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Europe equity fund buys Chase Bank shares for Sh1.5bn

Chase Bank has resumed its capital-raising drive in Europe, securing an extra Sh1.5 billion injection from strategic investors in a deal likely to translate into owners ceding a third of equity this year.

The injection in the bank that owns Rafiki DTM and stockbrokerage Genghis Capital will support its rapid growth and ensure compliance with new regulatory requirements.

The bank which early this year received Sh900 million from Paris-based Amethis Finance said it has already closed a deal with another European private equity fund for Sh500 million and a Sh1 billion deal with another fund is awaiting Central Bank of Kenya’s (CBK) approval.

Shareholders of the bank also raised Sh400 million last year through a rights issue.

“Our balance sheet has been doubling every 18 to 24 months which means we need more capital to support the growth,” said the bank’s deputy CEO and chief financial officer Paul Njaga.

The privately owned bank with just under 50 shareholders has thus far ceded about 15 per cent of its ownership (for the Sh500 million plus the earlier Sh900 million) to the strategic investors, but is expected to give up more with the coming on board of the other private equity fund.

As at end of last year, the bank had tripled its share capital to Sh4.5 billion from Sh1.4 billion in 2010, making it the fastest growing lender in the country.

Besides capital-raising, the bank has also signed long-term loans exceeding Sh2.4 billion ($30 million) with European-based investment banks for onward lending to SMEs and agribusiness.

It is the only bank—formerly United Bank based in Kisumu—to have emerged from CBK statutory management, but under new ownership in 1996.

With the new capital injection, the bank intends to open 20 new branches in the next 20 months as it seeks to break into the bracket of top-tier banks in the country. CBK ranked it 14 out of 43 last year with a market share of 1.87 per cent.

Kenya’s banking industry has increasingly attracted investors who are taking advantage of the sector’s need for new capital as players race against time to adhere to new minimum capital requirements to be effective June 2014.

Riding on high interest margins, the sector has posted record profits which have seen Kenyan lenders get global recognition for their efficient asset utilisation. 

Shareholders of banks will next June be required to put in Sh1 for every Sh7 mobilised in public deposits compared to the previous ratio which required them to put in 1:8.

Inviting strategic investors seems the preferred option for the non-listed lenders (like Chase) as it is cheaper and leaves them with some control of the bank.

“If most banks go into the market (to raise capital) some may not be successful or may have to pay more, especially the smaller ones that have a higher risk,” said Jeremy Awori, the chief executive of Barclays Bank in an interview last month with the Business Daily.

Fina Bank, which has a regional presence, sold a 70 per cent stake to Nigerian-based Guaranty Bank while Equatorial Commercial Bank is in the process of bringing in strategic investors to boost its capital adequacy.

Chase Bank justifies the decision to invite a number of investors, instead of working with one, saying it brings diversification on in its board beyond the financial muscle.

The managing director of Amethis Finance, Laurent Demey, who used to be the head of French investment bank in Africa Proparco, has been incorporated in its board of directors.

Notably, the board also includes the chief executive of another private equity fund, Actis Kenya, Michael Turner.

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