Share prices of banks listed at the Nairobi Securities Exchange are on a free fall as investors exit these counters a day after a new law capping interest rates was signed.
As at 11.25 am, Equity Bank - the largest lender in terms of number of customers- was down 9.72 per cent. The maximum allowable limit is 10 per cent.Equity closed Wednesday at Sh36.
"The banking stocks have taken a fearful battering this morning in the first reaction to the president assenting to the interest rate capping bill," said financial analyst Aly Khan Satchu.
Kenya Commercial Bank which had gained slightly by 0.77 per cent on Wednesday to close at Sh32.75 was down to Sh29.50 as at 11.30 am.
Barclays is down by 9.79 per cent so far, trading at Sh8.75. Stock brokers told the Star there are massive offers for the bank stocks as investors, mostly foreign ones, hit the eject button following the signing of the bill yesterday. Foreign investors had heavily invested in bank stocks at the NSE.
Most stock brokers predict a "Black Friday" tomorrow with expectations that more investors will offload their bank shares.
The new law caps interest rate at four hundred basis points above the prevailing Central Bank Rate. At the current CBR rate of 10.5 per cent, the maximum interest rate banks can now charge on loans is 14.5 per cent.
Additional charges and administrative costs are also supposed to be listed clearly, the law states.
"It is a blood bath!" a stock broker who did not wish to give his name told the Star.