Chase Bank plans private offering to raise Sh2.5bn

Medium-sized lender Chase Bank is to raise an additional Sh2.5 billion through a private placement to fund its fast-paced growth, the institution’s management has disclosed.

The bank’s capital ratios have grown thin following rapid growth mainly from lending to small- and medium-sized enterprises.

The bank expanded its loan book by Sh16 billion or 38 per cent to Sh57.2 billion from Sh41.2 billion in the previous year.

A private placement means the bank will get cash from investors invited privately and not from the general public.

At the end of last year the bank raised Sh1.3 billion from its shareholders who include European-based private equity firms through a rights issue.

“We are growing very fast hence the need for occasional additional capital. Existing shareholders have the capacity and the intention to continue supporting the bank in its growth trajectory,” said the bank’s chief executive, Paul Njaga.

The bank set up several branches last year after receiving a cash boost. It got Sh4 billion from the Netherlands Bank and another Sh1.6 billion from the Microfinance Enhancement Facility SA to boost its long-term lending to small and medium enterprises (SMEs).

Chase Bank has been involved in a series of capital raising ventures including inviting three strategic investors in the last two years.

The total long-term debt it has taken during the period is in excess of Sh10 billion.

“The shareholders have always anticipated this growth and the related need for capital. All capital raising activities have always been pre-planned well in advance,” said Mr Njaga.

This will be the second private placement by the lender in the recent past after it conducted one in 2011 for Sh810 million. It followed the placement with two rights issues in 2012 of Sh400 million and last year’s Sh1.3 billion underlining its capital thirst.

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Chase Bank joins other privately owned banks such as Commercial Bank of Africa and Family Bank in raising cash from a limited group of investors.

CBA raised Sh1.5 billion through a private placement in 2013 to finance its entry to Uganda.

Recently listed companies Atlas and Frame Tree raised cash through private placements last year before their listing in the growth enterprises market segment on the Nairobi Securities Exchange.

The bank owns micro-lender Rafiki Deposit Taking Microfinance and investment bank Genghis Capital. Chase group also owns investment advisors Orchid Capital, real estate firm Lighthouse Properties, and medical insurance company Tulip Healthcare.

The group is associated with leasing company Rivieres Finance.

Chase Bank posted a 48.8 per cent growth in after-tax profit following rapid expansion in lending. It recorded a profit of Sh2.3 billion last year compared to Sh1.5 billion the previous year.

The rapid growth in lending however cut the bank’s capital position leaving it with little room for further growth. Its total capital as a ratio to its loan book stood at 15.3 per cent in December compared to the minimum ratio of 14.5 per cent —leaving a headroom of only 0.8 percentage points.

Mr Nyaga said the banks’ customer numbers had risen to 140,000 from 50,000 in 2013, riding on the recently introduced agency banking model. It recorded a 50 per cent increase in customer savings to Sh79.8 billion from Sh53.3 billion a year earlier.

The bank had been ranked 12th in size out of Kenya’s 44 banks in 2013 by the Central Bank of Kenya, with a market share of 2.4 per cent.