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Family Bank in plans for another rights issue

Customers queue for service at a Family Bank branch in Nairobi. The bank is set to raise fresh capital this year through a rights issue to fund expansion. Photo/FILE
Customers queue for service at a Family Bank branch in Nairobi. The bank is set to raise fresh capital this year through a rights issue to fund expansion. Photo/FILE  NATION MEDIA GROUP

Family Bank is set to raise fresh capital this year through a rights issue to fund expansion.

This will be the second rights issue for the lender in two years following another in 2012 which raised Sh1.2 billion by issuing 40.5 million shares at a price of Sh31.

“In the course of the year we are likely to do another cash call to support growth,” Family Bank says in its new annual report for 2013.

The lender did not say how much it will be asking shareholders to raise in the upcoming cash call.

The rights issue is one of several funding options the bank is mulling over to meet higher capital adequacy thresholds and fund its expansion.

The lender is also in talks with financiers such as the African Development Bank (AfDB) and the International Finance Corporation (IFC) to raise up to Sh3 billion through long-term debt or equity.

“With our very ambitious targets on all key financial parameters, we are now looking at various funding options both equity and debt financing,” the bank said in the report.

The bank plans to open 11 more branches in the country this year, a move that would push its total branch network to 80.

It is also expanding its agency banking model, having received regulatory approval to add an additional 1,789 agents. It currently works with 818 active agents. 

The bank is angling for a larger share of the lucrative corporate lending market currently dominated by big banks like KCB, Equity, Co-operative, Barclays and Standard Chartered.

Private Equity firm Africinvest and development finance institutions Norfund, and FMO sold their stakes in Family Bank in 2012, and a rights issue could open opportunity for new investors to buy shares of the fast-growing mid-sized lender.

Family Bank aims to become a top-tier lender by 2016 and sees the increased funding as key to supporting its medium-term growth targets.

The lender announced a 109.6 per cent net profit growth in the first quarter, helped by increased lending. 

The mid-tier bank’s net earnings stood at Sh446.4 million in the first three months of the year compared to Sh212.9 million a year earlier.

This came as interest income rose 36.9 per cent to Sh1.5 billion, with its loan book expanding to Sh30.4 billion in March from Sh27.9 billion in December.

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