National Bank Gains 5 Percent on Consolidation Talks

The week commenced on a poor note, as all indices pointed south at the end of the trading session. The NSE-20 share index plunged by 1.02% to close at 3958.57 points as the NASI depreciated by 0.57% to 145.67 points. The NSE 25 Share Index similarly edged down by 0.67% to close at 4190.85 points. Market capitalization went down; 0.57% to KES 2.053Tn whilst equity turnover plummeted by 24.21% to KES 328.12Mn. Market breadth, a measure of market performance, indicated that the performance had slightly favoured the losers, with the number of decliners -25 outweighing the number of advancers -13.

Troubled National Bank of Kenya (NSE: NBK) is a target for a merger with other state-owned banks; Consolidated Bank and the Development Bank of Kenya. The bank requires around KES 13Bn (USD 130Mn) in capital to survive the turmoil it’s going through. The bank initially opted to close the financing gap through a KES 10Bn rights issue but the treasury pulled out their earlier allocation when they released their supplementary budget. The capital issue is not the only problem at hand, as the company will also need to clean up its operational inefficiencies which have led to increased levels of bad debts. The lender’s financial health lies on a balance as the consolidation talks are in progress. A cash call could be too far-fetched based on the fact that the treasury (one of its majority shareholders), has already hauled out their support for the ailing bank, leaving the bank to opt either for consolidation or a strategic investor.

Equity Market Highlights

KCB Group Ltd (NSE: KCB) was the most actively traded stock today accounting for 44.65% of the total market value traded activity. Equity Group Holdings Ltd (NSE: EQTY) also registered robust levels of activity, accounting for 13.45% of the total market turnover.

Pan Africa Insurance Holdings Ltd (NSE: PAFR) emerged as the day’s top gainer having advanced by 7.38% to close at KES 40.00. National Bank of Kenya Ltd (NSE: NBK) came in second, appreciating by 5.00%, to close the day at KES 10.50.

Marshalls (E.A.) Ltd (NSE: MASH) capped the top losers chart, slumping by 9.85% to close at KES 9.15. This was on account of a thin but significant volume of 100 shares traded. Carbacid Investments Ltd (NSE: CARB) declined by 6.25% to close at KES 15.00.

Article by Genghis Research.