18 March 2019

Kenya: Bank Stocks Gain Sh13.6 Billion After Freeze of Rate Cap Law

Kenyan banks' share prices rose further on the Nairobi Securities Exchange (NSE) on resumption of trade on Monday, three days after a court declared the lending rate cap null and gave Parliament 12 months to review it.

The listed 11 banking stocks made a net total gain of Sh13.6 billion in the period with NIC Bank emerging as the biggest gainer.

NIC's share went up 3.24 per cent to Sh38.25 while KCB Group saw its share go up by 1.47 per cent to Sh44.95.

Co-operative Bank of Kenya stock was up 0.33 percent to Sh15 while Barclays Bank of Kenya saw its shares jump 0.42 percent to Sh11.90.

Equity Bank saw its shares remain flat at Sh43.

Analysts have projected that the ruling will lift banking stocks. "With the High Court's ruling of the unconstitutionality of the rate cap law, we expect more activity concentrated on the banking counters during the week," said Genghis Capital in a research note.

"Additionally, results release from other companies could drive market activity during the week."

The High Court ruled on Thursday last week that the cap on commercial bank interest rates is unconstitutional, but judges suspended the ruling for 12 months to allow Parliament to re-examine the law.

Members of Parliament capped interest rates at four percentage points above the central bank's benchmark in 2016, saying they were concerned about their high levels.

However, that has led to a private credit squeeze, as banks say it forced them to cut back on loans to high-risk groups.

The ruling said the section of the Banking Act imposing the cap was unconstitutional because it only punished bankers and not customers for contravening the law.

However, the ruling does not mean the rate cap will be lifted immediately. "Implementation is suspended for 12 months," the Central Bank said in a tweet, reiterating what the judges had said.

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