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Prime Bank in talks for sale of stake after Sh2bn capital boost

Prime Bank Business Development Director Vijay Kantaria
Prime Bank Business Development Director Vijay Kantaria and Naivas Chief Operating Officer Peter Mukuha during the launch of intelligent cash deposit machines at Naivas Supermarket, The Mall branch on July 4, 2018. PHOTO | DIANA NGILA | NMG 

Mid-sized lender Prime Bank is in talks with private equity funds to sell an undisclosed stake.

The bank, according to sources familiar with the underway transaction, is keen to bring on board new investors to finance its local and regional expansion bid.

The talks come after the conclusion of a Sh2 billion private placement that was fully subscribed.

The fresh capital injection will see the lender give up an undisclosed stake to the new investors subject to approval by the Central Bank of Kenya (CBK).

Prime Bank operates more than 20 branches. It also has a regional presence through its investment in a Malawian affiliate, FMB Malawi, as well as Botswana, Mozambique, Zambia and Zimbabwe.

The bank recently acquired a majority stake in Tausi Assurance.

The funding will be spent on rolling out new products, and further digitising its banking services.

Prime Bank is ranked 15th in size out of Kenya’s 39 lenders, with 24,000 deposit accounts and 4,000 loan accounts — giving it a cumulative market share of 1.82 per cent, according to the CBK data.

The lender mainly focuses on corporate and SME banking.

Chief executive Bharat Jani had in an earlier interview said its lending to the SMEs accounts for a quarter of its loan book.

Increasing lending to this sector, he said, would see the bank open additional branches and seek long-term funding from development financiers.

“The bank is in partnership with French development financier, Proparco, to cater for small and medium businesses’ long-term foreign currency loans,” he said earlier.

Kenya has 39 banks, of with eight classified as tier one, 11 as tier two and 20 as tier three.

Experts note the interest rate controls have eliminated differentiation in the industry that saw some banks offer loans to riskier borrowers.

With all lenders boxed in to lending within a narrow band, only the most efficient are able to weather the rate caps by combining scale and cheaper delivery channels.

Treasury Secretary Henry Rotich has tabled in Parliament a proposal to scrap the interest rate caps.

Some of the merger witnessed in the last two years since the rate capping law came into force include the sale of third-tier lender Fidelity Commercial Bank to Mauritian lender SBM Bank, which said then it would pump in Sh1.46 billion.

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