Family Bank goes out for Sh3bn in cash call

Family Bank Chairman Wilfred Kiboro (left) with the bank's managing director Peter Munyiri during an investors' breakfast briefing on the rights issue at The Intercontinental Hotel on October 22, 2014. Family Bank has launched its second rights issue seeking Sh3.1 billion from shareholders to fund its growth plan. FILE PHOTO | DIANA NGILA | NATION MEDIA GROUP

What you need to know:

  • The bank will issue 120 million new shares priced at Sh25 apiece to finance short-term development projects as well as meet regulatory requirements.
  • Managing director Peter Munyiri said the bank has a target of becoming a tier 1 lender  by 2016, which means, it should have an asset base of at least Sh100 billion. It currently stands at Sh51 billion.

Family Bank has launched its second rights issue seeking Sh3.1 billion from shareholders to fund its growth plan.

The bank will issue 120 million new shares priced at Sh25 apiece to finance short-term development projects as well as meet regulatory requirements.

“Our growth strategy 2014 -2018 needs to have commensurate funding in place in order to implement the various critical success factors that we have endorsed as a board,” Family Bank chairman Wilfred Kiboro said at an investor briefing on Wednesday.

Managing director Peter Munyiri said the bank has a target of becoming a tier 1 lender  by 2016, which means, it should have an asset base of at least Sh100 billion. It currently stands at Sh51 billion.

“This calls for an increase in customer numbers, branch network and infrastructure as well as increasing our lending,” he said.

Mr Munyiri said the cash call will open up more opportunities for the bank by increasing its single borrower limit to over Sh2.75 billion, thus enabling it to participate in big ticket businesses.

Since Family is not listed on the Nairobi Securities Exchange, its rights issue is only limited to the current 6,000 shareholders. It will be offering one ordinary share for every nine held between October 14  and November 28, 2014.

Analysts said Family Bank’s current cost to income ratio is not attractive in the short-term adding that outlined investments will, however, push it down to desirable levels.

Cost to income ratio is used to measure how efficient a bank is in terms of the amount incurred to generate revenue. Family bank’s ratio stands at 67 per cent above the banking industry average of 50 per cent.

“If the bank can manage to bring down this cost as it has stated, returns on assets will be very attractive,” Standard Investment Bank director Amish Gupta said.