NIC rights issue set for full subscription, say market analysts

• According to the information memorandum, results are expected to be out on October 11. The new shares will start trading on the Nairobi Securities Exchange (NSE) on October 23.
• Dealers who spoke to the Business Daily said that signs were that there would be an oversubscription but doubted if it would match or surpass the DTB rights issue which was oversubscribed by 82 per cent. DTB attracted Sh3.36 billion against the Sh1.8 billion it was seeking.
• SIB’s report shows that last year the bank’s NPL ratio stood at 3.4 per cent, lower than Barclay Bank’s 5.4 but slightly higher than DTB’s 0.9 and the industry 3.3 per cent average ratio.
• The Sh21 rights offer price was a 22.4 per cent discount on the weighted average closing market price of the share over six months up to February 24.
• Family Bank, Jamii Bora Bank, CfC Stanbic and StanChart are the other banks seeking funding from shareholders through rights issues generally expected to hit targets due to the backing of their core stakeholders.

NIC Bank is set to net more than the Sh2 billion it was seeking from shareholders in the rights issue which closed last week, the management and analysts have said.

Transaction advisers NIC Capital said that while it could not give specific figures signs are that the bank’s rights issue is headed to become the second successful cash call of 2012 after Diamond Trust Bank’s (DTB) earlier in the month.

“Indicative numbers point to an oversubscription,” said NIC Capital managing director Wilson Nyakera.

His assertion on Monday followed Friday’s statement by NIC Group managing director James Macharia forecasting full subscription on the eve of the issue closure “given our track record of profitability, good management and sound expansion strategy”.

According to the information memorandum, results are expected to be out on October 11. The new shares will start trading on the Nairobi Securities Exchange (NSE) on October 23.

Dealers who spoke to the Business Daily said that signs were that there would be an oversubscription but doubted if it would match or surpass the DTB rights issue which was oversubscribed by 82 per cent.

DTB attracted Sh3.36 billion against the Sh1.8 billion it was seeking.

READ: DTB holds steady after listing of 24.5m new shares

Dealers and analysts said that the warm reception from investors arose from NIC’s low level of exposure to loss from bad debts and the discount on the offer price.

“From a non-performing loan perspective, NIC currently sits pretty with more than 95 per cent of its total loan book collateralised,” says a banking report by Standard Investment Bank (SIB) which covered the listed lenders.

SIB’s report shows that last year the bank’s NPL ratio stood at 3.4 per cent, lower than Barclay Bank’s 5.4 but slightly higher than DTB’s 0.9 and the industry 3.3 per cent average ratio.

Analysts also said that oversubscription will not be a surprise but the extent of investor interest is important.

Johnson Nderi, a research analyst at Suntra Investment Bank, said that there had been demand due to the discounted offer price.

“The share price of the rights is attractively discounted given its fair value,” said Mr Nderi.

The Sh21 rights offer price was a 22.4 per cent discount on the weighted average closing market price of the share over six months up to February 24.