Kenya’s banking stocks gave the Nairobi Securities Exchange a strong boost last week, with KCB Group leading the charge as investors responded to better earnings and the lender’s plans to raise Ksh 300 billion through a sustainability-linked debt programme.
KCB shares climbed through the week, closing at Sh93 on Thursday, August 20, according to market data, after starting the week at Sh87.25. The stock gained about 7.5 per cent during the five trading sessions, bringing its year-to-date rise to more than 41 per cent.
The rally came shortly after KCB released strong half-year results and unveiled plans for a five-year Medium-Term Note Programme with a target of up to Sh300 billion. The first tranche could raise as much as Ksh 100 billion, subject to regulatory approval and market conditions.
The programme will be supported by KCB’s Sustainability Bond Framework, which has received a Sustainability Quality Score of 2, rated “Very Good” by Moody’s. The framework will allow the bank to finance green, blue and social projects, including renewable energy, clean transport, sustainable agriculture, water management, affordable housing and funding for micro, small and medium-sized businesses.
KCB Group chief executive Paul Russo said the framework is intended to help the bank mobilise capital for projects with measurable environmental and social benefits.
“The true measure of sustainable finance is not the size of the bond, but the scale of the impact it creates,” Russo said.
The fundraising plans come at a time when KCB is enjoying strong financial results. Profit before tax increased 20.8 per cent to Sh49.3 billion in the six months to June, up from Ksh 40.8 billion during the same period last year. Profit after tax rose 14 per cent to Sh36.87 billion, while total income increased 9.5 per cent to Ksh 108.1 billion.
The bank’s balance sheet also expanded significantly, with total assets rising 16.8 per cent to Sh2.3 trillion. Customer deposits increased 15.1 per cent to Sh1.7 trillion, while gross loans rose to about Ksh 1.3 trillion. KCB also reduced its stock of non-performing loans, helping improve the quality of its loan book.
Shareholders are also set to benefit from the improved performance. The board increased the interim dividend by 50 per cent to Sh3 per share from Sh2, translating into a total payout of Ksh 9.64 billion.
KCB was not alone in attracting investors. I&M Group shares also gained strongly after the lender reported improved earnings, while Diamond Trust Bank and Kenya Re were among other financial counters that posted gains.
The broader market reflected the renewed appetite for equities. The NSE All Share Index gained 2.7 per cent during the week ending August 20, while the NSE 25 and NSE 20 indices rose 2.9 per cent and 2.2 per cent respectively. Market capitalisation increased to about Ksh 4.1 trillion, while equity turnover and volumes traded rose sharply.
Activity was also strong in the bond market, where secondary trading increased significantly. Government securities continued to attract investors, with the Treasury Bill auction on August 20 receiving Ksh 71.7 billion in bids against an advertised Sh28 billion.
The strong demand for government paper, together with rising bank share prices, suggests investors are becoming more willing to put money into Kenyan financial assets as corporate earnings improve and interest rates ease.
For KCB, however, the immediate focus is now on the Sh100 mark. With the stock already trading in the Ksh90s, investors will be watching closely to see whether continued earnings growth, stronger dividends and the planned sustainability bond programme can provide enough momentum to push the counter past the psychological threshold.
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