Family Bank floats Sh3.5b rights issue

Family Bank Finance and Strategy Director Njung'e Kamau, Chairman Wilfred Kiboro and Managing Director Peter Munyiri during the bank's AGM in Nairobi. [PHOTO DAVID NJAAGA]

NAIROBI, KENYA: Family Bank has asked its shareholders to inject more funds into the business to enable it comply with new prudential guidelines of the Central Bank of Kenya (CBK).

The funds will enable the bank finance its expansion to become a tier-one bank by 2017. Cash is also needed to up-scale the bank’s IT infrastructure as the present one will not be able to service growing customer numbers in the next two years.

Existing shareholders will purchase their rights at a discounted price of Sh25 per share with 120 million shares available in an offer that closes on November 28, 2014.

“The need to have a buffer of 2.5 per cent above the capital ratio of 12 per cent as required by CBK regulations, has constrained our capital and this is why we are seeking for funds from shareholders,” said the bank’s board Chairman Wilfred Kiboro.

The bank plans to raise its branch network from 78 to 100 branches. “We already have five branches as work-in-progress and will continue with the expansion because most of our customers still prefer brick-and-mortar outlets,” said Chief Executive Peter Munyiri.

The financial institution is also focusing on emerging opportunities within county governments and small and medium sized enterprises - a segment its officials admit was lost to competitors. Family Bank is now the fifth largest commercial bank in terms of branch network and has set its sights on listing at the Nairobi Securities Exchange.

Managing costs

Although the cost-income ratio is still high, at 17 per cent above industry average, the bank has plans to bring this ratio down. “This variance will even once we grow our incomes and manage costs. While 30 of our branches are not even two years old, they are breaking even at six months, above the industry’s two years,” said Munyiri.

Standard Investment Bank are the lead transaction advisers, assisted by Alpha Africa Asset Managers as investment advisers. Deloitte & Touche are the reporting accountants, while Walker Kontos Advocates are the legal advisers.