Equity Bank shareholders at an AGM last week. Helios said during the meeting that the bank has a lot of potential. File
What you need to know:
The London-based PE said in 2007 that it would exit the bank in a period of between three and seven years through the NSE.
Since debut on the NSE on August 7, 2006, the share has appreciated by more than 900 per cent, taking into account splits and bonus stocks.
Private equity firm Helios EB Investors has made a U-turn over the pledge to reduce its stake in Equity Bank and committed to remain the largest shareholder in the lender on improved returns.
The London-based PE said in 2007 that it would exit the bank in a period of between three and seven years through the Nairobi bourse after paying Sh11 billion to acquire a 24.9 per cent stake in Equity Bank.
The stake is now worth Sh30 billion and Helios has earned Sh3.4 billion in dividends since 2008, meaning its investment has grown three-fold.
Now, the private equity fund reckons that Equity Bank is yet to hit its peak on the bank’s regional agenda and that it is keen to enjoy dividends of the growth as the lender’s top shareholder.
“We have no plan to exit. We still see a lot of potential in this bank,” Helios co-founder Temitope Lawani told Business Daily on the sidelines of the lender’s AGM last week.
“With the regional growth to east and central Africa, the bank is growing very well and we foresee higher returns,” said Mr Lawani, who is also a director of Equity Bank.
He added that the PE firm could have mulled selling its shares in the bank had Equity Bank restricted its operations in Kenya. Regional expansion is becoming important as the East Africa Community (EAC) common market takes shape, opening way for free movement of factors of production in a market of 130 million people.
Kenyan companies are opening subsidiaries in the region with banks following suit in an effort to offer seamless banking services in EAC — which has caught the eye of Equity Bank, KCB and DTB.
Equity Bank posted a 16.9 per cent rise in net profit to Sh12 billion in the year to December —making the second most profitable bank in Kenya behind KCB.
Profits from its foreign subsidiaries including Tanzania, Uganda, Rwanda and South Sudan nearly doubled last year from Sh552 million to Sh1.08 billion compared to a loss of Sh330 million in 2009.
The bank has been one of the most sought after counters at the Nairobi Securities Exchange (NSE) having gained 70.5 per cent to trade at Sh33.25 and foreigners now own 46.63 per cent of the lender compared to 40.82 per cent in October 2011.
Since debut on the NSE on August 7, 2006, the share has appreciated by more than 900 per cent, taking into account splits and bonus stocks in what has made its owners, including employees, directors and founders, millionaires.
Individual top shareholders of the bank have since 2008 earned billions of shillings from the sale of their shares after the end of a two-year-lock-in for anchor shareholders. The anchor shareholders were barred from selling their shares as a condition to listing at the NSE.
James Mwangi, the CEO, has earned about Sh1.6 billion over the past four years from share sale that he said were dictated by regulations barring 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, but he has indirect interests through British American Investments and the bank’s Employee Share Ownership Plan amounting to 1.43 per cent. Mr Mwangi’s stake is now worth Sh6 billion.
The family of the late Nelson Muguku has cut its stake, which is currently worth Sh1.65 billion, by more than Sh2 billion since 2010.
