Housing Finance managing director Frank Ireri said he would comment on plans by the lender to create new shares if shareholders approve the proposal. Photo/FILE
What you need to know:
Housing Finance is seeking approval to increase its authorised share capital from 236 million to 500 million during an annual general meeting scheduled for April 25, 2014.
By creating additional shares, the bank would get headroom for floating a rights issue if it needs cash or give a paper dividend if the intention is to conserve cash. It could also close an acquisition through a share swap.
HF managing director Frank Ireri said he would comment on the matter if shareholders approve the proposal.
Housing Finance is seeking to create new shares in a drive that analysts say is intended to lay the basis for increasing the home lender’s capital base.
In a notice sent to shareholders, the financier is seeking approval to increase its authorised share capital from 236 million to 500 million during an annual general meeting scheduled for April 25, 2014.
“They have no immediate need for capital. But if they are looking at increasing their risky assets in form of loans what it means is that the capital adequacy ratios will come under pressure,” said Standard Investment Bank head of research Francis Mwangi.
By creating additional shares, the bank would get headroom for floating a rights issue if it needs cash or give a paper dividend if the intention is to conserve cash. It could also close an acquisition through a share swap.
The lender now has only five million unissued shares.
HF managing director Frank Ireri said he would comment on the matter if shareholders approve the proposal.
In the past, companies such as KCB, Co-operative and KenolKobil have increased their authorised share capital before making rights or bonus issue.
Mr Mwangi said Housing Finance had relied on borrowed funds to grow its loan book. Currently the bank’s borrowed funds stand at Sh14 billion and it has received regulatory approvals to issue a Sh10 billion bond.
The bank concluded its first foreign denominated loan last year with the Sh425 million ($5 million) financing of the Buffalo Mall in Naivasha.
Central Bank is pushing for increased capital base for banks to ensure the sector is strong enough to withstand market, credit or political shocks. If the bank chooses a bonus issue, it would have to capitalise its retained earnings of Sh2 billion.
The bank is expected to pay out Sh236 million as final dividends at the rate of Sh1.75 dividend per share upon shareholder approval. The lender had already paid out an interim dividend of Sh0.75.
Housing Finance reported a 33.9 per cent rise in profit last year to Sh995 million. The bank recently introduced a loan product for low-priced houses which are expected to be popular with the lower and middle economic classes.
It also plans to grow customer deposits held with it through savings accounts which it was allowed to operate in 2012 by CBK. It had also announced plan to offer advances in foreign currency.
Kestrel Capital pegged Housing Finance ability to sustain its high growth in the medium term to getting access to cheap funds.
