Family Bank plans fresh rights issue to fund expansion

Money Markets

Family Bank chairman Wilfred Kiboro (left) and managing director Peter Munyiri during the bank’s Annual General Meeting in Nairobi last Friday. PHOTO | SALATON NJAU 

By BRIAN NGUGI and AGEWA WAINAINA

In Summary

• Family Bank's shareholders on Friday gave the nod to the planned issue at an annual general meeting held at the KICC in Nairobi.
• The funds will enable the lender to expand both locally and in the region as well as to maintain its capital adequacy ratios beyond the legal requirement.
• The latest planned rights issue comes hot on the heels of a Sh3.1 billion cash call in the fourth quarter of 2014.

Family Bank plans to raise Sh4 billion through a rights issue planned for later in the year to boost capital ratios and fund expansion.

The lender’s shareholders on Friday gave the nod to the planned issue at an annual general meeting held at the KICC in Nairobi.

Family Bank chairman Wilfred Kiboro said the additional funds would enable them expand both locally and in the region as well as to maintain its capital adequacy ratios beyond the legal requirement.

“We will be asking our shareholders to pump in Sh4 billion…that will result in our adding an additional 200 million new shares to be offered by way of rights issue to be able to raise the Sh4 billion,” he said on the sidelines of the AGM. The additional funds will be essential to the implementation of the lender’s growth strategy, which involves going regional.

As part of the planned regional expansion process, Mr Kiboro said the bank’s shareholders had given a nod for the setting up of a non-operating holding company.

“We will be changing our name from Family Bank Limited to Family Bank Group PLC, which will be a non-operating company, which will then own a subsidiary which will be known as Family Bank Kenya Limited,” he said.

READ: Family Bank to open 10 new branches before end of year

The process is however subject to regulatory approvals and is expected to take about four to six months to be completed. The mid-sized bank has resorted to a mix of equity and debt to bankroll growth.

The latest planned rights issue comes hot on the heels of a Sh3.1 billion cash call in the fourth quarter of 2014.

The bank raised Sh977 million in 2010 followed by a Sh1.1 billion cash call in 2012 and a further Sh435 million from existing shareholders the following year.

It also recapitalised Sh557 million in 2013 through a bonus share offer. Last year it raised Sh2 billion through a bond issue that currently trades at the Nairobi bourse.

Last week the lender said it had received a Sh3.42 billion (€30 million) loan from the European Investment Bank (EIB) for onward lending to small and mid-sized businesses. Another Sh1.14 billion, it added, will be received in a month’s time.

The increase in funding it said will support its growth target as the facility aims to become a top-tier bank.
During the Friday AGM, Mr Kiboro assured its depositors that the lender was in a strong liquidity position.

“The Family Bank is in a very strong position. Obviously people were very concerned about the current turbulence in the market place arising out of some of the difficulties in the other banks,” Mr Kiboro said as he insisted the lender had weathered the storm.