Two renowned South Africa-based investment advisory firms, SBG Securities and BPI Capital Africa, have each rated Bank of Kigali’s shares as good to invest in, with "buy” and "hold” recommendations respectively. 

In its equity research that covered leading commercial banks in sub-Sahara Africa, BPI said Bank of Kigali’s good outlook was based on its ability to further increase return on equity to about 26 per cent following recent capital injection.

The report findings were released last week. 

This analysis was supported by SBG, which noted that a combination of good risk management and growth in non-interest income could enable the bank attain return on equity (amount of money made by each franc invested in the business) of over 35 per cent from the current 20 per cent.

According to BPI, prospects for Bank of Kigali shares are further strengthened by a good macro-economic environment and strong management, as well as good corporate governance. 

"Bank of Kigali’s selling position is its strength in corporate banking, but [its] long history of banking in Rwanda has helped it to cement strong relations with large corporates in Rwanda. Due to its large capital levels, it also dominates large corporate deal flows,” the firm indicated.

The firm recommendation on Bank of Kigali equity is ‘hold’ – effectively advising investors neither to sell nor buy more shares during this financial year. 

In effect, BPI Capital Africa’s rating also advises those who plan to buy shares in Rwanda’s biggest commercial bank  to hold their plans in the medium-term. 

A local financial analyst described a ‘hold’ rating as a neutral recommendation that is higher than ‘sell’ but lower than ‘buy.’

"This implies that if you own shares you shouldn’t sell or buy more. Similarly, if you don’t own, do not buy,” he said.

The SBG Securities report, which was released at the end of last month, assessed the banking sector in East Africa. 

It recommended a ‘buy’ for Bank of Kigali shares at price of Rwf275, slightly higher than Rfw235 projected by BPI. 

The bank shares are currently trading at about Rwf195 on the Rwanda Stock Exchange.

A ‘buy’ recommendation is the best any company listed on a stock exchange can get.

"As a result, we reiterate our ‘buy’ rating on the stock with a target price of Rwf275 per share from Rwf186. Our rating, however, comes with a health warning: limited liquidity. In our view, this is likely the single biggest barrier to broader interest in the stock, and in that sense, Bank of Kigali may not be for every institutional investor,” SFG Securities said in their analysis.

John Bugunya, the Bank of Kigali chief finance officer, said the SFG Securities report captured the bank’s achievements and future targets. 

"We feel that given our market dominance and operating where banking assets to GDP (Gross Domestic Product) are less than 35 per cent, there is room for growth,” he said.