Stanchart to raise Sh3.2bn to fund growth

Standard Chartered Bank Kenya is hoping to raise Sh3.2 billion through a rights issue to support its growth strategy.

The bank is optimistic that it will raise the targeted amount, given that the main shareholder has pledged to take up all its rights.

Standard Chartered Plc — which owns 74 per cent of the bank — will be taking over Sh2.4 billion of the rights’ value, leaving around Sh830 million to the other shareholders.

“The additional capital is expected to help the bank improve its capital position in line with Central Bank regulations and undertake its expansion plans,” said Standard Chartered Bank chairman Wilfred Kiboro.

Existing and potential investors will buy the rights at Sh145 each, at one for every 13 shares held. The offer opens on October 9 and closes on October 26. The new shares start to trade at the Nairobi Securities Exchange (NSE) on November 27.

This development puts StanChart in the line of NIC Bank, CFC Stanbic, Diamond Trust Bank and Jamii Bora, which have all opted for rights issues targeting a combined total amount of Sh11.5 billion from the market to finance their expansion programmes.

Mr Kiboro also talked against efforts by MPs to fix interest rates, which he said was worrisome to banks and not sufficient to solve market imperfections that might arise in the future, such as spiralling interest rates.

“This is shooting ourselves in the foot and quite retrogressive,” said Mr Kiboro, adding: “Stakeholders and lawmakers should engage each other on such matters to spur development.”

He noted that borrowing appetite by most customers had been dampened in the recent past, impacting negatively on the financial market.

Cost of borrowing

The cost of borrowing went up in the past year and has been averaging 13 per cent to 25 per cent, as the indicative Central Bank rate increased to 18 per cent to contain runaway inflation.

“What we have had are only a few people who can afford the high interest rates coming for the loans, and this is bad because only a few people are able to borrow,” said Mr Kiboro.

Central Bank data shows that borrowing in the domestic market by individuals and investors declined by 24.8 per cent to Sh206.3 billion in the 12 months ending June 2012, compared with Sh257.5 billion in a similar period the previous year.