Jamii Bora leaves Sh558m on the table in oversold issue

What you need to know:

Jamii Bora Bank said it had been offered Sh975.6 million against the Sh417 million its rights issue was seeking to raise to meet Central Bank of Kenya (CBK) capital adequacy ratios and fund its expansion.
The bank had raised Sh400 million in October through the conversion of a bond which brings the total capital raised this year to Sh817 million.

Jamii Bora Bank (JBB) has raised Sh417 million in a cash call oversubscribed by 137 per cent to underscore a huge appetite for banking stocks.

The bank said it had been offered Sh975.6 million against the Sh417 million its rights issue was seeking to raise to meet Central Bank of Kenya (CBK) capital adequacy ratios and fund its expansion.

CBK requires commercial banks to have a minimum core capital of Sh1 billion beginning next year in a move meant to strengthen the lenders and avert risk.

Despite the bank getting more offers than it had bargained for, it can only accept the Sh417 million since the issue did not have a green shoe option. It will refund Sh558 million.

Green shoe option

“We did not have a green shoe option. This is because we did not want more capital from the existing shareholders.

‘‘We will sell a stake to a strategic investor to raise Sh200 million in quarter one of 2015,” JBB chief executive Samuel Kimani told the Business Daily.

JBB had raised Sh400 million in October through the conversion of a bond which brings the total capital raised this year to Sh817 million.

READ: Jamii Bora set for sale of stake to bondholders

The cash call and the bond conversion have increased the bank’s core capital to Sh2.35 billion and total capital to Sh3.1 billion. Mr Kimani said the Sh200 million it plans to raise next year in addition to the Sh817 million it has raised now will increase its lending capacity by three times.

“That will take our total capital to Sh3.3 billion and a core capital of Sh2.55 billion. With that capital we can grow our balance sheet to Sh30 billion from the current Sh10 billion,” said Mr Kimani.

Analysts expect the bank’s expansion to be driven by agencies and other channels which are able to pool funds more efficiently and at a lower cost.

“Jamii Bora has drawn attention to slowing down establishment of brick and mortar branches pursuing alternative delivery channels that include mobile and Internet banking (to leverage on a new core banking system) and agency banking,” said a note on the bank’s bond conversion issued by Genghis Capital.