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Recent Topicals

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Kenya Mortgage Refinancing Company Update

Apr 28, 2019

Following the announcement of the formation of the Kenya Mortgage Refinancing Company (KMRC) by the National Treasury Cabinet Secretary, Hon. Henry Rotich in April 2018, we released the Kenya Mortgage Refinancing Company Note, where we introduced the facility and its main functions, highlighted the successes of other mortgage refinance companies in Africa, and emphasized on the conditions necessary for the KMRC to thrive. To recapture the Note, the KMRC is an initiative of the National Treasury and the World Bank, whose main objective is to grow Kenya’s mortgage market by providing long-term funding to primary mortgage lenders. The initiative aims to support the affordable housing agenda by increasing the availability and affordability of housing finance, thus boosting home ownership. Primarily, a mature mortg...

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Kenya Listed Banks FY’2018 Report

Apr 20, 2019

Following the release of FY’2018 results by Kenyan banks, the Cytonn Financial Services Research Team undertook an analysis on the financial performance of the listed banks and identified the key factors that shaped the performance of the sector, and our expectations for the banking sector in 2019. The report is themed “Growth and Recovery in a tough operating environment”, as we assess the key factors that influenced the improved performance of the banking sector in 2018, the key challenges, and also areas that will be crucial for growth of banking sector going forward. As a result, we seek to answer the questions, (i) “what influenced the banking sector’s performance?”, and (ii) “what should be the focus areas for the banking sector going forward?” as the sector navigates the relatively tough operating environment. As such, we shall address the...

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Nairobi Metropolitan Area Commercial Office Report 2019

Apr 7, 2019

The Nairobi Metropolitan Area (NMA) Commercial Office Report released annually aims to inform on supply, performance and the investment opportunity in the NMA Commercial Office Market. As per the Report-Market Review 2017, released in 2018, the commercial office sector had a surplus of 4.7 mn SQFT of office space, with average occupancy rates and rental yields coming in at 82.6% and 7.9%, respectively, 5.4% points and 0.6% point lower than 2016’s performance at 88.0% and 8.5%, respectively. The subdued performance was mainly attributed to a tough operating environment in 2017, with i) low credit supply as a result of the implementation of the Banking Amendment Act 2015, and ii) political uncertainty as 2017 was an election year, both factors leading to slower commercial activities thus reduced demand for office space amid the increasing supply of the same. In this report in...

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Fixed Income

Mar 31, 2019

T-Bills & T-Bonds Primary Auction: During the first quarter of 2019, T-bills were oversubscribed, with the overall subscription rate coming in at 157.2%, up from 74.3% in Q4’2018. The oversubscription was partly attributable to improved liquidity in the market during the quarter, which saw the average interbank rate declining to an average of 3.1%, from an average of 5.1% in Q4’2018, supported by government payments and debt maturities. Overall subscriptions for the 91, 182, and 364-day papers came in at 110.0%, 111.4% and 221.9% in Q1’2019, from 107.1%, 37.7% and 97.7% in Q4’2018, respectively, with investors’ participation remaining skewed towards the longer dated paper. The demand for the longer-dated paper is attributable to the scarcity of newer short-term bonds in the primary market. Yields on the 91-day T-bill rose by 20 bps to close at 7.5% in Q1’2019, from 7.3% in Q4’2018, while yields on the 182-day and...

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The Role of the Capital Markets in Economic Development

Mar 24, 2019

Ensuring economic growth and development is a primary objective of all countries. According to the World Bank, an estimated USD 4.0 trillion in annual investment is required for developing countries to achieve the Sustainable Development Goals (SDGs) by 2030. In light of the investment requirement, there is a greater need to develop and strengthen capital markets in order to mobilize commercial financing. The role that capital markets have in financing infrastructure development, large enterprises, and Small and Medium Enterprises (SMEs), and the links with economic growth, are increasingly being highlighted. Economists traditionally have looked to factors such as capital, labor and technology as the major factors affecting economic growth. The recent financial crisis has shown that there are substantial economic effects when there is lack of confidence in the financial systems. Therefore, the functioning of financial systems has received special attention in academic litera...

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