Markets & Finance

Chase Bank eyes Sh2.5bn injection to shore up capital base

khan

Chase Bank chairman Zafrullah Khan. PHOTO | DIANA NGILA

Chase Bank is set to expand its ownership through a private placement, after concluding its third cash call in as many years, to shore up a capital base that is running thin.

The bank raised Sh1.6 billion in the cash call that closed in June and an additional Sh600 million by selling shares to its staff members through the employee share ownership programme.

The lender also aims to raise Sh2.5 billion by introducing new shareholders in its books through a private placement which concludes in October.

“The total proceeds from the capital raising exercises will be used to further strengthen the bank’s capital base, support growth and onward lending activities, and fund branch expansion, investments in IT and other product development initiatives,” reads a credit rating report by Global Credit Rating.

The South African agency gave an initial rating of A- with a stable outlook to the mid-sized bank.

Chase Bank core capital to total deposit ratio was at 10.5 per cent as at March, equal to the minimum requirement, which denies it room to take in new savings from the public. In the year to March, the bank had grown its deposit base by 56.4 per cent to Sh90.6 billion.

Bank owners are required to back customer savings by investing at least Sh1 for every Sh9.5 they collect from the public.

In June the lender also raised Sh4.8 billion seven-year debt through its debut corporate bond which is classified as tier II capital.

READ: Chase Bank raises Sh4.8bn as bond draws strong demand

Chase Bank total capital to its loan book was also at par with the minimum requirement at 14.5 per cent giving it little space to increase its lending.

“GCR views the capital raising exercise as credit-positive,” reads part of the credit rating report.

Chase Bank has been involved in a series of fund raising including inviting three strategic investors in the last two years.

Last year, the lender raised Sh1.3 billion through a rights issues following a similar amount raised in 2013 and Sh400 million in 2012. In 2011 it expanded its ownership through a private placement of Sh810 million.

The bank’s institutional shareholders include Amethis Finance, German fund DEG, European Investment Bank (EIB) and Zurich-based asset management firm Responsibility Participations AG.

The bank has in the past relied heavily on long-term debt from multi-national lenders.

The lender’s growth has seen it increase its market share to 2.98 per cent up from 1.87 per cent in 2012. This has seen it move up two places in the banking sector ranking to be 12th largest bank in an industry with 43 players.