Mr Mwangi says the regulator does not allow him to hold more than five per cent stake in the firm as an executive director. Photo/FILE
Equity Bank chief executive James Mwangi has defended his recent stock sale and that of other anchor shareholders with analysts attributing the statement to attempts to calm investors worried of the executive’s confidence in the bank’s prospects.
Mr Mwangi sold Equity’s 28 million shares last year that earned him more than Sh600 million while the late Nelson Muguku and John Kangema reduced their holding by 66 and 39 million shares respectively.
Analysts read this as efforts by the bank’s anchor shareholders to cash out on the stock, arguing that it signalled that the owners were not confident that the bank’s share or earnings would maintain their growth levels.
On Friday, Mr Mwangi said the cutback of his shares in the bank was informed by regulatory requirements that do not allow him to hold more than five per cent stake as an executive director.
“The reason I did that was because I am only required by law to hold as much stake in the bank being the chief executive. Equity is the dream I invested in,” said Mr Mwangi.
He said that none of the directors were harvesting their investments and that Mr Muguku sold some shares to buy a prime building that was being offloaded by a rival bank.
Sources say Mr Muguku had expressed interest in buying the Standard Chartered bank former headquarters along Moi Avenue, but Business Daily could not confirm whether the deal went through.
Mr Muguku cut his stake to 4.3 per cent last year from 6.08 per cent the previous year—earning the family more than Sh1.2 billion while Mr Kangema earned more Sh700 million, reducing his stake to 2.22 per cent from 3.28 per cent.
Mr Mwangi’s direct stake has dropped to 3.8 per cent from 5.37 per cent in 2008 since he sold 38 million shares in 2009 worth about Sh800 million — pushing his total harvest to nearly Sh1.5 billion over the past two years.
He said on Friday that his total holding now stands at five per cent — 3.8 per cent directly and 1.2 indirectly through British American Investments and the bank’s Employee Share Ownership Plan (Esop).
Mr Mwangi has been reducing his stake in the bank since the expiry of the golden handcuffs period that the regulator imposed on the major shareholders to prevent them from abandoning ship in the first two years of going public.
Peter Munga, the bank’s chairman and founder, reduced his interest in 2009 which removed him from among the top 10 shareholders list where he had a 3.2 per cent stake in 2007.
“The news of the selloff made investors a bit concerned since it signalled that he (Mr Mwangi) had no confidence about the bank’s future,” said Francis Mwangi, an analyst at African Alliance. “The clarification that share sale was for regulatory compliance was meant to show that he still believed in the bank’s future prospects.”
The bank’s share stood at Sh25.25 on Friday compared to Monday’s Sh24.75 and African Alliance reckon that it remained steady mainly due to a road show Mr Mwangi conducted in London in the week to March 16.
Other analysts’ attributed the sale by other anchor shareholders to a case of “profit taking” on claims that Equity Bank is unlikely to witness the phenomenal growth that saw it double its profits in a span of three years – driving its share price to a peak on increased investor demand.
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