African Banking Corporation (ABC) Bank shareholders are raising Sh400 million through a rights issue, joining the list of lenders racing against time to meet the enhanced Sh3 billion minimum core capital threshold by the end of the year.Ā
The lender, which closed June with core capital of Sh2.59 billion, said the process is already ongoing and will yield at least Sh400 million.Ā
The amount will help the lender comply with the Central Bank of Kenya (CBK) requirement that banks close this year with a minimum core capital of Sh3 billion, which is a raise from the Sh1 billion that had been in place for 12 years. Ā
āOur shareholders recently initiated a cash call to meet CBKās minimum core capital requirement. This move reflects shareholdersā strong confidence in ABC Bankās growth strategy and long-term prospects,ā said Shamaz Savani, managing director at ABC.
ABCās cash call reflects a similar move by other lenders such as Paramount Bank and Sidian Bank, which have turned to a rights issue to secure fresh capital for immediate and long-term compliance. This is after a change in law compelling banks to build core capital gradually up to Sh10 billion by 2029.
The minimum core capital in the banking sector was, through the Business Laws (Amendment) Act 2024, revised upward from Sh1 billion to Sh3 billion by the end of 2025, Sh5 billion by the close of 2026, Sh6 billion by the end of 2027, Sh8 billion in 2028 and Sh10 billion by the close of 2029.
The timelines for fresh capital mean ABC will require about Sh2 billion come next year if it is to remain compliantāan amount that may require another cash call or options like sale of stake.
Mr Savani said ABC is in āadvanced engagementsā to meet subsequent capital requirements to fund the next phase of growth.
ABC was founded in November 1984 as Consolidated Finance Company before transitioning into a commercial bank in December the same year.
The lender currently has about 11 branches focusing on individuals, small businesses, corporates, non-governmental organisations and faith- and education-based institutions.Ā
The lender was among the 11 banks that were left requiring additional capital of about Sh14.7 as a result of the revision of the core capital rules.Ā
Another lender whose core capital was below Sh3 billion by the end of June this year was Paramount Bank which has since raised Sh332 million through a rights issue.
Other lenders requiring fresh capital as at June this year to hit Sh3 billion threshold were M-Oriental, Premier Bank, CIB International Bank, Middle East Bank Kenya and the Development Bank of Kenya, UBA Kenya Bank, Credit Bank Plc, Access Bank Kenya and Consolidated Bank of Kenya.
UBA Bank Kenya, which had a shortfall of Sh1.51 billion at the end of June, said in September that it was pursuing fresh funding from its parent company, Nigeriaās UBA PLC.Ā
Earlier this year, CBK asked 24 banks whose core capital was below the final core capital target of Sh10 billion to submit plans detailing how they intend to raise new funding to meet the new enhanced requirements.Ā
