KCB to release half-year results

KCB Bank Group will announce its half-year results on Tuesday, just a day after its Sh15 billion rights issue closed to shareholders, signalling the direction the bank is taking to investors wishing to take up any new shares left on the table.

“We have not seen the government offloading its 209 million shares today, which is an indicator it could have let them lapse,” said Mr Wycliffe Masinde, an investment analyst at Kestrel Investment Bank, adding that the half-year results announcement is expected to be good to assure investors buying into the right issue that the bank is on the right growth path.

Market analysts have indicated that there has been good demand for the shares, but they anticipated the government’s decision to forego its rights to cause a dip in the rights price, with some research reports down grading KCB’s future expected share price.

“The drop in rights price is purely on speculation that the government will cash out its rights at a very low price,” said Mr Masinde, adding that the massive number of shares being listed would dilute the ownership of existing shareholders who forewent the offer.

Success rate

The issue has not been underwritten, and its success rate is pegged at 50 per cent, which would raise Sh7.5 billion for the bank.

“Those taking up the rights will have to hold their shares for at least two years within which the bank would be able to effectively utilise the new capital,” said analysts from NIC Capital.

The government is the biggest shareholder in KCB Group with a 23.6 per cent shareholding, which is set to reduce to 16.86 per cent after Treasury sat out the issue.

This will be the second time that the Kenyan government forfeits its rights, having stayed out of an earlier issue in which the bank raised Sh5.5 billion, cutting its stake in the 110-year-old bank from 26.2 per cent to the current 23.6 per cent.

A report from NIC Capital, the stock broking arm of NIC Bank, indicated that KCB strategy of raising capital through equity minimises on its exposure to additional debt which would have eroded profitability and the value to shareholders.

The banks shares at the NSE have dropped 14 per cent, from Sh20.75 when the right issue offer price was announced mid last month to Sh17.75 at the close of trade on Monday.

KCB, the biggest bank in terms of assets in Kenya, reported a pre-tax profit increase of 11 per cent in the first quarter of this year to Sh1.9 billion.

In 2009 it made a pre-tax profit of Sh6.3 billion, compared to Shs6.0 billion in 2008, with its net interest income growing to Sh14.5 billion while total operating income stool at Sh22.5 billion, mainly attributed to a drop in non-performing loans to Sh856 million and a 57 per cent reduction in provisions for non-performing loans to Sh1.6 billion.