Equity Bank moves closer to becoming a foreign lender

Equity Bank has inched closer to becoming a foreign lender as international investors’ purchase of the firm’s shares nears the 50 per cent mark.

Regulatory filings show that foreign investors own 47.4 per cent of the bank, up from 46 per cent in December and 40.82 per cent in October 2011.

This means that international investors now only need to buy shares equivalent to 2.6 per cent to hit the 50 per cent mark, which would turn the bank into foreign-owned, based on the Central Bank of Kenya classification.

Since the bank’s debut at the Nairobi Securities Exchange (NSE) on August 7, 2006, its stock has appreciated the most over the six-year period, opening the way for investors to skim their holdings at decent capital gains.

The stock has appreciated by more than 900 per cent since listing when share splits and bonuses are taken into account, a performance that has attracted investors’ attention because of the rate at which the bank has created wealth for its owners, including employees, directors and founders.

The bank’s share has gained 68 per cent over the past year to the current price of Sh34.75 — pushing the lender’s market valuation at the Nairobi bourse to Sh128.6 billion. This has seen Equity accelerate past KCB to become the most valued bank at the NSE.

KCB Group’s valuation stood at Sh122.5 billion while that of Barclays Bank was at Sh95.8 billion despite Equity’s assets not being the largest. KCB assets stood at Sh369 billion in March and Equity (Sh252 billion).

Equity’s share movement and steady dividend payout has made the lender one of the most sought after counters both by short and long term investors, analysts at Kestrel say. This is what prompted UK-based PE firm Helios to make a U-turn over a pledge to reduce its stake and commit to remain the largest shareholder in the lender on improved returns.

The increasing share of foreign investors’ interest in Equity comes as local investors, especially its founders, reduce their shareholding.

Individual top shareholders of Equity Bank have since 2008 harvested millions of shillings from the sale of their stock after the end of a two-year lock-in period for anchor stakeholders.

The principal shareholders were barred from selling their shares as a condition for listing on the NSE.

This has seen the likes of the late Nelson Muguku’s family loosen their grip on the bank after the transfer of shares worth Sh220 million within the three months to June.

The family cut their shareholding from 4.3 per cent in October last year to 2.03 per cent in December and 1.76 per cent in June after selling 10 million shares. The Muguku family cut back their stake by 12.9 million shares within the nine months to September 2011, earning about Sh250 million.

The bank’s chief executive, James Mwangi, has earned about Sh1.6 billion over the past three years from share disposal that he said was dictated by regulations that bar an executive director of a bank from holding more than five per cent of the institution’s capital.

His direct stake has dropped to 3.45 per cent from 5.49 per cent.

Local individual investors now control 17.3 per cent of the bank, from 26.21 per cent in October 2011, while institutional investors have increased their stake to 35.2 per cent from 32.97 per cent.