NIC Bank seeks Sh3bn in cash call

IC Bank has opened its corporate bond seeking to raise Sh3 billion to help the lender meet Central Bank’s regulatory capital requirements.

Bond issue is one of the capital-raising mechanism that NIC shareholders approved during its annual general meeting. They also gave nod to Sh2 billion rights issue.

In a note to the Nairobi Securities Exchange, the mid-tier bank said the minimum investment amount in the cash call is Sh100,000.

The bond issue is to close on September 3 and it has an interest rate return of 12.5 per cent per year, payable semi-annually over its five-year maturity period.

CBK PRESSURE

The last rights issue by NIC was in October 2012 and was oversubscribed by 238 per cent. It received Sh7 billion worth of applications against a target of Sh2 billion.

The lender is rushing to raise its capital base as the pressure to conform with CBK guidelines weighs in.

Its total capital stood at 12.52 per cent of total risk-weighted assets by June — just 0.52 per cent — above the mandatory minimum of 12 per cent.

Starting January 2015, all banks are required to maintain the ratio at 14.5 per cent, a plan that has seen lenders device means of raising additional capital.

GROW CAPITAL

For instance, Barclays Bank of Kenya is borrowing Sh4 billion from its parent company in the UK, Barclays Bank PLC.

On its part, NIC has sought Sh4.4 billion loan from International Finance Corporation, the World Bank’s private lending arm.

Rating agency Moody’s said in a recent regional banking report that banks need to grow their capital bases in order to take advantage of economic growth in East Africa.

“While capital buffers held by individual banks far exceed minimum prudential requirements, the size and capital bases of the EAC banking sectors in absolute terms are small, limiting the extent to which banks can participate in the region’s economic growth,” it said.