Oral East Africa>Kenya shilling wrestles the dollar down in H1 At the hut of the story

data, analysis, tips, politics and gossip

— NSE dollar rally draws in Foreign investors

— Kenyan Banks extend dividend party to woo the dollars

— Beneath a volcano of risks.

King Kes;

The Kenyan shilling has strengthened following the successful repayment of the 2024 Eurobond. This has earned East Africa’s largest liberal capital markets, Nairobi Securities Exchange (NSE), a steady stream of dollars that have lifted stock prices.

Kenyan shilling has rallied 19 percent this year strengthening to 128 units against the dollar on June 1, with the stronger currency sweetening returns for foreign investors cashing out more dollars for the same value of stocks sold in local currency after the rally.

At the 70th AGM of the @NSE_PLC Chairman Kiprono Kittony reassured shareholders of better times ahead as they bank on innovation and Kenya's improved macroeconomic conditions to deliver attractive returns.

When the rally began in April, offshore investors took up Kes1 billion worth of stocks --signifying the return of external investors to the bourse.

The foreigners have kept buying over the last three months although the sizes being bought has declined to Kes419.5 million by June.

Bankers party

NSE is dominated by the blue chips like Safaricom and the 11banking counters that have been targeting this flow of buyers, including Equity Bank, KCB, NCBA , Co-op, Absa, Family bank etc. The Banks stocks remain attractive after a show of profitability in the first quarter which jumped 12.9 percent to Kes73.5 billion.

In the 19th Annual General Meeting held last year, the shareholders approved the creation of Equity Group Employee Share Ownership Programme (EGH ESOP) and allocated 5% of the share capital to it.

They are using these profits to splurge on the shareholders with dividends attracting buyers and paying huge executive bonuses.

An analysis by the Star of the final dividend payout for the top five banks in terms of asset value excluding KCB Group shows that at least 43 per cent of earnings for the year, Sh51.08 billion, went to shareholders

Yet the profit growth is mainly driven by cost-cutting measures and higher income from loan interest charges on very vulnerable borrowers.

Bubbling volcano?

The borrowers are having difficulties repaying their loans in hard economic times and are defaulting.

Kenya’s non-performing loans have crossed to 16.1 percent in April stoking fire sales (auctions) with data by the Office of the Official Receiver showing petitions for company liquidations are on the rise and have hit 30 since July 2023.

However, banks have run into litigation for enforcing business seizures and prefer giving firms an option of restructuring payments.

This in turn has pushed firms to sell inventory cheaply, like Home Afrika which said it is looking to sell six housing units off its Mitini Scapes Development along Kiambu Road and Lake View Heights in Kisumu to repay its restructured debt facilities.

The company said as part of the debt restructuring programme, its directors engaged in negotiations with 'various lenders including I&M Bank, Cooperative Bank and NCBA Bank to restructure the defaulted facilities..