Prime Bank bond raises Sh1bn for expansion, SME lending

Prime Bank has raised a $10 million (Sh1.02 billion) dollar-denominated bond through a private placement, partly for its continental expansion and lending to SMEs.

The bank raised the cash from local institutional and private investors who bought the dollar-denominated notes with a seven per cent coupon rate and a 5.5 year tenor.

“Prime Bank plans to use the funds to support its future expansion plans,” said chief executive Bharat Jani.

The second-tier lender will spend some of the funds on expansion into southern Africa where it already has a presence through its shareholding in Malawi-based First Merchant Bank. Prime Bank has a 22.47 per cent stake in the lender.

First Merchant Bank also has a presence in Mozambique, Botswana and Zambia.

Locally the bank plans to open new branches at Two Rivers Mall and UAP Towers in Upper Hill, Nairobi.

Prime Bank said it would also use the loan to grow lending to SMEs. The bank has previously said the sector accounts for a quarter of its loan book.

Kenyan lenders are increasingly looking for dollar-denominated loans for onward lending to customers, especially small and mid-sized enterprises (SMEs) that are either importing or exporting.

“You find that a lot of customers demand foreign currency loans and therefore banks have to look for foreign currency liabilities,” said Standard Investment Bank head of research Francis Mwangi.

He added the best source for lending such business is long-term dollar-denominated funding as opposed to relying on deposits from customers such as expatriates.

Early last month the Co-operative Bank received a $105 million seven-year loan from the International Finance Corporation (IFC) for onward lending to SMEs and women-owned enterprises.

READ: Co-operative Bank gets Sh10.7bn for long-term lending

Co-operative Bank at the time said that it too was borrowing in a dollar-denominated facility for its customers mainly in export business.

“The funding comes at a most appropriate time in view of the critical need to support the growth of exports in the economy,” said Co-operative Bank chief executive Gideon Muriuki.

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In early December last year, Family Bank received a Sh1 billion loan from Netherlands-based Oikocredit for lending to SMEs.

Family Bank had in October of the same year gone to the market to raise a Kenya shilling and dollar-denominated bond from the market.

READ: Family Bank receives Sh1bn funding from Dutch firm for SMEs

Prime Bank had a net asset base of Sh64 billion as at the end of September 30, 2015, while net profit rose by 15 per cent to stand at Sh1.5 billion, up from Sh1.3 billion posted over a similar period a year before.

Customer deposits rose to Sh50.4 billion from Sh46 billion over the same time.

Burbidge Capital acted as the arranger and placing agent for the dollar-denominated loan while Coulson Harney was the legal advisor on the offer.