Boost for Bank of Africa’s expansion bid

Bank of Africa CEO Kwame Ahadzi speaks at a Nairobi function last year. The lender has 32 branches in Kenya, up from seven in 2009. Photo/FILE 

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• The Malian bank has been operating on thin capital margins, resulting in stifled business growth and on the brink of breaching statutory ratios.
• Besides the April issue, the lender had made a cash call last year, adding up to three rights issue in four years.
• The lender is likely to invite an additional shareholder during the year to boost its capital levels.

Bank of Africa has raised Sh1.7 billion in a rights issue, giving it headroom to expand business as it prepares to engage a strategic partner for further capital injection.

The Malian bank has been operating on thin capital margins, resulting in stifled business growth and on the brink of breaching statutory ratios. Besides the April issue, the lender had made a cash call last year, adding up to three rights issue in four years.

“We have been in a capital raising regime. We raised Sh1.7 billion in April, increasing our ratio to 16 per cent. Now we are ready to roll,” said the bank’s chief executive Kwame Ahadzi.

As at March the bank’s total capital was 13.1 per cent of its risk weighted assets, only 1.1 per cent above the current statutory minimum of 12 per cent but below the new rate of 14.5 per cent which becomes effective at the end of the year.

Mr Kwame said the bank, majority owned by BMCE of Morocco, was likely to invite an additional shareholder during the year to boost its capital levels.

The bank is currently increasing its branch network to expand its retail business. Expansion costs, however, saw the lender’s profits in Kenya drop 24 per cent in the first three months of the year compared to a similar period last year.

In the first quarter, the bank reported an after tax profit of Sh234 million compared to Sh308 million in March last year.

“We have been aggressive in retail branches and each takes time to mature,” said Mr Kwame.

READ: West African banks struggle in Kenyan market

The bank, which also owns minor stakes in Uganda and Tanzania operations, now has 32 branches in Kenya up from seven in 2009. The subsidiaries’ performance improved leading to growth of the group total profits to Sh200 million from Sh184 million last year.

Its loan book grew marginally by Sh600 million in the first three months of the year to Sh31.6 billion, while its deposits contracted by Sh1.5 billion over the same period to Sh35.2 billion. 

Interest rates

Last year the lender raised Sh1.1 billion by issuing shares to its owners. It had raised a similar amount in 2011.

The bank joins a growing list of lenders who are sourcing for capital as they rush to comply with new capital requirements coming to force at the end of the year.

Diamond Trust Bank and National Bank are in the processing of issuing more shares to their shareholders to raise additional capital