Centum pumps Sh1.1 billion into Sidian Bank

Centum CEO James Mworia (left) with Sidian Bank chief executive Chege Thumbi. PHOTO | SALATON NJAU 

By CHARLES MWANIKI

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Summary

• Sidian chief executive Chege Thumbi said the capital injection will support trade finance, which the bank has been eyeing as part of a wider scheme aimed at growing its loan book.
• The bank says its foray into trade finance in the past year more than quadrupled to Sh6.6 billion making it an area of interest that needed to be supported with better capitalisation.
• Centum holds a 73 per cent stake in Sidian Bank and the Sh1.1 billion cash injection means it has defended its entire stake in the rights issue.

Investment firm Centum has pumped Sh1.1 billion into its banking subsidiary Sidian in a rights issue that is meant to boost the lender’s core capital.

Sidian chief executive Chege Thumbi said the capital injection will support trade finance, which the bank has been eyeing as part of a wider scheme aimed at growing its loan book.

Centum holds a 73 per cent stake in Sidian Bank and the Sh1.1 billion cash injection means it has defended its entire stake in the rights issue.

“Shareholders approved a total of Sh1.5 billion rights issue and we have received Sh1.1 billion, which is the share due from our main shareholder Centum. The other investors have until November to contribute their share of the rights,” Mr Thumbi said.

Sidian says its foray into trade finance in the past year more than quadrupled to Sh6.6 billion making it an area of interest that needed to be supported with better capitalisation.

“We changed our business mode slightly and grew our trade finance from Sh1.2 billion to Sh6.6 billion. As a result of growth in that sector, we felt we need to get more in core capital to continue growing that book,” Mr Thumbi said.

Sidian’s core capital at the end of September 2017 stood at Sh3.51 billion, with a core capital to total risk weighted assets ratio of 20.8 per cent versus a minimum requirement of 10.5 per cent.

This is the second time in as many years that Centum has put money into Sidian through a rights issue.

In 2016, the investment firm put in Sh1.2 billion into the bank, earning it an additional stake of 8.1 per cent, pushing its shareholding to the current level.

The investment firm managed to increase its stake in the bank after some of the minority owners failed to take their rights in the 2016 transaction.

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Centum’s latest decision to pump additional money into Sidian comes at a time when the investment firm has been divesting from some of its investments in companies such as asset manager GenAfrica, where it sold a 73.35 per cent stake to New York-based equity fund Kuramo Capital.

The firm also sold its stake in micro-financier Platinum Credit.

“Despite the short-term challenges in the banking sector, we have a lot of confidence in the long-term view. For us this is a fairly young investment, and we are therefore backing it…the more mature investments that we have held for a longer period of time we have exited after they realised their optimal value,” said Mr Mworia.

Sidian reported a Sh274 million loss in the year ended September 2017 compared to a net profit of Sh220 million made in a similar period a year earlier.

That in turn weighed down Centum’s profit for the six months to September by 21 per cent to Sh1.6 billion.