A recent projection by Ivestec Securities has put Co-operative Bank shares at the top in terms of potential share price growth at 14.2 percent.
The share price could shoot to Ksh17.30 from the current Ksh15.15, the report has indicated.
Co-op Bank is closely followed by the Kenya Commercial Bank (KCB), whose share price is projected to grow by 12.9 percent from Ksh52.00 to Ksh58.70.
Equity comes third with a projected rise of 3.9 percent from Ksh50.25 to Ksh52.20.
In case the projection happens, Co-op Bank will deliver a 12-month return of 22.3 percent in Kenya shilling and a return of 16.0 percent in US dollars.
The projection retains Co-operative Bank at a BUY rating, KCB upgraded from HOLD to a BUY while Equity has been rated a HOLD.
“We forecast rising Return on Equity as existing clients are migrated to cheaper digital and agent channels which should contain cost. Overall, we expect Cooperative Bank to continue to benefit from strong NIR generation driving revenue growth as costs are contained below inflation. We believe Cooperative Bank will continue to deliver positive JAWS to FY21 as existing clients are migrated to cheaper digital and agent channels containing year-on-year growth in costs, while improved transaction volumes should drive sustained NIR growth,” notes the report.
According to the report, Kenyan banks continue to offer more competitive returns relative to their counterparts in Nigeria which is as a result of Kenya’s superior banking policy consistency and stability as compared to Nigeria. Especially the recent repeal of rate caps in Kenya.
“The current policy dynamic in Kenya, on balance, remains supportive of real earnings growth in the medium term. Following the repeal of the interest rate cap, we have increased our target prices by an estimated 27 per cent, on average, across our coverage banks,” says the Investec Report.