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February 23, 2019

Retained rate cap hurts banking

Central Bank Governor Patrick Njoroge before parliamentary Finance Committee on the ammendments regarding the banks interest rates caps law. April 12, 2018. /Jack Owuor
Central Bank Governor Patrick Njoroge before parliamentary Finance Committee on the ammendments regarding the banks interest rates caps law. April 12, 2018. /Jack Owuor

Every African Head of State and his core team have trooped off to China to make ''win-win'' music with Xi Jinping and his FOCAC gig.

According to Carlos Lopez ''Xi Jinping announced eight new initiatives, an additional $60 billion for Africa and a clean up of the debt maturing by this year of its LDCs, highly indebted, landlocked and Small Islands States.''

According to latest reports, ''MTN Group Ltd. may receive a naira-denominated refund if Africa’s biggest wireless carrier returns the $8.1 billion that Nigeria says was illegally taken out of the country.''

Here in Kenya everyone is closely watching the fall-out from the VAT imposition on fuel.

On a YTD basis, the shilling has gained by 2.5% against the US Dollar making it one of the best performing currencies in the World in 2018.

Improving diaspora remittances which increased by 4.9% to $266.2 million in June 2018, from $253.7 million in May 2018, with the bulk contribution coming from North America at $122.8 mn [Cytonn] has been underpinning the Shilling.

During the month of August, the NSE equities market was on a downward trend with NASI, NSE 20 and NSE 25 declining by 1.7%, 2.8% and 3.2% @CytonnInvest.

The market is currently trading at a price to earnings ratio (P/E) of 13.9 times and a dividend yield of 3.9%.

The Nairobi Securities All Share retreated -1.67 points to close vat v165.92.

The NSE20 retreated -25.16 points to close 3178.24

Safaricom traded ex-dividend today and that coupled with a report via Reuters that Safaricom faces a fine of 0.2 per cent of its gross revenue for the last financial year, equivalent to Sh449 million ($4.47 million), documents from the regulator reviewed by Reuters showed brought downside price action to the share today which closed -1.77% at 27.75 and traded 1.732m. You would be forgiven for thinking that the regulator's raison d'être is to penalise success and favour failure a reverse Darwinism, as it were.

These proposals are not forward-looking. We believe the focus should be on finding opportunities to enable all operators serve customers better, rather than reversing the gains of one operator.” @SafaricomPLC @bobcollymore. 

 LongHorn Kenya reported a +36.375% acceleration in 2018 earnings per share, a +16.844% full year revenue gain and raised the dividend pay-out by 10.526%. LongHorn improved its cash and cash equivalents position by 3,497% to end the year with Sh418.78 million on hand. In the accompanying commentary, LongHorn spoke to product diversification, entry into new markets and growth of the digital offering as all contributing to these promising full year results. Operating margin expanded from 16% to 21% and LongHorn spoke to its intention to ''new territories within Southern Africa and Francophone territories'' These were good results and LongHorn is a beneficiary surely of the ''demographic dividend'' LongHorn surged +10.00% to close at 4.95 and traded 26,000 shares.

The failure to substantively modify the rate cap has brought some sell side pressure of late on the banking counters.

KCB Group closed unchanged at 45.00 and was heavily traded with 4.875m shares worth 219.752m changing hands.

Equity Bank closed unchanged at 44.50 and traded 2.896m shares worth 129.137m.

KenGen closed unchanged at 6.60 and traded just 24,000 shares. Buyers outpace sellers by a factor of three to one and volumes thinning out signals seller exhaustion at these price points.

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