DTB charts new expansion path for Kenya banks

Diamond Trust Bank Chief Executive Nasim Devji (left) and the chairman Abdul Samji during the bank’s Annual General Meeting May 31, 2013. The bank net profit for 2013 grew o Sh5.23 billion. Photo/FILE
Diamond Trust Bank Chief Executive Nasim Devji (left) and the chairman Abdul Samji during the bank’s Annual General Meeting May 31, 2013. The bank net profit for 2013 grew o Sh5.23 billion. Photo/FILE  Nation Media Group

DTB Group is eyeing entry into the Democratic Republic of the Congo (DRC), Madagascar and Rwanda markets in an expansion plan that could see it chart a new course for Kenyan banks.

The lender’s entry into DRC and Madagascar is likely to be a first for Kenyan banks, bucking the traditional growth trend that has involved opening shop in Tanzania and Uganda before venturing into Rwanda and South Sudan.

DTB, which already has a presence in Tanzania, Uganda and Burundi, made the announcement Tuesday after getting shareholders’ approval for a rights issue expected to finance the plan.

“The additional capital raised will help us enter new markets such as DRC, Rwanda and Madagascar which are on our radar. This will be within the next 12 to 24 months,” said Nasim Devji, group CEO and managing director of DTB.

DTB is mainly focused on financing small and medium enterprises, which could have informed its focus on the mineral rich DRC and Madagascar.

DRC is billed as Africa’s most resource rich economy probably only rivalled by South Africa, but sporadic fighting in recent decades has underscored the challenge of stabilising the country.

Madagascar, an Indian Ocean island, has been mired in political uncertainty for more than two years and is struggling to regain the confidence of foreign investors who had been eyeing its oil, gold, chrome and uranium deposits. The island is also the world’s biggest producer of vanilla.

Driven by a 20.9 per cent growth in interest income from its loan book, DTB Tuesday posted a 28.5 per cent jump in net profit to Sh5.23 billion for the year to December 2013, compared to Sh4.07 billion in the previous year.

The mid-tier lender’s net interest income shot to Sh11 billion, lifted by increased lending to companies and households which grew by Sh23.2 billion to stand at Sh110.9 billion last year from Sh87.7 billion in 2012.

DTB’s provision for loan losses increased by about a third to Sh1.19 billion from Sh887 million in 2012 after its net non-performing loans rose to Sh1.21 billion last year from Sh957 million.

Shareholders are set to get a first and final dividend of Sh2.10 per share, up 10.5 per cent from a Sh1.90 payout last year.

The rights issue will see the lender sell up to 22 million new shares by June. It will offer the shares in a ratio of one for every 10 held, which will increase the lender’s authorised share capital to Sh1.2 billion and stay above the new regulatory capital buffer rules set to be enforced next year.

“It (the rights issue) will also help increase the bank’s headroom further above the CBK guidelines.”

The Central Bank of Kenya has put in place new prudential requirements raising the ratio of total capital to total risk-weighted assets by an extra 2.5 percentage points to 14.5 per cent in order to provide the extra cushion in times of unexpected shocks.

DTB’s ratio of capital to total risk weighted assets had shrunk to 17.1 per cent as at December 2013, about 2.6 per cent above the statutory minimum.

Assuming a discount margin close to the 28 per cent offered in the 2012 rights issue, DTB could raise up to Sh3.7 billion from the cash call going by Tuesday’s closing price of Sh235 per share.

Part of the proceeds from the offer will be invested in its units in Tanzania, Uganda and Burundi as well as and grow its branch network in Kenya.

Ms Devji said the lender would maintain the transaction advisers that handled the 2012 rights issue. This means the DTB’s cash call will be steered by Kestrel Capital and Standard Investment Bank, auditing firm PricewaterhouseCoopers and law firm Oraro & Co Advocates.