Capital Markets

NIC Bank gets more than double Sh2.1bn sought in cash call

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NIC chief executive John Gachora. The bank's heavily subscribed cash call attracted Sh4.6 billion. PHOTO | FILE

NIC Bank has become the second lender to make a heavily subscribed cash call as lenders partly race to beat the new Central Bank of Kenya capital requirements by end of the year.

The rights issue attracted Sh4.6 billion, slightly more than two times the Sh2.1 billion the bank had sought from shareholders and investors.

“Its success is a welcome vote of confidence by shareholders on the bank’s long-term strategy,” said NIC chief executive John Gachora.

“The money raised will help us focus on continued growth in the coming years as we continue to invest in Kenya and the region.”

NIC peer, Diamond Trust Bank (DTB), managed to attract Sh15.9 billion against the Sh3.63 billion requirement last August.

Analysts say banking has continued to show steady growth relative to other sectors making stocks attractive to investors.

“Looking at quarter on quarter returns, they tend to outperform other sectors,” said Maureen Kirigua, a research analyst at Sterling Capital.

Ms Kirigua added that investors are also attracted to diversification and regional expansion plans that some of the banks are carrying out. She noted that banks are busy innovating and diversifying to non-funded incomes.

ALSO READ: NIC Bank takes Sh5bn in oversubscribed bond issue

Corporate finance analysts observed that as bonds mature, liquidity is coming to the market and finding way into stocks.

“There is a lot of liquidity in the market,” said Johnson Nderi, corporate finance and advisory manager at ABC Capital.

He said there are a limited number of good stocks at the moment which has made the few available highly coveted. For the two banks, the discount was a sweetener that encouraged investors to take part.

NIC Bank rights issue sold at Sh49.25, a 38 per cent discount on its Sh79 market price while DTB went for Sh165 a share, a 25.31 per cent discount on the six-month average price of Sh238.

Both NIC and DTB said they would use funds from the cash calls to fund their respective expansion plans, both within the country and in the region.

Both issues were from the start assured some level of success after anchor shareholders agreed to participate in the offers.

First Chartered Securities, ICEA Asset Management and Livingstone Registrars with a combined 36.62 per cent ownership in NIC at the time of cash call pledged to take up their rights.

The Aga Khan Fund for Economic Development and its related companies Habib Bank Ltd, Jubilee Insurance Company Ltd, Diamond Jubilee Investment (Uganda) Ltd and PDM Holdings Ltd who controlled a 41.73 per cent ownership stake in DTB also agreed to participate in the issue.