The bank is selling shares at an offer price of Sh21 per share compared to the current market price of Sh37.75 and Group Managing Director James Macharia said the money from the Rights Issue will be used to help the bank establish its presence in new strategic and commercially viable locations.
“The proceeds which we shall be getting from this Rights Issue will be for two uses. One is for our local expansion which is business as usual, but also now NIC is very much focused on regional expansion,” he said.
“Regional expansion means either setting up subsidiary companies or doing takeovers which means there’s a lot of capital required,” he explained.
The Rights will be issued in the ration of one New Ordinary Share for every four Ordinary Shares held.
Macharia added that another reason for the launch of the Rights Issue is to complete the implementation of a modern co-banking system called T24, which will cost over Sh670 million.
“This system basically puts us at par with the best players worldwide. We believe that with this kind of co-banking system, we shall be able to attract customers globally and we’ll be able to get customers from the Diaspora” he noted.
“This is because it’s a live system which will be able to ensure that customers, wherever they are globally, can bank with NIC Bank,” he added.
He also announced that NIC Bank intends to carry out a Bonus Issue at a date to be announced soon after the Rights Issue.
“Holders of the New Shares issued during the Rights Issue will be entitled to receive Bonus Shares in respect of the New Shares in the ration of 1 additional Bonus Share for every 10 New Shares held after the Rights Issue,” he explained.
“Current shareholders will also participate in the Bonus Issue, although it’s still subject to approval by the Capital Markets Authority,” he said.
Shareholders who were in the bank’s shareholder register as of July 30 are eligible to participate in the Rights Issue which will be carried out between August 27 to September 14.
During the launch of the Rights Issue, Macharia also announced that NIC Bank has posted a 42 percent increase in its pre-tax profit for the first half of 2012 to Sh2.3 billion up from Sh1.6 billion in the same period last year.
Total operating income grew by 36 percent to Sh4 billion and Macharia said this was due to their strong performance in asset financing, which was unaffected by the difficult operating environment characterized by high interest rates, instability in the financial markets and increases in geopolitical uncertainty due to the upcoming elections.
“Because we are very strong in asset finance, it has not been affected much because people buy assets to put them in productive use and therefore they are able to pay for themselves,” he said.
“So our lending in asset finance has not been affected as much as other assets in the banking sector and because of that we might grow our portfolios and enhance our net interest income,” he added.
Macharia noted that the growth in income was in line with the balance sheet expansion as underpinned by total assets growth of 31 percent to Sh89 billion.
Net interest income grew by 30 percent to Sh2.5 billion due to the growth in the bank’s loan book of 32 percent to Sh62.4 billion.
To fund this growth in advances, the deposit base increased to Sh72.7 billion reflecting a growth of 31 percent from Sh55.5 billion reported in June 2011.
Total operating expenses excluding provisions for loan losses increased by 28 percent to Sh1.7 billion and Macharia noted this was partly due to the bank’s support of various productive sectors across the country.
“We’ve been supporting all the productive sectors in this country whether it’s transport, manufacturing and we are a pioneer in leasing and because of that we have sustained the growth of our net interest income,” he revealed.
“The gross interest was about Sh5.6 billion against interest costs of about Sh3.5 billion giving us about Sh2.5 billion in terms of net,” he added.
The provisions for loan losses amounted to Sh105 million compared to Sh78 million in June 2011.
“The minimal increase in provisions for loan losses is commendable given the prevailing economic difficulties and growth in the lending book and it reflects our robust credit risk management policies and procedures,” he explained.