National Bank to shore up capital with bonus shares

National Bank chief executive Wilfred Musau. FILE PHOTO | NMG 

By HERBLING DAVID

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Summary

• NBK has proposed to issue one new share for every 10 shares held by existing shareholders, a move which will see it capitalise Sh153.99 million reserves.
• This is NBK’s second bonus issue in as many years, having issued another bonus in a similar ratio in 2015.
• The new shares will bring the total fully paid-up share capital at NBK to 338.79 million ordinary shares.

National Bank of Kenya has once again turned to issuing bonus shares to shore up its shrinking capital base that has steadily slipped below regulatory requirements.

The distressed mid-tier lender has proposed to issue one new share for every 10 shares held by existing shareholders, a move which will see it capitalise Sh153.99 million reserves.

NBK has resorted to capitalising earnings as a strategy to raise capital following a four-year impasse on a Sh13 billion rights issue approved by shareholders in mid-2013, but has failed to take off due to differences between the two top shareholders.

“Subject to receipt of requisite regulatory approvals, the sum of Sh153.99 million being part of the amount standing to the credit reserves be capitalised,” National Bank said in regulatory filings.

NSSF is the largest shareholder at National Bank with a 48.05 per cent stake while the Treasury directly owns 22.5 per cent of the bank.

The additional 30.79 million shares will be issued at a price of Sh5, which is also the stock’s par value.

This is NBK’s second bonus issue in as many years, having issued another bonus in a similar ratio in 2015.

The new shares will bring the total fully paid-up share capital at NBK to 338.79 million ordinary shares.

NBK’s total capital to total risk-weighted assets ratio stood at 11.9 per cent as at December 2016, which is 2.6 percentage points below the Central Bank of Kenya statutory minimum of 14.5 per cent.

READ: National Bank close to sealing Sh4.4 billion shareholder loan

The listed lender first breached the ratio — crucial for the bank to grow its loan book — in March last year when it fell short by 1.4 per cent after remaining compliant by a razor-thin margin for several quarters.

Uncertainties linked to shareholder wars surrounding the bank’s fundraising efforts has seen analysts project a bleak outlook for National Bank.

The standoff on the rights issue forced NBK to request for a shareholder loan in June last year, where NSSF was to provide Sh3 billion and National Treasury (Sh1.4 billion), on a prorated basis.

NSSF acting managing trustee Anthony Omerikwa said the pension scheme is currently carrying out due diligence on NBK before pumping in taxpayers’ cash into the troubled bank.