Family Bank plans Sh1.5bn rights issue, targets NSE next year

Family Bank is seeking to raise Sh1.5 billion through a rights issue to finance its expansion plan and is inviting insurance and private equity funds to take shares left by its shareholders through private placement.

The lender will host its annual general meeting on May 31 that will clear the way for the bank to offer new shares for every six left and include high net worth investors. It needs about Sh3.5 billion this year to strengthen its capital, expand to new markets and support its new businesses like home loans, corporate banking, and forex trading.

“The shareholder interest is very high and we expect to raise all the money needed. At the same time we are giving institutional investors who have in the past lacked a route through which to invest with us a chance to do so,” Family Bank CEO Peter Munyiri said in an interview Tuesday. “We expect the entire process to carry on smoothly and that the money will be in the company by the end of July.”

The bank said it will issue part of its 258 million unissued shares for the rights and the private placement with remaining shares being offered after its listing at the Nairobi Securities Exchange (NSE) next year after the recovery of the bourse.

Family, which began as a building society in 1984, was set to list by end of the year by introduction meaning it does not aim to immediately raise cash from sale of shares but offer its shareholders a platform to unlock the value of their shares. “The decision to shelve the IPO was prudent given the level of value erosion that we witnessed at the stock market last year. We are however optimistic that this will improve in time for our listing in 2013,” said Mr Munyiri.

The bank’s plan to list is aimed at boosting liquidity and offering its investors an exit route.

Last year, Tunis-based Africinvest, Netherlands’ FMO, and Norway’s Norfund made a joint equity investment of Sh1 billion in the bank that gave them a 22.4 per cent stake.

Its net profit dropped marginally to Sh354.6 million last year from Sh354.69 million in 2010 on high operating expenses that grew to Sh3.24 billion from Sh2.6 billion.

Mr Munyiri said the bank is counting on new product lines, expansion to new markets, and increased capital to return to profit growth.

The bank, whose products have targeted the low end of the market, aim at widening its product offering to include home loans, corporate banking, and forex trading with focus on corporate lending.

A stronger Family Bank is looking to lend more to companies and big ticket projects in the property market to grow its lending book and push it to the top tier of Kenya’s banking sector.

Family Bank has been modelling its strategy on that of Equity Bank, which has upset Kenya’s conservative financial sector with the rollout of products that are popular with the low end of the market