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Consolidated Bank targets IPO

NAIROBI, Kenya, May 26 – Consolidated Bank has said it prefers to raise additional capital in the ongoing privatisation process through an Initial Public Offering (IPO).

The bank\’s Chairman Eunice Kagane said they favour an IPO as it would give the Kenyan public an opportunity to own a piece of the institution which was created 22 years ago.

The Privatisation Commission has already met with the shareholders to consider the various ways of injecting additional equity required for the bank\’s growth.

IPOs, bringing on board a strategic partner or having the shareholders\’ inject more funds into the business are some of the various options that are being considered with the help of consultants, PriceWaterhouseCoopers.

"As a board, we would like to see it (privatisation) go the IPO way because that is how we will know that we have given value to the people who sacrificed so much when those banks went under," said the Chairman.

She was referring to the nine financial institutions including Estate Finance Company, Estate Building Society, Business Finance and Home Savings and Mortgages that were amalgamated in 1989 when they could not meet their obligations.

"With an (IPO), we will be giving back to the people who lost money when those banks collapsed and it would give them an opportunity to own the bank," she said.

Over the last two decades the bank has fought hard to catch up with its competitors in the banking industry. The bank is for instance almost clearing a Sh5billion debt that it inherited following the consolidation of the other institutions.

By the end of this financial year for instance, the company hopes to wipe out the accumulated losses amounting to Sh223 million. Once this happens, it means that Consolidated Bank will be able to start paying out dividends to its shareholders in the distant future.

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Its shareholders include National Social Security Fund which holds a 22.3 percent stake, Kenya National Assurance Company with 19.4 percent and others such as Kenya Pipeline Company, Kenya National Examination Council and National Hospital Insurance Fund whose shareholding is less than 10 percent each.

On the profitability front, the bank has been able to return double digit growth registering a 121 percent rise in pre-tax profit to Sh257 million for the year ended December 31, 2010.

Managing Director David Wachira said they hope to post a profit of Sh500 million in 2011 although they have an ambitious target of Sh1 billion.

"The market is growing, our brand has positioned itself very well and we have the support of our customers, we have chosen a market niche which is the SME (Small and Medium Enterprises) which is growing very fast and with our core banking system investment, we believe that we can get much more than what we did in 2010," Mr Wachira said.

To achieve this feat, they have a number of strategies that they plan to execute going forward. For instance, they are looking to exploit the agency banking model where they have already contacted 356 agents who they hope to contract.

He said they are investing Sh65 million to implement this plan which they hope will enable them to contribute to the bottom line.

However, agency banking will not be a substitute for physical branches and as such they plan to have at least one outlet in all the 47 counties in the country in the next few years.

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