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Recent Topicals

Kenya Listed Banks Q1’2020 Report

Jun 14, 2020

Following the release of the Q1’2020 results by Kenyan listed 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 of the banking sector for the rest of the year. Asset quality deteriorated in Q1’2020 with the gross NPL ratio increasing by 0.9% points to 11.3% from 10.4% in Q1’2019. This was high compared to the 5-year average of 8.5%. In accordance with IFRS 9, banks are expected to provide both for the incurred and expected credit losses. Consequently, this saw the NPL coverage increase to 57.4% in Q1’2020 from 54.5% in Q1’2019 as banks adopted a cautious stance on the back of the expected impact of the COVID-19 pandemic. The report is themed “Deteriorating Asset Quality amid the COVID-19 Operating Environment” as we assess the key factors that i...

Impact of COVID-19 on Kenya’s Real Estate Sector

Jun 7, 2020

On 15th March 2020, we wrote about the Impact of Coronavirus to the Kenyan Economy where we analysed the resultant effect on the Kenyan economy given the negative impact that the pandemic is having on international trade, the financial and commodity markets, and the global macroeconomic environment; and, The Potential Effects of COVID – 19 on Money Market Funds, where we highlighted the macro-economic environment in the country and the effects on the fixed-income market, having reported the first infection on 13th  March 2020. This week, we focus on the impact COVID-19 has had on the real estate sector where various emerging trends have shown varied implications on the different sectors of real estate. We shall therefore cover: Brief Analysis of the Real Estate Performanc...

Accelerating Funding to Affordable Housing

May 24, 2020

Kenya’s growing economy translates into an expanding middle class, thus, increasing demand for housing. According to the National Housing Corporation (NHC), the housing deficit stands at 2.0 mn and has been growing annually by approximately 200,000 units. As such the government introduced ‘provision of affordable housing’ in 2017 as one of its four key pillars for the following five years with the aim of delivering 500,000 units to alleviate the housing crisis. However, three years later, the government has only delivered approximately 228 housing units, an indicator that the target units might just be a pipe dream. The slow momentum is largely attributable to unavailability of financing for both developers and buyers alike. In our previous topicals, we have looked into government strides aimed at resolving the deficit: the establishment of Kenya Mortgage Refinancing Company,

Cytonn Note on the Monetary Policy Committee (MPC) Meeting for May 2020

May 22, 2020

The Monetary Policy Committee (MPC) is set to meet on Wednesday, 27th May 2020, to review the outcome of its previous policy decisions and recent economic developments, and to make a decision on the direction of the Central Bank Rate (CBR). In their previous meeting held on 29th April 2020, the committee decided to reconvene within a month for an early assessment of the impact of these measures and the evolution of the COVID-19 pandemic. In the last sitting, the MPC lowered the CBR by 25 bps to 7.00% from 7.25% citing that the accommodative policy stance adopted in March 2020 was having the intended effects on the economy. They however noted that the Coronavirus pandemic had continued to affect economic growth and as such, there was need to further cushion the economy against the effects of the pan...

Currency and Interest Rates Outlook

May 17, 2020

In our Q1’2020 Kenya Macroeconomic review, we analyzed the 7 macroeconomic indicators namely; Government Borrowing, Exchange Rate, Inflation, Interest rate, GDP, Security, and Investor Sentiment that we expected to influence Kenya’s economic growth. Based on these indicators, we switched our 2020 outlook to negative from positive with the decision mainly driven by the expected effects of the Coronavirus on the economy. On the interest rates, we gave a negative outlook since we anticipated upward pressure to emanate from the increased government borrowing. As the business environment becomes more challenging, we expect a dip in tax revenues amidst the Government being in dire need of funding to offer the requisite financial stimulus to the economy. The currency outlook was negative due to continued pressure on the shilling from the unfavorable balance of payments position, as we expected forex in...