National Bank picks advisers ahead of Sh13bn rights issue

National Bank has appointed lead transaction advisers to arrange its Sh13 billion rights issue, the biggest cash call by a listed lender.

The Dyer & Blair and Faida Investment banks will also act as the sponsoring brokers for the cash call that is intended to inject funds into the bank for expansion.

“We announced our intention to raise additional funds in our AGM (annual general meeting) in June last year where the shareholders approved the raising of additional capital to support our ambitious growth plans,” said National Bank chief executive Munir Ahmed. “We are keen to accomplish this successfully in the next few months.”

A coverage note on the listed bank that Old Mutual Securities said was based on meetings with the bank’s top management indicates that up to Sh13 billion was targeted.

Old Mutual said that it expected the bank to issue 520 million additional shares in the ratio of two new stocks for every one held, a dilution of 66.7 per cent, bringing the total number of issued shares to 800 million.

“Taking a six-month trading price average, we estimate that the new shares are likely to be priced at Sh25, a 25.4 per cent discount to the current share price,” the note read.

National Bank’s Sh13 billion target is bigger than KCB’s rights issue in 2010 which raised Sh12.4 billion, CFC Stanbic’s Sh4 billion, NIC Bank’s (Sh2 billion), DTB’s (Sh1.89 billion) and Standard Chartered’s (Sh3.2 billion).

The other four banks were floated in 2012, the same year as Kenya Airways’ Sh14.48 billion — the largest by a listed firm.

Kenya Power raised Sh9.83 billion in 2011 while KenGen is planning a Sh15 billion rights issue by the end of the year.

National Bank is raising the funds to help diversify its products, expand branch network and spread beyond Kenya’s borders. The bank traditionally relies on government business but has been diversifying into small business, Sharia and corporate banking sectors.

The bank targets 30 new branches in Kenya by 2017, increasing the outlets to 105 and to open shop in Tanzania, South Sudan, Ethiopia, Somalia and Uganda.

The bank’s largest shareholders committed to take up their allocations in 2013, assuring the issue success of up to 70 per cent.

The government is the largest shareholder with a 48.05 per cent stake followed by the National Social Security Fund with 22.50 per cent.

“Other stakeholders are still interested in the counter even if the government does not take up the rights,” said Agnes Achieng, a research analyst at Sterling Capital.

Old Mutual Securities says that the bank is well positioned to attract large strategic investors such as the International Finance Corporation.

The investment banks will be joined by Oraro & Company Advocates as the legal adviser, Deloitte & Touche, the reporting accountants and Image Registrars as the receiving agents.

Diamond Trust Bank and Uchumi Supermarkets are other listed firms that are raising capital through rights issues by the end of this year. Faida Investment Bank is also transaction advisers for the Uchumi rights issue.