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Credit Bank in Sh2bn cash call for expansion

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Credit Bank CEO, Betty Korir with Uasin Gishu Governor Jackson Mandago during the opening of the lender’s Eldoret branch on April 04, 2019. FILE PHOTO | NMG

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Summary

  • Credit Bank has asked shareholders to approve the cash call as a special resolution at the annual general meeting scheduled for June 27.

Credit Bank is set to raise Sh2 billion through a rights issue to boost capital and for expansion, joining other lenders raising cash or growing through mergers.

The lender has asked shareholders to approve the cash call as a special resolution at the annual general meeting scheduled for June 27.

The bank will, however, first spend Sh200.5 million to implement a bonus issue that will see the volume of ordinary stock rise by two million units to 52 million shares.

The tier III will afterwards undertake the rights issue expected to boost its razor-thin capital ratios.

“That … the directors be authorised and directed to offer a maximum of 14,438,550 new ordinary shares in the capital of the company at an offer price of Sh140 per share to shareholders in the company’s record as at December 31, 2018 by way of a rights issue of three new shares for every five ordinary shares held,” reads part of the special resolution.

The bonus and rights issue, if fully implemented as planned, will see the lender’s ordinary shares rise to 66.4 million from the current 50 million units.

Credit Bank’s top shareholders are Nyachae’s Sansora Group with a 14.96 per cent stake, followed by Sanama Investment (14.34 per cent), Ketan Morjaria (9.88 per cent) and Jay Karia (8.61 per cent).

The lender’s total capital to total risk weighted assets stood at 14.7 per cent in March, above the statutory minimum of 14.5 per cent by just 0.2 percentage points.

This means that the bank’s ability to expand its loan book –the largest income stream— is significantly constrained. The capital ratio rose marginally to 15.2 per cent after factoring in boosters afforded by the Central Bank of Kenya’s directive allowing lenders to add expected credit loss provisions back to capital.

Credit Bank’s liquidity ratio stood above the minimum requirement of 20 per cent by 0.9 per cent, meaning that it just covers short-term cash outflows including deposit withdrawals.