Pakistan’s biggest bank in bid for 26pc DTB stake

Habib Bank is seeking additional stake in Diamond Trust Bank (DTB), Standard Investment Bank reported. Photo/FILE 

By GEORGE NGIGI

In Summary

• Habib Bank—which is Pakistan’s biggest lender by market share, said it has set a target to increase its shareholding in DTB Kenya to 26 per cent, up from the 11.68 per cent that it held at the beginning of this year.
• Habib Bank has direct presence in over 17 countries including Kenya, where it has three branches in Nairobi, Mombasa and Malindi.
• Habib has set aside Sh3.6 billion ($43 million) to acquire an additional 31.5 million of DTB Kenya shares—assuming there are no rights and bonus issues— at an estimated price of Sh114 per share.

Pakistan-based lender Habib Bank Limited (HBL) has announced an intention to more than double its shareholding in Diamond Trust Bank within the next five years.

In its latest annual report, Habib Bank—which is Pakistan’s biggest lender by market share, said it has set a target to increase its shareholding in DTB Kenya to 26 per cent, up from the 11.68 per cent that it held at the beginning of this year.

In the 10 months to October, the Pakistani lender has increased its stake in DTB Kenya to 11.9 per cent, according to the latest records.

“This is a strategic investment which will enable HBL to strengthen its foothold in the emerging markets of Africa. HBL intends to achieve the threshold of 26 per cent in up to five years,” said Habib Bank in the annual report.

The Pakistan lender has an asset base of Sh1.3 trillion (1.6 trillion Pakistan Rupees), which is about a third of Kenya’s GDP. Habib’s asset base is more than three times bigger than Kenya’s largest lender, KCB with a balance sheet size of Sh385 billion.

Habib Bank has direct presence in over 17 countries including Kenya, where it has three branches in Nairobi, Mombasa and Malindi.

It is the second Pakistani bank this year to declare interest in a Kenyan lender, following MCB Bank’s announcement that it was conducting due diligence on a “small Kenyan bank” with the intention of acquiring it.

READ: Pakistan bank files notice to buy out small Kenyan lender

Habib has set aside Sh3.6 billion ($43 million) to acquire an additional 31.5 million of DTB Kenya shares—assuming there are no rights and bonus issues— at an estimated price of Sh114 per share.

The share closed at Sh192 each Monday, putting the market value of the stock that Habib intends to acquire at about Sh6 billion.

“To acquire additional shareholding of 14.32 per cent in Diamond Trust Bank Kenya Limited at or around the prevailing market price or issue price as the case may be, as a result of which the total shareholding of Habib Bank Limited in Diamond Trust Bank Kenya Limited shall stand increased up to 26 per cent,” read a special resolution in the lenders annual report.

DTB which has operations in four countries including Uganda, Tanzania and Burundi, has been enjoying a share price rally at the bourse buoyed by investors’ appetite for banking stocks following improved performance by the industry.

In the nine months to September, DTB reported a 33.3 per cent growth in profit to Sh3.9 billion. DTB is classified as a mid-tier lender as per the Central Bank of Kenya’s categorisations with a market share of 4.1 per cent, up from 3.77 per cent in 2011.

Habib has been progressively increasing its shareholding in DTB since 2006 when it bought a 3.7 per cent stake. Currently, DTB is majority owned by Aga Khan Development Fund (AKFED) which has a 17.3 per cent stake. AKFED also holds a majority 51 per cent stake in Habib Bank

.

“HBL’s investment in DTB Kenya is a reflection of the strong confidence it has in East Africa and Kenya, in particular, which it views as growth markets, holding a lot of promise for sustained growth and new opportunities,” said DTB in response to Business Daily queries on the deal.