The shilling was last at 101.40. I am sure not many folks were ready to pop their heads above the Parapet yesterday. It was the first opportunity for the stock market to react to the statement issued by President Uhuru Kenyatta on the Banking Amendment Act (2015). The reaction was brutal and ugly. The Nairobi All Share slumped by 5.01 per cent to close at 139.14. The Nairobi NSE20 crashed 4.41 per cent lower to close at 3309.76, a level last reached in March 2012. As I said on August 8, we have entered a new populist normal. Politicians the world over are having to wrestle this (populist) tiger by its tail. The president evidently was convinced that parliament would return the bill to him (if he were to reject it) with a super-majority and that political response was probably perceived to diminish his ''populist'' bona fides. The law is in my opinion the equivalent of using a sledge-hammer to crack a nut. Banks will surely park their money in ''risk-free'' government bills and bonds. Small banks (which were already struggling) are effectively out of the market.
I find it difficult to see this bill being operationalised in its present format or that lashings and lashings of credit are going to be made available at 14.5 per cent. The collateral damage as we witnessed yesterday is vicious and should give policy makers pause for thought. Banking shares were a sea of red.
Commercial and services
Safaricom got caught up in the negative feedback loop and eased 5.88 per cent off a record all time high to close at 20.00 and was the most actively traded share at the exchange with 26.239m shares worth 530.142m.
Banks
All the attention was on the banking sector (which frankly had been underperforming this year) where we saw some dramatic moves and I am afraid given the demand-supply structure, this sell-off has further to run and for the bold sorts Monday might be an interesting entry opportunity.
Equity Group fell 9.027 per cent to close at 32.75 the lowest in 16 months. Equity traded 16,600 shares and there were 53.025m shares ($17.1m equivalent) available for sale at 32.50 the limit down price.
KCB Group fell by the most in 13 years. KCB Group dropped 9.9 per cent to 29.50 the biggest drop since August 2003, to 29.50 and has closed at the lowest level on a closing basis since December 2012.
Co-operative Bank crashed by the most since it was listed at the securities exchange. Co-op Bank closed at 11.95, 9.81 per cent lower and traded 24,200 shares.
I&M Holdings slid 9.8 per cent, the most since December 2013 to close at 96.50. Barclays Bank retreated by 8.76 per cent to close at 8.85 which is a fresh multi-year closing low. CFC Stanbic Bank retreated 8.125 per cent to close at 73.50. Diamond Trust Bank reported first half 16 earnings where loans and advances to customers (net) expanded by 10.209 per cent to Sh178.526591 billion and profit after tax and exceptional items clocked 11.289 per cent up to 3.621869 billion. Gross non performing loans and advances clocked Sh7.402105 billion, up by 214.279 per cent and total non performing loans and advances clocked Sh6.317767 billion. What I thought were better than respectable results were unable to staunch a 10.69 per cent slump in the price to 142.00. Stanchart (which I referred to as an outlier) eased by 1.45 per cent to close at 204.00. Their business is largely within the corridor. Jacques Nel, a senior economist at Paarl, South Africa based NKC African Economics told Bloomberg: “The rate cap presents opportunities for consolidation, for smaller banks it’s definitely going to be bad. If they can’t charge higher rates anymore, it’s going to be tough for them to survive.”
Britam EA reported that its first half profit after tax accelerated by 184.822 per cent off the back of a 14.85 per cent gain in total revenue, a 38 per cent gain in investment income, and a 7.00 per cent increase in total assets. Britam EA adjusted its methodology to gross premium valuation versus net premium valuation which created an outcome where net claims expense declined by Sh2.28 billion and an improvement in profitability of Sh1.95 billion. If you stripped that out, Britam EA actually was behind in its profit year-on-year comparison. Britam firmed 0.41 per cent to close at 12.05 and traded 226,800 shares.