A Barclays Bank branch in Nairobi. Barclays Kenya’s share price has risen nine per cent in the past three months, knocking off Equity Bank from the position of the most the valuable lender as measured by market capitalisation. File
Barclays Kenya’s share price has risen nine per cent in the past three months, knocking off Equity Bank from the position of the most the valuable lender as measured by market capitalisation.
An investor rush to buy Barclays shares ahead of its split expected to take effect today has seen the lender’s market capitalisation rise to Sh92.3 billion as per Monday’s market data, ahead of Equity’s Sh91.6 billion.
Barclays’ share price has risen by Sh5.50 to Sh68 since the board recommended a four-for-one share split in February, a level last seen in July 2008.
Runners up KCB at Sh74.5 billion, Stanchart at Sh70.3 billion and Co-operative Bank with market capitalisation of Sh61.1 billion consist the top five most valuable banks listed at the Nairobi Stock Exchange.
The Barclays board’s move to split the share is aimed at increasing the number of shares available for trading which is expected to attract small investors who currently view the stock as nominally expensive relative to other lenders.
The board’s recommendation was approved by shareholders last Friday at the bank’s AGM.
Stockbrokers said demand for the bank’s share has been building since the announcement, driving the price up. Robert Munuku, a research analyst at Drummond Investment Bank, said that the market had received the planned share split positively as seen by the share price appreciation.
Mr Munuku said that the demand is likely to be sustained in the near future since investors, both retail and institutional, were taking positions for the share split to allow them get more shares at a bargain price.
“At Sh68, many retail investors had been shut out,” said Mr Munuku.
“High demand on Barclays ahead of Monday’s books closure for the split saw it gain since beginning of last week. It moved a solid volume of 3 million shares,” said a weekly report by Sterling Investment Bank’s research desk.
Market rules say that investors have to buy at least 100 shares of a listed company meaning that a split resulting in a share price of between Sh17 and Sh20 will mean that an investor will need up to Sh2,000 to participate, a third of the Sh6,800 they would currently need to buy the stock.
Dealers at Faida Investment Bank said that the bank’s share price dipped slightly due to supply and demand nearly leveling out in trading yesterday but said that there is likely to be more interest after the split.
“Ideally if the stock becomes more liquid it becomes more attractive,” said the Faida Investment Bank dealers.
Adding that in the next few days the share price could either go up similar to other shares that have undergone splits.
Shares that rose one day after their split include Equity Bank’s which rose by 3.94 per cent in 2008 after its 5-to-1 split, KCB’s share price rose by 9.89 per cent after its 10-to-1 split (April 2007), East Africa Cables share price rose by 9.03 per cent after its 10-to1 in August 2006 and EABL share appreciated by 1.75 per cent in August 2004 after its 5-to-1 split.
Barclays Bank’s share price however dropped by 5.43 per cent after its share split in November 2006. Nation Media Group’s share price also dropped by 9.89 per cent after its 2-to-1split in 2008.
Speculation is also said to be driving the share price following announcement of the split.
George Bodo, a research analyst at Genghis Capital, said that the rally is driven purely by speculation.
“Ideally a split should have zero effect,” said Mr Bodo.
The market, he said, is obsessed with book closures and share price increase towards the build up.
Mr Munuku said that the firm’s growth in profitability in the first quarter is bolstering confidence in the stock.
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