Consolidated Bank to double its loan book by 2014

Consolidated Bank plans to double its loan book and deposits as it expands its network over the next two years.

By 2014, the bank plans to have an Sh18 billion loan book, nearly twice the Sh9.2 billion of 2011.

According to the information memorandum for the bank’s Sh4 billion medium-term note, customer deposits are expected to grow to Sh24 billion over the two year period up from Sh12 billion, while bank branches are expected to grow to 27 from the current 17.

The Sh4 billion medium-term note, whose pricing details will be unveilled today, will be used for lending as well as increasing the bank’s recapitalisation.
“Generally, the proceeds will be used for onward lending to clients and to boost Tier II capital of the bank,” says the memorandum.

The capitalisation plan will cost Sh5.17 billion.

The information memorandum says the expansion by the bank, which has lately gone huge on SME funding, will focus on specific sectors.

“The bank has identified growing industries and segments for which it has developed solutions,” it says. “The bank has further segmented this market to provide competitive credit products that answer specific needs.”

Financing bid bonds, bill and invoice discounting are the bank’s strong areas.

These accounted for 38 per cent or Sh3.47 billion of the loan book in 2011. But it also plans to finance youth-run businesses that aim to sell products and services to the government, the biggest buyer of goods.

Real estate, agriculture, manufacturing, transport and communications, business service and other lending made up the remainder of the bank’s loan book.

The focus on the youth comes as Treasury rolls out an affirmative action policy where all government contracts are to have a portion reserved for youth-run enterprises.

Corporate banking is another area the bank expects to expand into and it has already set up a unit for this.

The bank’s customer base has been growing at an annual rate of 23 per cent from 19,684 in 2006 to 55,359 in 2011.

Deposits are also expected to double to Sh24 billion from the Sh12 billion at the end of 2011.

“Customer deposits are critical sources of funds for the bank and will largely determine the growth in the size of the bank,” says the document.