The franchise score measures the broad and comprehensive business strength of a bank across 13 different metrics, while the intrinsic score measures the investment return potential.
The report, themed "Reduced Loan Provisions Spur Banking Sector Recovery in 2021" ranked Cooperative bank second while
"The asset quality for listed banks improved in FY'2021, with the gross NPL ratio declining by 1.2 percentage points to 12.3 per cent, from 13.5 per cent in FY'2020. We however note that despite this marginal improvement in the asset quality, the NPL ratio remains higher than the 10-year average of 8.1%," the report noted.
According to Cytonn, four key drivers shaped the banking sector in FY'2021, namely; regulation, regional expansion through mergers and acquisitions, asset quality, and capital raising.
"Mergers and acquisitions remained a key theme in FY'2021, with the current environment providing opportunities for bigger banks with a sufficient capital base to expand and take advantage of the low valuations in the market to further consolidate and buy out smaller banks," said Stellah Swakei, Investment Analyst at Cytonn Investments.
According to Cytonn, the Covid-19 pandemic exposed the weak banks in the industry which might need to be acquired by larger banks in order to boost their capital adequacy and liquidity ratios to the required minimum statutory levels.
"We expect to see continued consolidation in the banking sector as the weaker banks are merged with the big banks to form a stronger banking system. We also expect to see Kenyan banks continue to diversify into other African regions as they look to reduce their reliance on the Kenyan Market and distribute risks as well," said Swakei.
Key regional acquisitions during 2021 included;
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