National Bank of Kenya (NBK) #ticker:NBK expects to close a Sh4.4 billion shareholder loan by end of September to shore up its capital, which has remained below regulatory requirements for 15 months.
The mid-sized lender has been seeking the debt funding from its top two shareholders: National Social Security Fund (NSSF) and the Treasury, since June last year following the collapse of a planned Sh13 billion rights issue.
“We are engaging our shareholders. We have done presentations to them and hope to close this financing by end of third quarter,” said NBK chairman Mohamed Abdirahman Hassan after the lender’s annual general meeting held on Friday.
“We decided to look for debt as we wait for equity. On rights issue, we are waiting for the Treasury to sort out the matter,” said Mr Hassan.
The NSSF will provide Sh3 billion and the Treasury is expected to chip in Sh1.4 billion; prorated as per their shareholding.
The State-run pension scheme is the largest shareholder at NBK with a 48.05 per cent stake while the Treasury directly owns 22.5 per cent of the bank.
Shareholders Friday approved a bonus issue of one new share for every 10 shares held, a move which will see NBK inject Sh153.99 million in its operations from the reserves.
Below statutory minimum
The NBK’s total capital to total risk-weighted assets ratio stood at 11.9 per cent as at December 2016, which is 2.6 percentage points below the Central Bank of Kenya statutory minimum of 14.5 per cent.
The Nairobi Securities Exchange listed lender first breached the ratio — crucial for the bank to grow its loan book — in March last year when it fell short by 1.4 per cent after remaining compliant by a razor-thin margin for several quarters.
“This under-capitalisation continues to impair business growth and exert pressure on the operations of the company,” NBK chief executive Wilfred Mutuku Musau said in the bank’s latest annual report.
The bank turned to a shareholder loan following a three-year impasse on a Sh13 billion rights approved by shareholders in mid-2013, but has failed to take off due to differences between NSSF and the Treasury.
The bank bounced to profit zone with net earnings of Sh162.1 million for the year ended December 2016, compared to a net loss of Sh1.15 billion in 2015.
Its shareholders have weathered a three-year dividend drought, having last received a dividend of Sh0.33 per share for the period to December 2013.
The NBK counter has rallied 11 per cent since January due to the bonus offer, and closed on Friday at Sh7.90 per share at the Nairobi bourse.