NIC opts for rights issue, bond in search of expansion capital

NIC Bank will be going for a mix of debt and equity in its bid to raise funds that would accelerate its expansion.

NIC becomes the fifth firm to float a bond this year and the fourth to sell new shares to its existing owners with the company saying the proceeds would maintain the growth that has seen a threefold growth in its asset base over the past five years.

“The bank will therefore be seeking for additional capital through a corporate bond and a rights issue within the course of 2014 subject to approvals from the shareholders and the Capital Markets Authority,” NIC Bank stated without indicating how much it was targeting.

The bank had said earlier that it needed to raise capital to meet statutory requirements. NIC’s total capital stood at 12.44 per cent of its total risk weighted assets just 0.44 per cent on top of the Central Bank of Kenya’s minimum of 12 per cent.

The Central Bank requires banks to increase the ratio to 14.5 per cent by the end of the year. Banks that fail to comply would be constrained to increase lending.

Analysts expect the bank to raise through the rights issue more than the Sh2.07 billion that shareholders injected in July 2012. “It is difficult to determine how much they want to raise but I think it will be way higher than the proceeds from the last rights,” said Sterling Capital head of research Moses Waireri.

Mr Waireri said that the rights issue would inevitably lead to dilution of the bank’s share price at the Nairobi Securities Exchange.

NIC’s stock has dropped by seven per cent since the beginning of the year to Sh57 from Sh61. The bank had also raised Sh1.15 billion in 2007 to launch the expansion which saw it enter Tanzania through the purchase of a 51 per cent stake in Tanzania Savings and Finance Commercial Bank Ltd.

Uchumi, Diamond Trust Bank, National Bank of Kenya and CIC Insurance are all having rights issues while Britam, UAP and Athi River Mining have opted for bonds.