KCB nears Equity market valuation

KCB Group #ticker:KCB has nearly eliminated the market capitalisation gap between it and rival Equity Group #ticker:EQTY as the latter loses its traditional large trading premium over the country’s largest bank by assets.

KCB on Wednesday closed trading with a market value of Sh133.6 billion, trailing Equity’s Sh135.4 billion by just Sh1.8 billion as the convergence in their paper value intensified.

On April 8, 2018, Equity had a lead of Sh40 billion as its market capitalisation stood at Sh205.6 billion compared to KCB’s Sh165.5 billion.

KCB’s gain has been linked to the bank’s enhanced dividend payout and an increase in its issued shares by 142.9 million units.

The new stocks were allotted to previous owners of National Bank of Kenya (NBK) #ticker:NBK who were bought out in a share swap deal. The additional shares alone have bumped up the lender’s market value by nearly Sh6 billion.

The country’s largest bank raised its dividend per share payout from the previous Sh2 to Sh3.5 while Equity has maintained its offering at Sh2.

KCB’s total dividend of Sh10.7 billion for the year ended December 2018 amounted to a payout of 44.7 percent of the Sh23.9 billion net profit.

Equity’s distribution of Sh7.5 billion for the same period represented a 38.3 percent payout of its 19.6 billion net earnings.

Analysts also say that Equity’s recent share price slide may be due to investors reacting to its significant spending on a rebranding exercise.

“Equity was the leading laggard in the top movers’ list, slumping 3.3 percent on sustained foreign selling, to close at a five-month low of Sh36.25,” Standard Investment Bank said in its Tuesday market close brief.

“We suspect that the jitters might be attributed to the costs associated with the ongoing rebranding exercise.”

Equity says its new brand identity is being rolled out in Kenya and later in all its other markets where it is already operating or will soon enter –Uganda, Tanzania, South Sudan, Rwanda, Democratic Republic of Congo, Zambia, Mozambique and Ethiopia.

The cost of the rebrand has not been disclosed but is expected to be substantial going by the amounts spent by other institutions on similar exercises.

Barclays Bank of Kenya, for instance, has said that is spending billions of shillings to switch to the brand of Absa, its South Africa-based parent company.