Chase Bank plans to boost capital base as profit hits Sh2.3bn

Chase Bank is set to undertake another capital raising venture following rapid growth, straining the ratios set by the regulator.

The bank posted a 48.8 per cent growth in after-tax profit which was attributable to increased lending. Chase bank recorded a profit of Sh2.3 billion last year compared to Sh1.5 billion the previous year. This followed a 38 per cent expansion of its loan book to Sh57.2 billion from Sh41.2 billion.

The rapid growth in lending however cut the bank’s capital position leaving it with little room for further growth. Its total capital as a ratio to its loan book stood at 15.3 per cent in December compared to the minimum ratio of 14.5 per cent - leaving a headroom of only 0.8 percentage points.

“We will continue to review our capital requirement in 2015 and ensure we have headroom to cover regulatory requirements as well as fund our growth strategy,’’ said the bank’s chief executive Paul Njaga in a statement.

However, Mr Njaga did not respond to specific questions on the capital raising strategy.

In the last three years, the bank has conducted two rights issues, invited three strategic investors and booked more than Sh10 billion in long-term debt to cover its capital needs. The bank’s share capital has grown tenfold to Sh10 billion since 2009 underlining the intensive capital raising.

Last year it raised Sh1.3 billion from shareholders in a rights issue and Sh9 billion in long-term debt from international financiers such as the International Finance Corporation (IFC), Dutch Development Bank (FMO) and Micro Finance Enhancement Fund.

READ: Chase Bank raises Sh1.3bn in second cash call in 2 years

Banks are required to match their growth with higher capital to ensure they have financial muscle to absorb any shocks they may encounter.

Mr Nyaga said the banks customer numbers had risen to 140,000 from 50,000 in 2013 riding on the recently introduced agency banking model. It recorded a 50 per cent increase in customer savings to Sh79.8 billion from Sh53.3 billion a year earlier.

It paid out Sh4.9 billion to customers as interest for their savings while receiving Sh12.2 billion for lending allowing it to book net interest income of Sh7.2 billion.

The bank owns micro-lender Rafiki Deposit Taking Microfinance and investment bank Genghis Capital. The subsidiaries contributed Sh44 million to the group’s bottom line, up from Sh17 million the previous year.

Formerly United Bank based in Kisumu, is only the second bank to have emerged from CBK statutory management, but under new ownership in 1996.