KCB Rights Issue Price Announced 

The subscription price for the KCB Rights Issue has been announced. 

The KCB Rights will cost Kshs 17 per right which represents a discount of 21% percent on the current share price.

“In arriving at the offer price, we considered the recent performance of the Nairobi Stock Exchange, the performance of the business as at the end of 2009, past performances of other rights issues at the Nairobi Stock Exchange, the current political and macro-economic environments in so far as they impact on the banking sector as well as KCB’s   unique competitive strengths and future plans,” said the KCB Group Chairman during the launch of the Rights Issue Price. 

With a total of 887.1 million shares being offered in the KCB Rights Issue, the bank targets to raise a total of Kshs 15 billion, which will be used to finance its consolidation plans, following an aggressive expansion plan which has seen it grow its regional branch network and Automated Teller Machine (ATM) platform.

“In this respect, the purpose of the rights issue is to raise additional capital   to improve   key bank ratios, fund business growth and consolidation across the markets and increase our capacity to provide long term   finance   such as credit for housing and property development,” said the KCB Group Chairman.   

Currently, KCB has a total of 212 branches comprising 168 branches in Kenya, 14 in Uganda, 11 in Tanzania, Rwanda 9 and 11 in Southern Sudan respectively. 

The bank has the largest number of ATM with a total outlay of over 370 ATMs and access to 110 PesaPoint units and over 250 Kenswitch outlets.

 "We have reached a level where we need to raise more capital. This is to reduce pressure on the balance sheet, take up more deposits from customers and increase our lending portfolio," said Dr Martin Oduor-Otieno, the KCB Group Chief Executive Officer and Managing Director.

The Third KCB Rights Issue is historic in two ways: first it is the largest rights issue in the history of this country and the region at large and secondly it is the first rights issue to be conducted and marketed across the region.  Thirdly, the rights issue comes at a time when the KCB shares are cross-listed in Uganda, Tanzania and Rwanda which opens the way for the bank to access investment funds in those markets. 

“With the coming into force of the East African Common Market Protocol on July 1st, 2010, we believe existing structures would be enhanced to ensure regional investors take part in this issue with minimal impediments,” said Muthoka. 

The trading of the KCB Rights Issue will commence as per the timetable from July 1, 2010.  “We expect shareholders to confirm or trade in the KCB Rights allocated to them,” added Oduor-Otieno.
Currently, the bank’s share price is trading at an average price of Kshs 21, down from a close of Shs 23.50 on April 14, when it announced plans for the KCB Rights Issue.
The KCB Rights Issue will increase the bank’s paid up capital to Kshs 3.1billion shares of Shs 1 each from 2.2 billion shares.

This will be the third time the bank is seeking to raise funds through a Rights Issue since its first one in 2004 raised Kshs 2.45 billion and a Kshs 5.5 billion issue in June 2008, both of which were oversubscribed.
In the 2008 KCB Rights Issue, which allowed shareholders to buy one share for every nine, the new shares were sold at Kshs 25 per share which marked a 20 percent discount from the then trading price of Kshs 31.50.
Recently, the bank posted a 10 percent increase in pre-tax profit to KShs.1.9 billion and a 29 percent growth in total assets to KShs.220 billion for the first quarter ended March 31, 2010.

Net interest income went up by 10 percent to Kshs.3.9 billion from Kshs.3.5 billion posted over the same period in 2009 while fees and commissions grew to Kshs.1.5 billion from Kshs.1.35 billion last year.

“The year 2010 is for consolidation through efficient management of our resources, cost reduction, product and service innovation as well as growth in market share,” said the CEO.

He added that the introduction of the bank’s core banking system, T24, which was operationalized towards the end of 2008, had helped the bank deliver superior customer service cost-efficiently and on-a-real-time basis across its network.

“Using the T24 banking platform, we are in the process of testing a new internet banking product to increase our channel options for the convenience of customers,” said Oduor-Otieno.

About KCB

The KCB Group has grown to become a regional giant with operations in Kenya, Tanzania, Uganda, Rwanda and Southern Sudan. At the moment, its 400 quickserve Automated Teller Machines (ATMs) are able to give cash in local currency in Kenya, Uganda, Tanzania and Southern Sudan regardless of where an account is held within its network.

KCB has a wide-range of products and services which gives it the capacity to support the business requirements with ease and convenience.

Currently, it is the largest bank in the region in terms of branch network and asset base valued at over Kshs 220 billion. Its network of over 210 outlets in the region is strategically located to provide synergies for our operations across the markets. 

About KCB Rights Issue

The KCB Rights Issue is a privilege given to the existing shareholders of KCB to buy additional shares in the company on a pro-rata basis to their current holding.

Chronology

• On October 25, 2009 a special KCB Board Meeting resolved to raise a total of Kshs 15 billion through Shareholder Equity.
• The bank appointed KPMG as Lead Transaction Advisors, Standard Investment Bank as Lead Sponsoring Stock Brokers and Oraro & Company as Legal Advisors.
• The bank made applications as required by law to the Capital Markets Authority and the Nairobi Stock Exchange for the regulatory approvals. Similarly, the bank wrote a letter to the Central Bank of Kenya for their no-objection letter as the banking industry regulator.
• On May 7, 2010 shareholders gave their approval for the KCB Rights Issue.