Family Bank seeks Sh4bn in rights issue

Family Bank will be tapping its shareholders for a Sh4 billion capital to be raised through a rights issue before the end of this year.

In a media briefing on Friday, the bank said it would raise between Sh3.5 billion and Sh4 billion from its shareholders to meet the Central Bank’s capital adequacy ratio rules.

The lender’s chairman, Mr Wilfred Kiboro, said some funds will also be used to fast track the bank’s growth plans in Kenya.

“We are looking to raise between Sh3.5 billion and Sh4 billion in additional capital as a result of the change in calculation of capital adequacy ratios,” Mr Wilfred Kiboro said.

The bank, at a meeting to be held on Wednesday next week, will decide on the number of shares to sell and the price that each share will fetch.

Currently, the bank’s share is trading at a high of Sh60 over the counter.

In 2012, the Family Bank conducted a rights issue to raise Sh1.25 billion by offering 40.5 million new shares at Sh31 each.

The funds were used to grow local branch network as well as supporting an internet banking platform. The bank had then planned to expand to South Sudan and Uganda.

Part of the new capital will also be used in expansion, especially as the lender looks to strengthen its position in the Kenyan market.

EXPANSION ON HOLD

Meanwhile, the bank has put on hold its expansion plans within the East African region. The decision was arrived at partly due to political instability in South Sudan, a country with a high potential for investment.

Mr Kiboro also said the bank lacks the capital to expand to some countries such as Uganda and South Sudan, which it had put on its expansion radar.

“If you go to say, Uganda, you require new capital of Sh1 billion but our balance sheet is quite small. We want to grow our balance sheet first before we consider regional expansion plans,” Mr Kiboro said.

The bank would instead focus on increasing its branches in Kenya with a focus on the 47 counties as it eyes tier-one status by 2016.

Its outreach has seen its countrywide branch network reach 78 at the moment. It plans to open additional new branches in the next two months to reach 80 with an eye on tapping emerging opportunities in the country by mobilising cheap deposits and increasing the numbers of its customers.

This year alone, the bank has opened seven branches.

Chief executive Peter Munyiri said the lender was keen to expand in the counties.

In the first half of this year, Family Bank reported a 76 per cent growth in after tax profit to Sh875 million compared to Sh496.6 million realised in a similar period in 2013.