The bank’s chief executive, Munir Ahmed, said the cash call, which will take place in the first quarter of next year, had the blessing of the two principal shareholders who have a combined stake of 70 per cent.
This means that the government will inject Sh2.2 billion and NSSF Sh4.8 billion in the bank through a fundraiser that has dimmed plans to sell a majority stake in the lender to a strategic investor.
“The major shareholders are committed to making this rights issue a success. Remember, they are represented on the board so they are part of the decision,” said Mr Ahmed in an interview with the Business Daily.
“We do not need a strategic investor since our shareholders can raise the required capital. We also have the necessary expertise,” added Mr Ahmed who was appointed from Standard Chartered to lead the bank eight months ago.
NSSF dominates NB’s 10-member board. Three seats are occupied by the bank’s executives including Mr Ahmed and his two deputies with NSSF managing trustee Peter Odongo, and the permanent secretary to the Treasury, representing the principal shareholders.
Five directors; Francis Atwoli, Mohammed Hassan, Erastus Mwongera, Sylvia Kitonga, and Wangui Mwaniki sit on the board courtesy of NSSF.
The fund argued strongly against plans to sell the bank to a strategic investor as designed by the Privatisation Commission. In 2008 the Cabinet approved the sale of government and NSSF shares in the bank in two phases.
The first phase involved selling 25 per cent of NB shares held by NSSF to a strategic investor. The second phase would see the sale of 17 per cent of shares held by the government and 23 per cent held by NSSF to the public.
The State owned pension fund is said to support the rights issue route and strengthening of management, which started with the hiring of Mr Ahmed, over the share sale.
“Raising additional capital is part of a strategic programme developed with the advice of McKinsey consultants,” said Mr Ahmed. “We need additional capital to grow the bank to top-tier status by 2017.”
This is the bank’s first rights issue since listing at the Nairobi bourse in 1994 and will see the bank issue up to1.12 billion shares, which is four-times the 280 million shares available for trading at the NSE.
Its share has gained 2.44 per cent over the past year to Sh21 in a period that has seen all banks record double-digit appreciation of their stocks.
Ranked number 12 out of 44 lenders in Kenya, the bank dropped from a top-three lender in 1996 as its model of focusing on government banking and personal lending was upset by newer, nimbler rivals like Equity Bank.