Centum in Sh1.2bn injection into K-Rep shareholder cash call

Centum chief executive officer James Mworia signs a Sh1.2 billion cheque before handing it to K-Rep Bank’s Titus Karanja on October 14, 2015. PHOTO | COURTESY
Centum chief executive officer James Mworia signs a Sh1.2 billion cheque before handing it to K-Rep Bank’s Titus Karanja on October 14, 2015. PHOTO | COURTESY 

Centum has injected Sh1.2 billion into K-Rep Bank, taking its majority share in the bank’s ongoing rights issue expected to be concluded by end of the year.

The Nairobi Securities Exchange (NSE) listed investment company is majority shareholder of K-Rep Bank, having raised its stake in the lender to 67.54 per cent nearly a year ago.

The equity injection, which now raises K-Rep Bank’s core capital to Sh3.8 billion, was sourced from the proceeds of a Sh6 billion corporate bond that Centum floated in July.

K-Rep Bank expects to have raised about Sh1.6 billion on conclusion of the shareholders cash call.

“With the injection, K-Rep Bank now stands well in excess of the minimum statutory ratios and is well placed to enhance its services to customers,” said the K-Rep chief executive officer Titus Karanja in a statement.

“Our core capital has now improved and is set to close at Sh4.1 billion at the conclusion of the rights issue. Other shareholders have expressed commitment to participate in the rights issue to the full extent of their entitlement.”

K-Rep Bank was taken over by Centum last November. The lender, which has 37 branches across the country, had Sh13.9 billion assets as at March 2015.

Centum says it plans to grow the lender into a tier-two bank by 2021.

It has already shaken up K-Rep’s board and announced plans to rebrand the bank, which has about 500 employees.

This growth strategy, which also included the hiring an ex-Co-op Bank director as chief executive, was to be backed by a capital injection by Centum totalling Sh3.6 billion.

Centum had already made a Sh2.4 billion investment in K-Rep funded by a short-term facility and a part of the proceeds of the corporate bond that were to go towards refinancing this facility.

The remainder of its bond proceeds were to go towards the investment firm’s real estate project in Entebbe, Uganda and power projects in Lamu and Olkaria, Nakuru.

“The additional income will play a significant role in enhancing customer experience through the revitalisation of channel offerings,” said Centum’s chief executive officer James Mworia in a press statement.

He said the latest round of funding will be channelled towards mobile, Internet and agency banking, refurbishment of the brand as well as upgrade of the core banking system.

K-Rep mainly lends to small and medium enterprises (SMEs) and expects to benefit from the capital injection which increases its ability to give loans to the fast-growing sector.

The funding will also enable the bank to take in more customer deposits.

With the latest round of funding, K-Rep’s core capital to deposits ratio stands at 30 per cent, which is 19.5 per cent above the statutory minimum as per the Central Bank of Kenya’s requirements.

The lender’s core capital to loans ratio stands at 27 per cent, 12.5 per cent above the statutory minimum. K-Rep represents Centum’s major investment in a financial services institution. The investment firm has interests in several firms including AON Insurance Brokers.