NCBA H1 profit lifts banks as NSE treads water on thin volumes

Key takeaways

• NCBA led banks higher after reporting KES 12.4b H1 profit and a 3.75 interim dividend. The Nedbank bid for NCBA’s 66% stake was notably oversubscribed at 121%, a factor that kept sentiment buoyant even as trading volumes remained thin.
• The market backdrop saw the NASI advance 0.09% to 238.13 and the NSE20 gain 0.24% to 4,136.12, with both indices continuing to trade in a narrow range, signaling a wait-and-see mood among investors.
• Foreign participation dipped to 31.43%, with no confirmed flows in the session, while local buyers dominated a quiet market, underscoring a lull in broad market participation.

Market pulse

The NSE closed with a marginal up-tick on Friday, but the session carried a sense of limited commitment among traders. Turnover registered KES 959.6m, a level well below the 30-day average, and 20.1m shares changed hands. Market breadth was mixed, showing 12 gainers, 10 losers, and 38 counters trading flat. The modest moves in NASI (0.09% higher) and NSE20 (0.24% higher) reflect a market waiting for clearer catalysts—either an update on the Nedbank/NCBA deal or the release of the next inflation print.

What moved

• NCBA (NCBA): Up 1.8% as Faida Weekly highlighted a KES 12.4b H1 profit and a 3.75 interim dividend. The stock benefited from the oversubscription of Nedbank’s 66% stake in NCBA, which reached 121%, contributing to a positive near-term tone.
• KCB (KCB): Rose 0.7% amid defensive buying, with brokers noting the counter’s resilience in a high-rate environment where the Central Bank Rate stands at 8.75%.
• KenGen (KGEN): Fell 1.2% after warning of near-term earnings pressure driven by higher depreciation costs. The energy sector overall remains under pressure as oil prices stay elevated.
• SCOM (SCOM): Traded flat but remains on brokers’ radar for a potential bounce if NASI breaks 239. Some trade ideas suggest entering on strong intra-day moves.

Sector & themes

Banks were the clear bright spot, with NCBA and KCB leading the charge. The sector’s relative strength is anchored by two primary tailwinds:

1. Earnings momentum: NCBA’s H1 results point to banks weathering the 8.75% CBR relatively well, reinforcing a view of steady profitability in a higher-rate environment.
2. Deal flow: The oversubscription of Nedbank’s bid for NCBA’s stake serves as a vote of confidence in Kenyan financials, even though regulatory hurdles remain a consideration. Energy lagged as KenGen flagged near-term earnings pressure tied to depreciation costs. The sector’s soft tone mirrors persistent high input costs linked to global oil prices. Across the market, foreign flows were absent in the session, with local institutions taking the lead but not generating enough volume to push prices decisively higher.

Risks

• Liquidity crunch: A turnover of KES 959.6m signals a thin session, implying that a single large order could move prices substantially.
• Regulatory overhang: The Nedbank/NCBA deal’s 121% oversubscription may attract scrutiny from the CBK or the Treasury, introducing a layer of regulatory uncertainty.
• Rate sensitivity: The 8.75% CBR remains a headwind for highly leveraged counters, making market participants attentive for any hints of a forthcoming MPC move.
• Global spillovers: USD strength and Fed signals could influence foreign capital flows away from emerging markets like Kenya, adding a layer of external risk to the local equity mix.

What to watch next

• Nedbank/NCBA deal updates: Any official confirmation on the stake transition could move NCBA and KCB. Monitor for updates in the coming days as the regulatory process unfolds.
• Inflation data: The upcoming CPI print, due late August, will shape expectations for the MPC’s October meeting. A surprise uptick could unsettle markets and alter rate outlooks.
• NASI breakout: A close above 239 would help confirm a short-term uptrend, while support sits around 235; a break below would signal caution and potential risk-off conditions.
• Treasury yields: The CBK’s next bond auction dates, still to be announced, will test appetite for Kenyan debt. Rising yields could draw funds away from equities and reprice risk.

Informational only, not investment advice.