Commercial Bank of Africa to borrow Sh10bn to beat CBK deadline

What you need to know:

  • “By mid-2015, we expect to put between Sh3 billion and Sh4 billion in new investments across East Africa,” CBA group managing director Isaac Awoundo said. Rwanda and Burundi will be the first priority on the regional expansion.

Commercial Bank of Africa plans to borrow Sh10 billion from the public as it joins other financial institutions in the race to beat the new Central Bank regulations deadline.

The money, to be raised through a medium term note, will also fund the bank’s expansion in Kenya and Africa, increasing its presence from three to 16 nations. Currently, CBA operates in Kenya, Uganda and Tanzania.

The bank hopes to raise Sh5 billion — with an option of Sh7 billion if oversubscribed — in the first tranche.

This will help it beat the January deadline to increase total capital to risk weighted assets ratio to a minimum of 14.5 per cent as a cushion to financial shocks in the market.

The bank, whose majority controllers are the Kenyatta family, was given approval to raise funds by the Capital Markets Authority on Friday. The offer opened yesterday morning and will close on December 10.

NEW INVESTMENTS

“By mid-2015, we expect to put between Sh3 billion and Sh4 billion in new investments across East Africa,” CBA group managing director Isaac Awoundo said. Rwanda and Burundi will be the first priority on the regional expansion.

The second tranche of between Sh5 billion and Sh3 billion — depending on whether the current offer will be oversubscribed — will be raised next year. Mr Awoundo said the shareholders injected Sh2.1 billion this year, but the bank required more capital to meet its growth objectives.

The note has a tenure of six years, and payment will be done twice at 12.7 per cent interest.

The bank said its mobile money-driven product, M-Shwari, had attracted six million users by October 31, with 300,000 more accounts being opened every month.

Barclays Bank borrowed Sh4 billion from its parent company and Co-operative Bank borrowed Sh4.3 billion from German Development Institution (DEG). Others like NIC Bank and Family Bank went for rights issue to enable them meet the requirements.