NIC Bank has set aside Sh608 million to inject in its Tanzanian subsidiary through a rights issue slated for mid this year and also buy more shares of the lender.
The cash call will see NIC raise its shareholding of the Tanzanian unit above the current 51 per cent, the Nairobi Securities Exchange (NSE) listed lender has disclosed in its annual statement.
The Tanzanian subsidiary has planned to raise an additional capital of Sh468 million (Tsh8.5 billion) through the rights issue, which implies that NIC will require about Sh234 million to take up all its rights.
The mid-sized Kenyan lender has, however, also set aside an additional Sh374 million to buy more shares of its Tanzania subsidiary.
“The board of directors approved the acquisition of additional shares from existing shareholders, and the take-up of rights that are not exercised by existing shareholders. This brings the total additional investment in NIC Tanzania to Sh608 million,” said the board in the statement.
NIC Bank Tanzania is not listed on the Dar es Salaam Stock Exchange. The bank’s stock is trading at Sh53 at the NSE, up 26.95 per cent in the past three months.
NIC Group includes an insurance firm, stockbrokerage, investment banking and bank operations in Kenya, Tanzania and Uganda.
The group posted an after-tax profit of Sh3 billion with the Tanzania business contributing Sh103 million to the basket, a drop from Sh109 million earned in the previous year.
The rights issue is expected to conclude by end of June. Funds raised would finance branch expansion, with the target being to reach more small and medium-sized enterprises. In Kenya, the lender has a strong base in corporate banking and asset financing.
NIC Bank ventured into Tanzania in 2009 by acquiring a 51 per cent stake in Savings & Finance Commercial Bank, which it later renamed in line with the group’s brand. The bank has two branches in Dar es Salaam and one in Mwanza, Arusha and Kahama.
Plans by the group to firm its foothold in Tanzania are in line with its overall strategy of an increased regional presence.
Last year, NIC raised Sh2 billion in a rights issue, with part of the capital being used to start new operations in Uganda. The group has already registered the business name NIC in Rwanda and Zambia, with the management stating that they were waiting for any opportunities in the future.
Kenyan banks have taken to regional expansion and business diversification in a bid to increase their income streams. Twelve local banks, which include large players Equity, KCB, Co-operative and CFC Stanbic, have regional operations.
The Tanzania subsidiaries accounted for 33.8 per cent of the total profits, Sh2.3 billion, made by the regional outlets. The performance was only second to South Sudan which contributed 42 per cent and had exceeded Uganda’s 27.3 per cent contribution. This is despite Kenyan banks operating 113 branches in Uganda, double those in Tanzania.
However, the enhanced presence of Kenyan banks in Uganda, which has more competition, has been attributed to better working environment and work ethics than Tanzania.
NIC Capital, the group’s investment banking services provider made a profit of Sh63 million last year, while the brokerage firm NIC Securities made Sh20 million profit and NIC Insurance Sh12.9 million.
The banks are expected to further diversify after the Central Bank issued guidelines allowing them to sell insurance, shares and broker bonds beginning next month with the requirement that they make clear distinction between their product and those of third parties.