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The release of first quarter results (1Q21) in the banking sector has been pertinent in the bourse in this review period. The spotlight was on KCB and Equity Group which received different investor reactions that saw foreigners exiting KCB and accumulating Equity.  

Equity Group reported an impressive 63.8% y/y rise in Earnings per Share (EPS) to KES 2.3. This performance was on the back of substantial decrease in loan loss provisions (-59.3% y/y) coupled with 28.4% y/y rise in Net Interest Income (NII). Interest expense on customer deposits however, weighed down on NII, rising 63.5% y/y to KES 4.2Bn. Non-Interest Revenue (NIR) grew 30.7% y/y to KES 10.9Bn. Borrowed funds went up 68.2% y/y to KES 88.4Bn on acquisition of development finance institution (DFI) funding to boost liquidity that stands at 60.6%. The Group’s subsidiaries in Rwanda and Uganda now deliver above the cost of capital returns giving a positive

KCB Group Plc reported a 22.2% y/y decrease in EPS to KES6.11. The turn in profitability was mainly due to a slight doubling in Loan Loss Provision (LLP) to KES27.5Bn. Net Interest Income (NII) recorded a solid growth of 21.0% y/y to KES67.9Bn. The balance sheet grew 9.9% y/y to KES987.8Bn, propelled by growth in both deposits (driven by precautionary instincts due to COVID-19 shock) and loan book. During the period, the company rallied from KES38.75 at the beginning of the month and closed at KES41.3 accounting for a significant investor participation in the sector. 

Equity Group reported an 11.6% y/y decrease in EPS to KES5.24. The drop in profitability was as a result of a quadrupling in LLP to KES26.6Bn. Its balance sheet grew by half its previous level to KES1,015.1Bn. Equity group benefited from its digital transformation that accounted for 63% of the total transactions being generated outside

Concerns about the pandemic especially with new fast spreading mutations, heightened political activity and uncertainty around the shape of business and economic recovery continues weighing heavily on risk asset pricing in the local market.

The distribution of vaccines is off to a slow start especially in the developed countries while locally, news flow indicate vaccines will be available later this month than as previously indicated.…

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One of the oddest by-products of the Covid-19 pandemic is how it has affected many investors’ attitude to risk. Over the past three months nearly every client I have spoken to has become more risk-tolerant. Cautious investors have become balanced investors. Balanced investors have become risk-tolerant. And the risk-tolerant are all in the casino putting their life savings on zero at the roulette table. Why?! 

We have seen recession before, stock markets correct cyclically and we are now very accustomed to very low interest rates over very many years. And I have never seen so much money going into Initial Public Offerings.  

Risk is inherent in everything we do. It is impossible to live a risk-free life – but it is possible to mitigate risk to a point where it is non-existent. However, to eliminate risk in life might mean that life then was not worth living. Particularly in these