Co-op seeks shareholder nod for 50pc capital rise
What you need to know:
- Co-op Bank has asked shareholders to pass a resolution increasing its authorised share capital from five billion shares to 7.5 billion at an annual general meeting to be held later this month.
- The funds will partly pave the way for issuance of the 977 million shares for its one-for-five bonus bonus.
- The lender has in recent years adopted a conservative dividend policy coupled with issuance of bonus shares to retain more capital for expansion.
Co-operative Bank of Kenya #ticker:COOP plans to raise its authorised shares by 50 per cent or 2.5 billion units to cater for its upcoming bonus issue and future capital raising.
The lender has asked shareholders to pass a resolution increasing its authorised share capital from five billion shares to 7.5 billion at an annual general meeting to be held later this month. This will partly pave the way for issuance of the 977 million shares for its one-for-five bonus bonus.
The top-tier lender currently has 4.89 billion issued shares meaning the unissued balance of authorised stock — at just 110.6 million shares — is insufficient to cover the bonus issue.
“The increase in authorised share capital is to accommodate the new shares to be created by the proposed one-for-five bonus issue. It also gives headroom for future capital issues, but we do not have a rights issue planned,” said Co-operative Bank in response to the Business Daily queries.
At a par value of Sh1 each, the bonus shares will see the lender convert Sh977 million worth of reserves into capital, with the new shares expected to be credited to shareholders on June 30 subject to approval of the Capital Markets Authority.
Cooperative Bank has in recent years adopted a conservative dividend policy coupled with issuance of bonus shares to retain more capital for expansion.
In 2014, the bank issued a bonus share at the rate of one for every six held, which saw it capitalise a total of Sh698.5 million.
As a result of the retention policy, the lender’s shareholder funds grew by 22 per cent from Sh50.2 billion in 2015 to Sh61.3 billion at the end of 2016. Co-op has mainly used the additional funds to finance its regional expansion.
In addition to the bonus shares, the lender’s owners will be paid a dividend of 80 cents a share for the 2016 financial year, unchanged from the previous year.
Co-op reported an 8.2 per cent net profit growth to Sh12.6 billion in the year ended December 2016, on the back of a 14.8 per cent increase in total interest income to Sh42.2 billion and a six per cent drop in interest expenses to Sh12.7 billion.
The banks is, however, likely to take a hit from the interest rate controls.
