CfC Stanbic floats Sh5bn bond to fund an expansion drive

What you need to know:

CfC Stanbic is offering a fixed return of 12.5 per cent to investors who lend it cash for a seven-year period.
The bank will raise Sh4 billion in the first tranche which it is selling in the next two weeks.

CfC Stanbic is seeking a Sh5 billion debt through a corporate bond to fund expansion plans.

The lender, partly owned by South Africans, is offering a fixed return of 12.5 per cent to investors who lend it cash for a seven-year period. The bank will raise Sh4 billion in the first tranche which it is selling in the next two weeks.

CfC Stanbic is in a strong capital position unlike some of its peers who are pressured to seek additional funds by new statutory requirements taking effect next January indicating it is building a war chest.

“The proceeds of the issue will be applied by the issuer for general corporate purposes and future growth,” said CfC Stanbic in its information memorandum.

Investors have been generous to corporates that have sought for cash through bonds with recent issues made by UAP Insurance, CIC Insurance and NIC Bank being oversubscribed.

The indicative 91-day Treasury bill is currently yielding 8.6 per cent, making corporate bonds attractive to investors holding long-term cash positions.

The debt will boost the total capital position of the bank that stood at 18.7 per cent of its risk-weighted assets — which mainly constitutes of loans — as at the end of June, giving it headroom for growth compared with the new minimum requirement of 14.5 per cent.

CfC is yet to release its third quarter financial results. Banks have been in a rush to raise additional funds in order to comply with the new requirements.

The bank recorded a growth of 47 per cent in profit after tax in the first half of the year and plans to build on the momentum to solidify its market share in the country and expand in South Sudan.

CfC is currently incorporating a subsidiary in South Sudan where it has been operating a branch.

“There are still plenty of growth opportunities in South Sudan and the bank is positioning itself to expand its branch footprint accordingly,” said the bank. Shareholders in June approved the plan to set up and capitalise an operation in South Sudan by December.