3 Blue-chip bank stocks you could buy at over 30% discount as economy reopens
The Covid-19 turmoil has rattled banks, leaving many bank stocks trading at steep discounts to what investors were paying for them just before the coronavirus entered Kenya. Uhuru’s move to reopen the country comes as huge relief for banks.
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| Absa Bank Kenya CEO Jeremy Awori |
President Uhuru Kenyatta on Monday (July 6) set aside most of the restrictions that his administration imposed in March in a bid to curb the spread of the coronavirus disease in the country. The highlight of the chances was the lifting of the lockdowns on Nairobi of Mombasa cities, the country’s commercial hubs. Additionally, air flights will resume from next week, which should be a major boost to the hospitality industry. Hotels and tourist spots are some of the largest bank customers.
The Covid-19 outbreak and the resulting government restrictions to stop its spread have rattled the economy with businesses shutting down or scaling back operations and millions of people losing jobs.
The economic turmoil has thrown banks into a tailspin as they face the risk of mass default on loan repayments and blow to their profits. Indeed, several banks have turned to revising loan terms for existing borrowers to try to keep them afloat as a way to reduce the risk of loan losses. Other banks have pulled the plugs on dividend payment and shelved expansion plans in a bid to preserve cash to ride out the Covid-19 storm. Therefore, President Uhuru’s move to reopen the country in a bid to revive the economy should come as a relief for banks.
Banks have been among the top-performing stocks in the country. Bank companies make huge profits and typically pay regular dividends to their shareholders.
Here are some of the 5-star bank stocks you could scoop up right now at more than 30% discount as the economy reopens.
1. Equity Group Holdings Ltd (EQTY) shares closed at Ksh32.90 on Monday. At this point Equity Group stock is trading at 40.7% discount to what investors were paying for it in January this year.
Equity made a profit of Ksh2.6 billion in 2019. It had planned to pay a cash dividend of Ksh2.50 per share totalling $9.5 billion but it halted the plan to conserve cash as Covid-19 fallout rattled its loans business. Moreover, the group decided not to proceed with the purchase of several bank operations in four countries from an entity called Atlas Mara. The group eyed the Atlas Mara bank operations in a bid to expand its business across East Africa region and beyond.
2. KCB Group PLC (KCB) shares closed at Ksh34.65 on Monday. At this point KCB Group stock is trading at 37.6% discount to the price investors were paying for it in January this year.
The group made a profit of Ksh25 billion in 2019, out of which it paid Ksh3.50 per share in cash dividend to its shareholders. KCB Group last year bought its rival National Bank of Kenya in a bid to expand its business. KCB Group CEO Joshua Oigara has said the National Bank business is doing well.
3. NCBA Group PLC (NCBA) shares closed at Ksh26.45 on Monday. The stock is currently trading at 34% discount to the price investors were paying for it in November last year. NCBA Group formed from the mergerof NIC Group PLC and Commercial Bank of Africa Limited in a transaction that closed in October 2019.
NCBA Group made a profit of Ksh7.8 billion in 2019. The group planned to pay Ksh1.75 per share in cash dividend to shareholders out of its 2019 profits but dropped the plan as the Covid-19 crisis forced it to conserve cash. Instead, the company only paid 25 cents per share in dividend. It made up for the lost cash dividend by giving its shareholders free shares.
The other big banks trading at discounts that bargain hunters may find attractive right now are Absa Bank Kenya PLC (ABSA) and Co-operative Bank of Kenya Ltd (COOP).
Absa Bank Kenya shares closed at Ksh9.98 on Monday. The stock is trading at 29.7% discount to what investors were paying for it in March this year just before Kenya started reporting Covid-19 cases. Absa Bank, formerly Barclays Bank, is profitableand pays dividends.
Co-op Bank shares closed at Ksh12.30 on Monday. The stock is currently trading at 27.7% discount to what investors were paying for it in January. Co-op Bank is profitable and pays dividends. The bank is currently working to expand its business. For example, it is the process of purchasing its smaller rival Jamii Bora Bank, which serves small business lending and microfinance segments.