Family Bank plans another rights issue as net profit rises
What you need to know:
The bank said net profit stood at Sh561.4 million in the year to December compared to Sh354.6 million a year earlier helped by increased income from loans.
The lender held its dividend at last year’s level of Sh0.40 a piece to preserve cash that will help it to open new branches and deepen its presence in the corporate market together with the cash call.
Family Bank will hold another rights issue next year to raise an undisclosed amount to fund its expansion in the retail and corporate lending market.
Family Bank is planning another cash call to fund its expansion as earnings rebounded to post a 58.3 per cent rise in net profit.
The bank said net profit stood at Sh561.4 million in the year to December compared to Sh354.6 million a year earlier helped by increased income from loans.
The lender held its dividend at last year’s level of Sh0.40 a piece to preserve cash that will help it to open new branches and deepen its presence in the corporate market together with the cash call.
“The dividend payout is conservative despite our good performance and this is to retain more capital to fund our ambitious expansion,” said Wilfred Kiboro, the bank’s chairman.
Corporate lending
The financier rebounded from flat earnings in 2011 when its net profit remained little changed at Sh354 million.
Mr Kiboro said Family Bank will hold another rights issue next year to raise an undisclosed amount to fund its expansion in the retail and corporate lending market.
The planned fundraising comes after the bank raised Sh1.2 billion from a rights issue in December to open new branches and boost its capacity to lend to large borrowers.
The bank is angling for a larger share of the lucrative corporate lending market that is currently dominated by big banks like Barclays, KCB, Standard Chartered and Co-operative.
Analysts say corporate lending is more lucrative since it has relatively fewer defaults and lower administration costs.
The bid for a larger share of the corporate debt market is partly behind Family Bank’s right issues on enhanced capital levels.
Lending to a single borrower is capped at 25 per cent of a financier’s core capital.
Following the Sh1.2 billion it raised in December, Family Bank’s core capital rose to Sh4.6 billion last year compared to Sh2.9 billion in 2011, raising its single-borrower limit to Sh1.1 billion from Sh750 million in the same period.
Family Bank’s loan book expanded 9.4 per cent last year to Sh17.8 billion but the lender managed to grow its interest income 67.8 per cent to Sh4.7 billion in what has been linked to high interest margins that benefited the entire industry.
Some banks increased the lending rate to a higher rate relative to the savings level, which widened the interest margin.
Banks grew their profit before tax by 20.02 per cent to Sh107 billion last year when interest rates shot above 25 per cent compared to an average of 14 per cent in 2011.
