Tom Mogusu
10 May 2008
Nairobi — Shareholders of Kenya Commercial Bank (KCB) have agreed to raise Sh5 billion through a rights issue. The bank will use the funds for expansion locally and within the region.
The funds will also be used to improve its share capital.
Most of the funds would be for new product development as the bank tries to cash in on expected economic growth and a demand from consumers.
It will be the second time that the bank will have called on shareholders for more funds.
The first time it managed to raise Sh2 billion, four years ago, which was used to restore the bank's financial fortunes at the time, by funding one of the most successful turn around projects.
That deal allowed the bank to improve its balance sheet, refurbish premises, put in place new branches and set in motion the improvement of its image. Yesterday, shareholders attending the annual general meeting voted to raise the funds as the bank prepares itself to compete against other key players.
The shareholders also voted to allow the bank to cross list in both the Uganda and Tanzania stock exchanges. The deal to cross list would ensure the maintains a healthy presence within the three countries that have been the source of its profits over the past two years.
The bank has a presence in Southern Sudan and is currently targeting Rwanda and Burundi. Mr James Wangunyu, the Managing Director at Standard Investment Bank, the leading transaction advisers, suggested that cross listing would provide KCB with a larger pool of secondary investors.
"By doing this, you will not just be tapping into a very large pool of investors but will also lower the costs of future secondary investments," he said.
The shareholders further allowed the bank to implement an employee share ownership programme. The programme should play a big role in plans to retain staff as the fight for talent increases among banks.
The shareholders agreed that the bank sets aside Sh150 million of the unissued shares in the company for allotment to the employees over a period of four years. At the same time, the bank said companies associated with some of its directors had been given loans during the last financial year. Managing Director Mr Oduor Otieno was forced to make such announcements after one of the shareholders pointed out that directors had hiked the loans by Sh1 billion bringing the total figure to Sh1.8 billion. "These increase does indeed include companies in which your directors are also directors," he said.
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