Treasury’s Sh5bn budget unlocks NBK rights issue

Corporate News

National Bank managing director Munir Ahmed said the cash call will help it achieve its strategic ambition of becoming a top-tier bank by 2017. PHOTO | DIANA NGILA 

By DAVID HERBLING, hdavid@ke.nationmedia.com

In Summary

• The Treasury controls a 22.5 per cent stake in NBK, which implies that the entire rights issue could be valued at about Sh22 billion.
• NBK shareholders last year approved a plan to create an additional 800 million new ordinary shares to be floated in a rights issue that was then expected to raise about Sh10 billion to fund its expansion plans.

The Treasury has budgeted for Sh5 billion to defend its stake in National Bank of Kenya at a rights issue set for the first quarter of next year, in what signals a likely doubling of the cash call from the initially announced amount.

Treasury secretary Henry Rotich has requested the National Assembly for the cash in a supplementary Budget tabled in Parliament on Thursday.

The Treasury controls a 22.5 per cent stake in NBK, which implies that the entire rights issue could be valued at about Sh22 billion.

National Bank shareholders last year approved a plan to create an additional 800 million new ordinary shares to be floated in a rights issue that was then expected to raise about Sh10 billion to fund its expansion plans.

“The funds will help us to maintain our shareholding as it is. We want to take up our entire rights,” said Mr Rotich in an interview.

The National Social Security Fund (NSSF) is the largest shareholder at NBK with 134.5 million shares equivalent to a 48.05 per cent stake. NSSF managing trustee Richard Langat said the pension fund is ready to take up its rights in the cash call.

Other top owners of the mid-sized lender include Kenya Re with two million shares equivalent to a 0.71 per cent stake and billionaire businessman Ephraim Maina who has 0.9 million shares.

This is National Bank’s first rights issue since listing at the Nairobi bourse in 1994.

READ: National Bank gets ready with rights issue papers

NBK also plans to use funds raised from the cash call to redeem the lender’s 1.135 billion preference shares held by the Treasury and the National Social Security Fund (NSSF) at an approximated cost of Sh7.09 billion.

The preference shares —which have a par value of Sh5 a piece—will be cashed at a 25 per cent premium translating to about Sh6.25 per share.

The mid-tier lender says it will use cash from the rights issue to enhance its statutory capital requirements, grow its loan book, revamp its core banking IT platform, open new branches across Kenya and fund regional expansion.

Delays in rolling out the NBK cash call has seen the lender nearly contravene Kenya’s regulatory capital and liquidity requirements.

NBK’s total capital-to-total-risk-weighted-assets stood at 14.7 per cent as at September, against the 14.5 per cent ratio set by the Central Bank of Kenya, giving it little headroom to grow its loan book.

CBK has put in place new prudential requirements raising the ratio of total capital to total risk-weighted assets by an extra 2.5 percentage points to 14.5 per cent to cushion banks from unforeseen shocks.