Victoria Commercial Bank (VCB) is looking to raise an additional Sh1.5 billion in tier-one capital before the end of the year to bolster its ratios in line with increased lending.
Disclosures made by the South African rating agency GCR said the lender is seeking additional capital in light of forecast loan growth of 11 percent by the end of the year.
By the end of June, VCB’s loan book grew by 18.5 percent year-on-year to Sh37.8 billion.
The agency affirmed the lender’s national scale long and short-term issuer ratings to BBB- and A3, citing the planned increase in core capital —which comprises equity and declared reserves— as a factor.
“Our core rating scenario forecasts capitalisation increasing to around 18.5 percent by mid-year 2024. This reflects the following assumptions: a tier-one capital raise of Sh1.5 billion in the fourth quarter of 2023…forecasted loan growth of 11 percent and risk weighted assets growth of 12 percent in 2023,” said GCR.
By the end of June, the lender’s core or tier one capital stood at Sh7.08 billion, against the Central Bank of Kenya mandated statutory minimum of Sh1 billion.
Its core capital to total risk-weighted assets ratio stood at 13.1 percent, against a statutory minimum of 10.5 percent.
Banks need to periodically raise their capital to keep up with growth in lending and also to improve their ability to weather shocks.
Regulations also limit a bank to lending no more than 25 per cent of the equivalent of core capital to a single borrower.
They normally raise tier-one capital from existing shareholders, but can also do so through equity sales either through private placement or initial public offering.
VCB has since last year been on a capital-raising drive to shore up its adequacy ratios and secure funds for onward lending to customers.
In June 2022, the lender secured a $10 million (Sh1.45 billion) loan from the Belgian Investment Company for Developing Nations towards tier-two capital.
The funds, VCB said, would boost its lending to small businesses that have in recent years been starved of credit by formal lenders due to heightened risk perception.
In September last year, the lender also secured a loan of $20 million (Sh2.9 billion) from the Arab Bank for Economic Development in Africa, meant for on-lending towards projects by private sector players in Kenya.
