NMB floats 200bn/- bond in trenches

DAILY NEWS Reporter

NATIONAL Microfinance Bank (NMB), the most profitable bank, has floated a three-year 20bn/- retail bond that goes to the market next Tuesday.

The Capital Market and Securities Authority (CMSA) has approved 200bn/- bond for NMB but the bank has started with the retail of three years and the remaining amount is scheduled for launch in trenches.

Orbit Securities General Manager Juventus Simon said yesterday that the bond that goes on offer next week is part of the 200bn/- trench and strictly for retail investors. “The bond is very attractive,” Mr Simon told the ‘Daily News’, adding “The interest rate is handsome and slightly higher than the (government) bond of two and five years.”

According to the statement issued by NMB, the bond, with a green-shoe option of 5bn/-, offers a 13 per cent interest per annum. According to Mr Simon, the interest rate is set to attract investors, especially those looking for other investment options bearing in mind that equities at the Dar es Salaam Stock Exchange have remained on bearish mode since January.

“This (NMB bond) is one of the reasonable corporate bonds issued in recent days,” Mr Simon said, “looking at the market trend, the bond is likely to be oversubscribed.” The medium term note, bearing senior unsecure status, is the first to be floated by any bank in Tanzania.

NMB is also listed at DSE main market. According to statement issued yesterday, the offers open on Tuesday 10, and close June 8, 2016 before being listed on the stock market mid next month.

In recent days, Exim Bank’s 10bn/- bond was oversubscribed and stock brokers predict that the NMB’s will also go through similar path, given the strong position of the bank in the market.

“Investors may shift to bond market on the back of stocks bearish mode—especially those who want to avert risks,” Mr Simon said. The senior unsecured bond isn’t backed by collateral or security of some kind, such as a mortgage, that can be used to repay the bondholders if the bond issuer defaults.

But most unsecured bonds pose limited risk of default because their issuers are usually financially sound. Last year, NMB posted a 148.8bn/- net profit, slightly down from 154.5bn/- in 2014.

The bank share has declined by 18 per cent to 2,050/-since the beginning of the year while return on equity stands at 2.37 per cent and price earnings ratio is 6.9 per cent.

However, since January all stocks, save for TOL and Yetu Microfinance Bank, have depreciated at the rate of between three and 30 per cent, with some stagnating according to Arch Financials and Investment Advisory.