Kenya's National Bank now turns to shareholders to raise Sh10b

By James Anyanzwa

NAIROBI, KENYA: National Bank shareholders have approved a proposal by the bank to raise Sh10 billion in additional capital through a rights issue.

The bank’s owners also backed the proposal to set up regional subsidiaries and increase the bank’s authorised share capital from Sh3 billion to Sh7 billion through the creation of 800 million new shares.

The bank, which has rebranded as part of its transformation programme is seeking to issue 1.12 billion new shares to the existing shareholders subject to regulatory approvals.

Managing Director Munir Ahmed said the proceeds of the cash call, which is scheduled for next year will be used to finance the bank’s local and regional expansion programmes.

“All what we are asking is for the shareholders to approve the resolution for additional capital. The actual rights issue will be from next year (2014) after the first quarter,” Munir told shareholders in Nairobi yesterday.

Munir who was speaking during the bank’s 44th AGM said the bank would be focusing more on the customers going forward.  “Customer service improvement initiatives are a key pillar of the strategy we will be driving in 2013 and beyond,” he explained.

“We have so far implemented a number of these including a 24/7 customer contact centre, revamping value propositions, product innovations and developing a customer centric sales and service models.”

The shareholders who suffered long spells of dividend drought also approved a payment of first and final dividend of 20 cents a share. The bank has crafted a five-year strategy seeking to grow its turnover from the current Sh8 billion to Sh31 billion by 2017.

The bank will also open 30 new branches during the same period. The plan, which has been coined by the new management, seeks to reposition NBK as a key player in the banking industry and restore its foothold in the market. NBK board has outlined a raft of new measures with hopes of transforming the 44-year-old institution into a highly profitable and competitive banking entity.

Consumer lending

Part of the restructuring includes diversification of the bank’s balance, which has highly concentrated on retail banking. NBK has created a new corporate and institutional banking division to rival top lenders and reduce reliance on consumer lending.

The state-owned bank has set in motion a turnaround strategy with hopes of joining the top-tier league of banks in the country. National Bank’s profit before tax (PBT) for the 12-month period to December 31 fell more than 50 per cent as high interest rates dimmed lending to the retail segment and the bank’s management scaled up investment in new branches, new products and new technological platform. And even as the cost of funds more than doubled to Sh3.56 billion as a result of a high interest rate environment NBK sought to cushion customers by absorbing the full costs. According to NBK ’s audited financial the bank’s pre-tax profit dropped 53 per cent to Sh1.14 billion from the previous year’s Sh2.44 billion owing to a high and volatile interest rate environment, which forced the bank to pay heavily for deposits. “The board took action to ensure we not only address concentration risk that made us vulnerable to the volatile markets but also laid down strong foundations for growth,” said Munir.