Fast-growing mid-tier NIC Bank is to sell each share in its rights issue for Sh21, a 22.4 per cent discount on a six-month average price.
The bank intends to raise Sh2 billion to buy a core banking system and expand its operations. It is also eyeing mergers and acquisitions of other financial institutions in Kenya.
NIC announced the expansion plans when it reported a 45 per cent growth in post-tax profit to Sh1.6 billion on Wednesday.
Trading of the rights at the Nairobi Securities Exchange (NSE) will begin on August 27 and end on September 7.
Announcement of results of the offer will be done on October 11, while listing of the new shares at NSE will be on October 23.
At present, the market price of the share is Sh32. The share has risen 27 per cent in the past six months. It is, however, slightly down from a year ago.
According to the NIC Rights Issue Information Memorandum, anchor shareholders have already committed to take up their rights, a position that is expected to increase the attractiveness of the offer.
First Chartered Securities, associated with the family of the late Philip Ndegwa, is the bank’s single largest shareholder with a 15.84 per cent stake and has expressly said it would take up all its rights.
“First Chartered Securities, which holds 15.84 per cent of the issued shares of NIC Bank, has agreed to subscribe for their full entitlement under the rights issue,” said the memorandum.
Other large owners are ICEA Asset Management Ltd with a nine per cent stake, Livingstone Registrars Ltd 8.13 per cent, Rivel Kenya Ltd 7.73 per cent, and Saimar Ltd 4.13 per cent.
Besides buying the new core banking system that will enable the bank to grow its balance sheet with new products and services, NIC intends to pursue more aggressive investment in retail and SME banking.
The bank has identified expansion in the region as a key plank in its growth. Already, NIC has subsidiaries in Uganda and Tanzania.
“The bank looks forward to expanding and increasing its presence in other countries in the region.
This move is informed by the opportunities arising from the regional convergence of markets and economies under different trade agreements, and the enviable geographical and economic position enjoyed by Kenya as the regional financial services hub,” said the information memorandum.
The opportunities for growth are bolstered by the fact that the bank has room for expansion, said Faith Atiti, a research analyst at Sterling Investment Bank.
“We think the rights are fairly priced with a big discount on the market price. Being a tier-two bank, we see that it has significant room for expansion and growth,” said Ms Atiti.
The bank hopes to convince investors that the rights are worth taking considering its financial performance in the past five years or so.
Its earnings per share have grown at between 39 and 67 per cent in four of the last five years. In 2009, the EPS grew by only five per cent.
In the latest six month results, the bank has grown its total income by 36 per cent, while total expenses grew at a slower pace of 28 per cent — boosting profitability.
Announcing the results on Wednesday in Nairobi, group MD James Macharia said income from asset finance was not adversely affected by the economic environment of the first part of the year.