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Capital Markets

Kenya Re now third biggest NBK shareholder

National Bank branch in Nyeri town. Bank’s share at the Nairobi Securities Exchange has gone up 14.8 per cent in the last one month. FILE
National Bank branch in Nyeri town. Bank’s share at the Nairobi Securities Exchange has gone up 14.8 per cent in the last one month. FILE 

Kenya Reinsurance Company is now the third largest shareholder of National Bank of Kenya (NBK) after buying two million shares last year.

The listed underwriter appeared on the lenders list of top 10 shareholders for the first time with a stake of 0.71 per cent valued at Sh64 million at the current trading price of Sh32 per unit.

“It (the bank) is on a reform path so we expect the value to increase,” said Kenya Re’s chief executive, Jadiah Mwarania on the investment.

Mr Mwarania was however non-committal on his firm’s participation in the lender’s upcoming rights issue: “When it comes we will make up our minds,” he said.

NBK plans to ask for over Sh10 billion from its current shareholders to fund its transformation process which includes opening new branches and muscled investors like Kenya Re could help scoop any untaken shares.

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The rights issue will provide an opportunity for Kenya Re to increase its shareholding in the lender which posted Sh1.1 billion in after tax-profits last year.

The National Social Security Fund (NSSF) is the majority shareholder of the bank with a 48.05 per cent stake followed by the government which holds 22.5 per cent.

Another new entrant in the banks list of top shareholders is Best Investment Decisions Limited which acquired a 0.42 per cent stake.

Kenya Re’s entry into National Bank comes soon after Habil Waswani was appointed the lender’s company secretary after exiting the reinsurer where he served as company secretary and head of legal affairs.

The reinsurer said that its entry was meant to rebalance its investment portfolio which was heavy in KCB under the banking sector.

National Bank’s stock at the Nairobi Securities Exchange has gone up 14.8 per cent in the last one month in spite of the looming rights issue. A cash call usually depresses a stock’s price as shareholders fear being diluted if they do not participate in the call.

National Bank is seeking to get back as one of Kenya’s top tier lenders after losing its allure following mismanagement during the Moi era.

The lender has poached experienced staff from its rivals, changed its IT platform to allow it to introduce new technology-based products such as mobile banking and has started physical expansion.

It is also putting a lid on its staff costs through voluntary early retirement and a hiring freeze despite the expansion.

Staff costs consumed 44 per cent of National Bank’s total income last year, one of the reasons for the recent staff layoffs that saw 192 people retired early.

The lender nearly closed down late last decade after its capital levels were depressed by bad loans given to parastatals and politicians allied to the then government.

Successful recapitalisation programme by the government has given the bank a springboard to grow. It paid out its first dividends in 12 years in 2010 after clearing accumulated losses.

The bank is now looking to liquidate preference shares which have been absorbing most of the dividend payouts using money that will be raised in the rights issue.

Insurance firms are major shareholders in the banking sector due to its impressive financial performance and the insurers high liquidity given their premiums collections.

Pan Africa Insurance recently increased its shareholding in non-listed Family Bank while Jubilee is a major shareholder in DTB.

Britam has exposure in Equity Bank and Housing Finance while ICEA Insurance has interest in NIC Bank.

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