Equity Group retained the crown, for the second time in a row, as the most attractive bank to the investors, according to Cytonn Investment’s third quarter of 2016 evaluation of most attractive banks in Kenya. The evaluation zeroed in on franchise value and future growth opportunity and aimed at assisting investors in making the right investment decisions.

Cytonn’s Chief Investment Officer, Elizabeth Nkukuu said, the report, themed ‘Transition continues to a more stable sector, in an era of increased regulation’ analyzed all listed banks in the Kenyan market so as to take a view on the banking sector to determine which ones are the most attractive for investors from a franchise value and future growth opportunity perspective.

The report also indicated that banks had recorded an increase in their earning per share (EPS). The EPS had a growth of 15.1% in the third quarter of 2016 compared to 9.7% growth in the same quarter of 2015. This went hand in hand with the country’s 6% GDP growth forecast for 2016.

This was attributed to the improvement in the economy especially the macroeconomic environment in addition to the ability of the listed banks to maintain their profit margins despite the decrease in rates to below historical average levels. For instance, the decline of the 91-day T-bill rates to 8.4% compared to their 5-year average of 10.4%.

Cytonn Investment manager, Maurice Oduor also said, “The growth in Kenya’s banking sector can also be attributed to the sector’s ability to develop products that respond to the needs of Kenyans, such as convenience and efficiency through alternative banking channels including mobile and agency banking, that also increase non-funded income for banks.”

He however added that as a result of interest rate cap enacted towards the end of the third quarter of 2016, “we are likely to witness contraction of the private sector credit growth as banks opt to lend to the government, which is considered risk free.”

This is expected to cause banks to reduce their lending to the public, which will cause the public to turn to non-banking institutions, a move that is in turn expected to cause a slow economic growth as the banking sector contributes 10.1% to the GDP.

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