Kenyan bank eyes another Rights Issue

May 7, 2010
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, NAIROBI, Kenya, Apr 7 – Kenya Commercial Bank Group shareholders have approved a Rights Issue intended to raise Sh15 billion.

Shareholders gave the go-ahead during the bank’s 39th Annual General Meeting to issue 1.1 billion additional shares making it the third issue in less than two years in the bank’s effort to raise capital to sustain a consolidation plan.

The money is intended to help raise its core capital with the aim of growing its deposit and loan capacity.

KCB Group Chairman Peter Muthoka said the bank’s rapid expansion into the region was exerting pressure on their sustainability of issuing loans.

“Our current capital base cannot sustain further growth of the bank,” Mr Muthoka said adding that KCB Group would now concentrate on consolidating its business portfolio rather than opening new branches.

KCB is Kenya’s largest bank by assets which currently stand at Sh195 billion. It is also the region’s biggest commercial bank with 203 branches in Kenya, Tanzania, Uganda, Rwanda and Southern Sudan.

KCB Group’s lending business has continued to thrive leading to a net interest growth of 23 percent from Sh11.8 billion in 2008 to Sh14.5 billion in 2009.

Mr Muthoka said it was ‘imperative’ for the bank to raise its core capital if it was to attain its growth targets.

KCB Chief Executive Martin Oduor-Otieno said the move was timely, as the bank had reached its cap in its ability to continue lending to customers.

“We do need a certain amount of capital to grow our deposits and loans because they are a multiple. If you have got so much capital you can do as much loans and we have exhausted that,” Mr Oduor-Otieno said adding that part of that money would be used to grow its other businesses in the region.

KCB is now waiting for the necessary approval from the Capital Markets Authority before setting the price for the issue but it is believed it will sell at a discounted price of the current market value of its share which closed Friday at Sh22.25.

The bank recently lowered its base lending rate from 15 percent to 13.5 percent, a move expected to attract more loan applications.

During the AGM, shareholders also passed a resolution to increase its share capital to Sh3.5 billion from the current Sh2.4 billion by creating 1.1 billion new ordinary shares each valued at Sh1.

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