up in Ethiopia last year while Equity entered DR Congo. The pair also operate in Uganda, Tanzania, Rwanda and South Sudan with KCB having added Burundi to its portfolio.
Mr Mwangi said the entry into the new markets and recent launch of Equitel by Equity did not play a big role in the share pricing as this information had been receiving a lot of publicity.
Foreign investors were net buyers in most of the banking counters seemingly looking at the recent turbulence in the sector as short-term blip.
Other banking counters preferred by the foreign cash in the month of April include DTB, I & M, CFC Stanbic and Co-operative. The foreigners, who are considered to be more sophisticated than most local investors, also had net withdrawals at National Bank.
National Bank shocked the market with a Sh1.2 billion loss at the end of March. Corporate governance issues were cited for its slump.
Foreign investors had net inflows of Sh385 million at the Nairobi Securities Exchange compared to outflows of Sh487 million a month earlier.
The NSE has generally dropped marginally this year with the indicative 20 share index down 1.6 per cent from the beginning of the year.