Listed lender Co-operative Bank is forecast to report a substantial rise in fees and commissions income for the year 2019, giving its share price a huge lift of up to 48% in the coming 12 months.
This is according to projections by Bermuda-based investment advisory firm Securities Africa Kenya Limited.
The forecast by Securities Africa Limited comes two weeks after a similar report by Investec Securities plc which indicated that the Co-op Bank share price has the highest upside potential at 14.2% to a projected fair price of Kes. 17.30 from the current Kes15.15.
Co-operative bank is currently trading on an undemanding valuation of 2020 P/E of 6.1x and a P/B of 1.1x.
Securities Africa Kenya Limited report further indicates that Co-op Bank share price has a 12-Month Target Price of KES22.30, which is a notable 48% upside potential relative to the current price of KES15.00.
“Securities Africa expects Co-op Bank to record a +15.6% rise in Earnings per Share, mainly driven by improving efficiencies. “the report indicated.
It further suggests that non-funded income is expected to grow significantly by +51.0%, driven largely by mobile loans, as currently, Co-op Bank is disbursing between KES 4.5bn to KES 5.0bn per month. This growth is likely to be sustained in the years 2020 and 2021.
Cost-to-income ratio is expected to decrease to 50.5% in 2019 from 54.6% in 2018. Cost of income will improve further to 49.0% and 47.0% in 2020 and 2021 as a result of enhanced efficiencies.
“We anticipate the cost of risk to increase to 1.0% in FY19 compared to 0.8% in FY18, with the NPL’s decreasing to 10.0% in FY19 from 11.2% in 3Q19 as the Group’s asset quality improves and some recoveries are made in particular in the real estate sector. The NPL ratio will continue to improve further in FY20 and FY21 to 9.2% and 8.4% respectively, “report indicates.