Family Bank chairman Wilfred Kiboro during the bell-ringing ceremony to mark the official listing of the lender’s Sh2 billion corporate bond at the Nairobi Securities Exchange on November 12, 2015. PHOTO | DIANA NGILA |
What you need to know:
Family Bank plans to raise as much as Sh15 billion through sale of stake to private equity (PE) firms.
Family Bank shareholders will now have to create more shares to accommodate potential investors.
Family Bank intends to use the cash injection to fund its expansion while addressing the large unbanked population.
Family Bank plans to raise as much as Sh15 billion through sale of stake to private equity (PE) firms. Bank chairman Wilfred Kiboro said the lender is talking with a number of firms who will inject funds in exchange of shareholding.
Mr Kiboro said the bank is looking for equity funding since it will reduce the cost of funds.
The funds, he added, will supplement the Sh2 billion debt financing raised through a five-year bond that listed on the Nairobi Securities Exchange (NSE) Thursday.
An additional Sh2 billion in dollar-denominated loans will be raised from the African Development Bank and the European Investment Bank.
Family Bank shareholders will now have to create more shares to accommodate potential investors.
“Existing shareholders have to agree that we issue more shares so that we can sell (to the private equity firms),” Mr Kiboro told the Business Daily.
The information memorandum on the bank’s medium term programme (bond) indicates that as at July 31, it had 1.25 billion issued shares out of the 1.5 billion authorised.
The top 10 shareholders held 65 per cent of the bank’s shareholding as at the time.
Analysts say local banks opt for private equity funds over the open market due to the value addition that the sophisticated investors bring.
“The funds are longer dated and the firms have people who can drive the banking business forward,” said Faith Waitherero, a research analyst at Standard Investment Bank.
Equity Bank and Jamii Bora Bank are the other lenders that have received funding from private equity firms.
Catalyst Principal Partners has increased its stake in Jamii Bora to 11 per cent from 4.4 per cent over the last one year.
Helios invested Sh11 billion in Equity Bank in December 2007 to acquire a 24.99 per stake in the lender.
Ms Waitherero added that private equity firms on their part are attracted to Kenya’s banking industry which has room to grow due to the large unbanked population and increasing innovation by lenders reducing associated costs.
Family Bank intends to use the cash injection to fund its expansion while addressing the large unbanked population.
“We are bullish about this potentially vast and virtually untapped market of nearly 40 per cent of the population who constitute the unbanked population. Most are those who still stuff cash under their mattresses,” said Mr Kiboro.
The bank will open four branches by the end of the month which will give it a network of 91 outlets spread across the country.
Family Bank was initially looking to raise Sh4 billion under its Sh10 billion medium-term note programme but the issue coincided with the recent high interest rates on Treasury Bills and the Imperial Bank sudden closure which sent jitters throughout the money market.
Imperial Bank managed to raise Sh2 billion through a bond but the Central Bank of Kenya closed the lender on the day the issue was to debut at the NSE.
These two factors resulted in an under subscription.
The interest rate scenario however is changing fast with the Treasury bill rates falling.
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