Kenyan market watch

Kenyan listed banks are projected to continue reporting stronger growth into 2025 as the macro-economic environment continues to slightly improve with the equities and fixed incomes market registering steady performance. The banking sector, known for its sensitivity to economic conditions, has seen significant positive sentiment driving its performance, with listed banks recording impressive share price growth. Abojani Investments Founder, Robert Ochieng, shared insights on the market dynamics and what investors can expect moving forward. 2024 was a significant year for the Kenyan equity markets, starting with a sense of pessimism due to financial challenges. However, the resolution of issues like Euro bonds payment led to the strengthening of the local currency against the USD, making the Nairobi Securities Exchange the best-performing stock exchange in Africa in USD terms. This momentum extended to the banking sector, with listed banks showcasing impressive performances. Despite this growth, Ochieng noted that valuations remained relatively low, indicating room for further growth. Key banks like KCB Bank Kenya and Standard Bank displayed positive sentiment, with price to earnings ratios below industry averages, suggesting an undervaluation of shares. Investors were advised to consider these factors alongside risks like non-performing loans. The banking sector also saw growth in adjacent financial services like bank assurance and asset management, indicating diversified revenue streams driving performance. Companies like INM Bank Kenya doubled their customer base at the group level, reflecting strong growth strategies. Subsidiaries of major banks, such as KCB Equity, presented exciting opportunities, supported by favorable macroeconomic indicators such as low inflation rates and reduced treasury bill rates. The latter is particularly beneficial for private sector investments, creating a positive economic outlook for 2025. Looking ahead to 2025, Ochieng highlighted the potential for increased dividends in the banking sector, given the strong performance of key players. Companies like Iron Dem Bank and Stanchart have already increased interim dividends, indicating a positive trend for shareholders. With the first quarter of the year showing promising signs, projections suggest a robust performance, especially as the banking sector hit Kenya Shillings 1 trillion in total shareholder funds for the first time. Factors like reduced fair value losses in the bond market are expected to enhance Q1 performance, setting a positive tone for the rest of the year. In terms of key themes shaping the equities market in 2025, Ochieng emphasized the importance of managing changing interest rates and digital transformation. With treasury bill rates decreasing, banks must adapt their strategies to address interest rate adjustments on deposits and loans. Additionally, catering to the needs of the youth population through digital channels is crucial for future growth. Banks that focus on developing youth-driven products and offering digital solutions for small and medium enterprises (SMEs) are likely to capitalize on emerging opportunities and drive growth in the market. As the Kenyan listed banks gear up for a potentially lucrative year in 2025, stakeholders are advised to keep a close eye on market dynamics and evolving trends to make informed investment decisions. With a positive economic outlook and strong performances in the banking sector, the stage is set for continued growth and profitability in the coming year.