Listed banks recorded improved earnings per share (EPS) of 15.1 per cent in quarter three compared to 9.7 per cent growth in a similar period last year.
Cytonn third quarter 2016 banking sector report said this was on the back of an improved macro-economic environment and the ability of listed banks to maintain their margins despite rates falling to below historical average levels as evidenced by the 91-day T-bill rates declining to 8.4 per cent compared to its five-year average of 10.4 per cent.
The banking sector contributed 10.1 per cent of GDP but this could change going forward as banks scale back on lending.
“As a result of the interest rate cap enacted towards the end of the third quarter of 2016, we are likely to witness contraction of the private sector credit growth as banks opt to lend to the government, which is considered risk free,” said Cytonn Investment manager Maurice Oduor.
Meanwhile, Equity Group is tipped as the most attractive bank for investment.
The bank held the same position in Cytonn’s the half year 2016 report and the position is supported by a strong franchise and intrinsic value score.
National Bank ranked lowest, returning a low score in franchise and intrinsic value score.