KCB rights issue falls short of the Sh15 billion target

Failure by retail and foreign investors to take up new shares in Kenya Commercial Bank’s third rights issue in six years led to the offer’s under subscription, analysts say.

KCB managed to raise Sh12.4 billion against a target amount of Sh15 billion with stockbrokers indicating that retail investors who form the dominant investor profile in the bank’s share registry opted to sit out the offer.

Foreign investors also failed to take up the bulk of their rights on uncertainty over the August 4th referendum.

Although institutional and high net worth investors are said to have taken up all their rights in the offer, retail investors’ reluctance to mop up the additional shares further hampered a 100 per cent success rate for the offer.

But the country’s biggest bank by assets said it was content with performance, adding that it earlier indicated that its target was a 50 per cent mark or Sh7.5 billion.

“There was less participation from foreign investors due to the referendum,” said Lucas Otieno, the CEO of African Alliance Kenya Securities.

“But given it was a big issue and the bank had indicated that it was looking for 50 per cent subscription, I would term it a big success.”

The bank’s share prices stood at Sh18.85 at the Nairobi Stock Exchange (NSE) compared to Sh19 at Monday’s close.

KCB plans to use the funds to support its regional expansion and to boost its minimum capital requirements to allow double its loan book and its deposits.

Money raised

KCB has subsidiaries in Tanzania, Rwanda, Uganda and South Sudan.

It raised Sh5.5 billion in 2008 and Sh2.45 billion in 2004 from the capital markets.

Stockbrokers reckon that retail investors reduced appetite for the equities market coupled with fears over dilution may have been the rights issue’s undoing as the bank was adding 887 million new shares.

The injection of a further 887 million KCB shares will increase the total shareholding from the current 2.2 billion to Sh3.1 billion.

Financial analysts had projected that the bank’s earnings per share would be significantly diluted in the short-term.