Co-operative Bank shares price has the highest upside potential at 14.2 per cent that is according to latest projection by Securities Africa Limited.
According to the firm, Co-op Bank has a 12-month Target Price of Sh22.30, which is a 48 per cent upside potential relative to the current price of Sh15.
The firm says the Bank is expected to record a +15.6 per cent rise in earnings per Share, mainly driven by improving efficiencies.
Securities Africa has also attributed Co-op Bank’s projected stronger interest to the recent repeal of interest rate cap, a move they say could see consumer lending as well as from SMEs and the agricultural sector grow.
The bank non-funded income is expected to grow significantly by +51.0 per cent, driven largely by the mobile loans, as currently Co-op Bank is disbursing between Sh4.5bn to Sh5 billion per month. This growth is likely to be sustained in years 2020 and 2021.
The bank’s cost-to-income ratio is also expected to decrease to 50.5 per cent in 2019 from 54.6 per cent in 2018 with the cost of income improving further to 49 per cent and 47per cent in 2020 and 2021 as a result of enhanced efficiencies.Bottom line, profit before tax is projected to grow by +15.3 per cent y/y to Sh20.7 billion in 2019, and profit after tax expected to grow by +14.0per cent to Sh14.51 billion.
We expect Return on Equity of 19.6 per cent and ROA of 3.3 per cent in 2019.Also projected to rise during the year in focus include the coast of risk, with Nonperforming Loans going down.
“We anticipate cost of risk to increase to 1.0 per cent in 2019 compared to 0.8 per cent in 2018, with the nonperforming loan’s decreasing to 10.0 per cent in 2019 from 11.2 per cent in the third quarter of 2019 as the Group’s asset quality improves and some recoveries are made in particular in the real estate sector,” read the statement.
“The Nonperfoming Loan ratio will continue to improve further in 2020 and 2021 to 9.2per cent and 8.4 per cent respectively.”Cooperative Bank of Kenya Group is currently trading on an undemanding valuation of 2020 P/E of 6.1x and a P/B of 1.1x.
This forecast by Securities Africa Limited comes two weeks after a similar report by Investec Securities plc indicated that the Co-op Bank share price has the highest upside potential at 14.2 per cent to a projected fair price of Sh17.30 from the current Sh15.15.
KCB comes second with a 12.9 per cent upside potential from Sh52.00 to Sh58.70 while Equity comes third, projected to rise 3.9 per cent from Sh50.25 to Sh52.20.
