AfDB doubles stake in EA bank with Sh2bn injection
The East African Development Bank (EADB) headquarters in Kampala. It is set to receive a Sh2bn boost from AfDB. Photo/FILE
What you need to know:
The AfDB board approved the equity investment, which will see its stake in the regional bank increase from 6.67 per cent to 15 per cent.
The bank said that the additional money would boost the regional lender’s balance sheet and improve its credit worthiness.
Additional capital will also allow the bank to raise its loan book.
African Development Bank (AfDB) has more than doubled its ownership in East African Development Bank after making a $24 million (Sh2 billion) capital injection.
The AfDB board approved the equity investment, which will see its stake in the regional bank increase from 6.67 per cent to 15 per cent.
“This transaction will increase AfDB’s shareholding in EADB to 15 per cent,” EADB director-general Vivienne Yeda told the Business Daily.
Kenya, Uganda, Tanzanian and Rwanda are major shareholders of the bank.
The development lender had loaned out Sh6.6 billion ($76.5 million) to businesses in Kenya, Tanzania, Uganda, and Rwanda at the end of 2011. Its major loans in Kenya have been to real estate lender Housing Finance and the tourism sector.
EADB was the chief lender of Oakpark Apartments in Mombasa County in 2008.
FMO Netherlands, DEG Germany, Consortium of Yugoslav Institutions, SBIC - Africa Holdings, Commercial Bank of Africa, Nordea Bank Sweden, Standard Chartered Bank (London), and Barclays Bank (London) also own takes in EADB.
The bank said that the additional money would boost the regional lender’s balance sheet and improve its credit worthiness.
“This confidence will also extend and provide leverage in our relationship with other multilateral development banks, development partners, and rating agencies,” said Ms Yeda.
International rating agency Fitch assigned AfDB a B, or stable, outlook in November, an improvement from B – following strengthening of the bank’s books.
Fitch said at the time that by the end of 2011 impaired loans as a percentage of total lending stood at 10.7 per cent, less than half the 27.3 per cent ratio in 2010. The rating agency added that the impaired loans were on the decline, possibly to single-digit levels.
Additional capital will also allow the bank to raise its loan book.
“This new capital injection allows EADB to grow and sustain a higher level of lending to both the private and public sectors in East Africa in tandem with growing demand for development finance,” said Ms Yeda.
EADB will receive $10 million (Sh86.8 million), while the $14 million (Sh1.22 billion) balance will be released in tranches.
“In particular, $10 million will be paid in with the balance in the form of callable capital,” said AfDB.
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