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Kenya: Co-Op Bank Gets Nod to Raise Sh5b in IPO
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The East African Standard (Nairobi)
26 April 2008
Posted to the web 25 April 2008
Tom Mogusu
Nairobi
THE Co-operative Bank will raise Sh5 billion by offloading a 35 per cent stake through an initial public offer (IPO).
The transaction got a nod from delegates who met in Nairobi yesterday during an annual general meeting.
The delegates approved a proposal to review the shareholding structure of the bank to facilitate IPO, which would see them retain a 65 per cent "to safeguard the identity of the Co-operative Bank".
The IPO proceeds will be used to finance the bank's expansion and upgrade the information communication and technology system.
"Due to increased competition, banks are expanding their networks to remain relevant," Chairman Mr Stanely Muchiri said. "We need Sh5 billion for further expansion."
Details of the offer would be released at a later date.
The bank, which is owned by co-operative societies and individual shareholders, will pay Sh8 dividend per share for the financial year ended December 31.
Approval to list at the Nairobi Stock Exchange is a major milestone for the 40-year-old bank - ranked the fourth largest by assets - that was recording heavy losses just seven years ago.
Co-operative Development minister, Mr Joseph Nyaga, told delegates that the IPO had the backing of the Government.
"The bank has no option but raise additional capital so that it can compete and continue growing," he said.
He said days when the bank would rely on co-operative societies for survival were long gone and that the competition at the market place demanded an expanded war chest.
"We will support the plan because the bank is faced with competition. Other banks are now targeting the agriculture sector that the organisation has relied on for growth," he said.
Last year, it reported a Sh2.32 billion pre-tax profit, a turnaround from a loss of Sh2 billion in 2000 incurred due to bad loans and a stagnant economy
The bank's customer base has grown by 66 per cent from 450,000 in 2006 to 750,000 last year.
"The bank has undergone restructuring in the last five years after the board of directors approved top management changes," the Managing Director, Mr Gideon Muriuki said.
Proceeds from the IPO will enable the bank to raise the bar in the banking sector at a time when major players are rolling out sales and marketing campaigns to net more customers.
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Muriuki said the bank will strengthen its footprint in rural Kenya, which forms the bedrock of the country's co-operative sector.
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