Bank borrows Sh4.6bn to meet new CBK rules
What you need to know:
- The Cooperative Bank said it opted for long-term loans as opposed to issuing a bond or rights issue due to cost differentials.
- “These long-term funds come at very concessional rates compared with bonds. It is better to borrow offshore as the interest rate is a single digit,” said managing director Gideon Muriuki in an interview.
- The listed lender also plans to leverage on retained earnings to capitalise its coffers and give it enough cover against any market risks associated with lending.
The Cooperative Bank has taken a Sh4.6 billion loan to boost its capital ratio in line with new guidelines by the Central Bank of Kenya.
The seven-year credit line from the German Development Bank brings to more than Sh16 billion the loans taken from international lenders since last year.
The loan’s effective date is September 15.
COST DIFFERENTIAL
Lenders have in the recent past been opting for various methods of capitalisation ahead of the new CBK rules expected to take effect from January next year.
The Cooperative Bank said it opted for long-term loans as opposed to issuing a bond or rights issue due to cost differentials.
“These long-term funds come at very concessional rates compared with bonds. It is better to borrow offshore as the interest rate is a single digit,” said managing director Gideon Muriuki in an interview.
The listed lender also plans to leverage on retained earnings to capitalise its coffers and give it enough cover against any market risks associated with lending.
“The facility is for onward lending to small and medium-size enterprises. The loan will be repaid in 10 instalments, ending on November 2020,” Mr Muriuki said.
Early last year, the bank took a seven-year loan of Sh8.1 billion (euros 70 million) from the European Investment Bank.
In mid-2013, it took another long term credit facility of Sh5.3 billion ($60 million) from the World Bank’s private lending arm, the International Finance Corporation.
