Are NSE Bank Stocks Actually Cheap Right Now?

The case that sounds convincing on paper

Kenyan bank stocks have been a recurring talking point since mid-2023: prices dipped, dividend yields looked attractive, and a wave of commentary declared that the sector was “undervalued.” It's a seductive narrative. But attractive narratives and good investments are different things, and the distinction matters when your money is on the line. We decided to sit down with the actual numbers — specifically price-to-earnings (P/E) and price-to-book (P/B) ratios for Equity Group, KCB Group, Co-operative Bank, Absa Bank Kenya, and NCBA Group — and ask a simpler question: cheap compared to what? A stock trading at 5x earnings sounds cheap if you're used to London or New York multiples. It looks different when you adjust for Kenyan inflation running above 6%, elevated non-performing loan ratios following a difficult post-pandemic credit cycle, and a shilling that lost roughly 20% of its value against the dollar between 2022 and 2024. Context is everything, and this piece provides it.

What the ratios actually show

Across our sample, P/E ratios ranged from roughly 4x to 7x at the time of writing — below the five-year historical average for each name. On a raw screen, that looks like a buying opportunity. But P/B ratios told a more complicated story: two of the five banks traded above book value, which is unusual for institutions carrying elevated NPL ratios. That divergence suggests the market is pricing in a faster-than-expected loan recovery for those names — a scenario that is possible but not guaranteed given the current CBK policy rate environment. The one metric that did look genuinely constructive across the board was dividend yield: three of the five banks offered trailing yields above 7%, which compares favourably to 91-day T-bill rates even after accounting for the 15% withholding tax Kenya applies to dividends. The honest summary: parts of the sector are cheap for a reason, and parts are cheap for real. The skill is knowing which bank you're looking at.