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Kenya

Bear scares Family Bank from bourse

NAIROBI, Kenya Nov 25- The bearish run currently being witnessed at the Nairobi Securities Exchange has seen Family Bank suspend its plans for listing on the bourse.

The NSE 20 Share Index shed 25.5 percent of its value to stand at 3,288.70 points in the last couple of months.

Speaking to Capital Business Family Bank Chief Executive Officer Peter Munyiri said other companies that have listed during the course of the year have seen their share price eroded, adding that the bank’s board had decided to protect shareholder value.

“If we just go to the NSE for the purpose of wider public access, it will be very irresponsible of us in terms of capital erosion. The decision taken by the board is that listing is still on but we can’t go contrary to the things we are seeing at the macro level,” Munyiri said.

The bank had initially wished to have been listed in October.

Family Bank had 242 million issued and paid-up shares at the end of last year that is currently trading over the counter at between Sh37 and Sh40.

While the bank has already received shareholder approval and the Central Bank, Munyiri said timing for the listing by introduction will be crucial and will only list once the Marco economic conditions in the country stabilise.

“If this situation improves and the index follows the pattern of the economy we can come in as early as the first quarter of 2012 but we have to be very cautious of when this will be,” he stressed.

The bank’s decision to put on ice its listing plans could be informed to the experience from other institutions that have listed this year. After listing via introduction at Sh50 investment firm TransCentuary has seen its share price eroded and is currently trading at Sh25.50.

Inflation, which currently stands at 18.91 percent, has reduced interest from foreign and high-net worth investors with analysts saying that the stock market is unlikely to return to its peak next year.

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Listing by introduction is particularly seen as the best route to listing given the tight economic conditions that have dimmed enthusiasm for the previously favored initial public offer.

While going public offers the micro-lender’s shareholders a liquid forum to unlock the value of their shares, Munyiri said the company would seek to protect shareholder value and that current market fundamentals were not right.

In 2010, Family Bank unveiled a consortium of private equity firms as their new strategic investors, acquiring 22.31 percent stake in the bank. This pushed up its total shareholder funds by 97 percent from Sh1.6 billion in 2009 to Sh3.1 billion.

The bank is also looking at unlocking funds as it embarks on a business transformation strategy to move from a mid tier bank and compete with top banks such as Equity Bank, KCB and Standard Chartered Bank.

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