KCB trains brokers to boost rights issue uptake

Kenya Commercial Bank has moved to sensitise brokerage firms on how to ensure a greater uptake of its rights issue set to open on July 1st.

During a stockbrokers’ luncheon on Thursday, KCB with the lead transaction advisers of the rights issue—Standard investment Bank and KPMG, went through the process with brokers to ensure no investor is turned away for application mistakes.

“The bank is laying out an elaborate communication in the media and through strategic stakeholders to ensure that the issue is a success,” said Martin Oduor-Otieno, the chief executive officer, KCB.

Training for brokers handling the issue application process is set to take place at the Nairobi Stock Exchange auditorium from July 28th .

“We don’t want any applicant to lose out because of a clerical error,” said Mr Job Kihumba, the executive director of Standard Investment Bank.

The bank will also be conducting extensive road shows in major towns of Kenya and the capital cities of Kigali, Dar es Salaam and Kampala where KCB shares are cross-listed, in which stockbrokers are encouraged to join in to market there services.

In total, the bank indicates in its rights issue prospectus that it will expense Sh446 million including Sh48.9 million in advertising.

The offer is also open to international investors, though the bank is putting more effort in marketing the offer in Kenya, with the exact offer price in other East African markets yet to be set.

The Sh15 billion rights issue, through sale of 887 million new shares, is the largest rights issue to ever take place in Kenya and the second largest equity issue after the Safaricom initial public offer in 2008 that raised Sh50 billion.

This will be the third time the bank is seeking to raise funds through a rights issue since its first one in 2004 raised Sh2.45 billion, the second one in June 2008 raised Sh5.5 billion; both which were oversubscribed.

KCB shares has dropped over 10 per cent since the right issue offer price of Sh17 per share was announced, from Sh20.75 to Sh18.65 at close of trade on Tuesday this week.

“The short-term dip in price is due to perception of dilution by investors following the rights issue announcement,” said Mr Oduor-Otieno, adding that the share outlook in the long term was still strong and will maintain a strong growth trajectory.

The bank’s cost to income ratios have been an issue of concern, but funds raised from the rights issue are set to check this as it devolve it in growing its loan book and double its mortgage portfolio.

“Despite these funding initiatives, we continue to pay our dividends since the profile of our shareholders is largely composed by small individual investors,” said the KCB CEO.

KCB Group hopes to grow its market share from the current 15 per cent to at least 20 per cent in the next five year, consolidating further its market share in the Kenya and the East Africa region.

The government, which is the largest shareholder in the bank, will not take up its portion of the forthcoming rights issue, significantly reducing its stake in the country’s biggest bank by assets, from 26.3 per cent to 16.86 per cent.

212 branches

This will be the second time that the State will be forfeiting its rights, having stayed out of an earlier issue in which KCB raised Sh5.5 billion, cutting its stake in the 110-year-old bank from 26.2 per cent to 23.6 per cent.

According to the rights issue information memorandum, the bank expects to spend Sh12.9 billion of the proceeds on its Kenyan operation, with KCB Uganda receiving about Sh1.5 billion, KCB Tanzania Sh894 million, and KCB Rwanda Sh473 million. KCB Southern Sudan is not expected to benefit from the proceeds.

Currently, the bank has a total of 212 branches across the region; 168 in Kenya, 14 in Uganda, 11 in Tanzania, 9 in Rwanda, and 11 in Southern Sudan; with a personnel base of over 5,000 employees.