Standard Chartered Bank shareholders yesterday approved an increase of its authorized share capital ahead of a rights issue to raise Sh3.7 billion shillings to support growth and boost its lending ability.
The banks has offered 37 million new shares of 5 shillings each, as it embarks on the process of determining price for the rights issue and when shareholders can access their due . This will increase the banks its authorized share capital from Sh1,780,000 to Sh1,905,000. "The board believes the rights issue safeguards the banks ability to pursue the opportunities we see for growth to support our customers our clients while also raising our capital ratios. We believe this approach will create a clear long term value of our shareholders and underpin the financial strength of our bank," Wilfred Kiboro the chairman of the bank said.
Chief executive Richard Etemesi said additional capital raised would go towards supporting strong growth in lending and and expansion of branches. "Any fast growing business is hungry for investment, so we are looking for the money to grow our business between year 2012 and 2015. The money will support all aspects of our business including Recruitment of staff, opening new branches and refurbishment of existing outlets," Said Etemesi.
Etemesi indicated that the preparations may be complete by October this year. Standard Chartered Plc, the mother company which owns 75 percent of the Kenyan operation has already approved the rights issue and confirmed willingness to take up its share in full. The cash call comes barely two and a half years after another rights issue in year 2010 worth 2.5 billion shillings used to buy the custody business of Barclays Bank.
According to Etemesi, the banking sector is facing challenges due to uncertainties in the movement of inflation rates which have a direct impact on interest rates and the value of the shilling. "Our current account deficit, is too high and we are living beyond our means by importing too much and exporting very little, a scenario which has weakened the shilling, unfortunately we are seeing this continuing for the next six months as the central bank tries to contain it.
The high interest rates are making borrowing very expensive and whole sale deposits especially from corporates and investment funds are costing banks a lot in interest, forcing some banks to mitigate this go for campaigns to encourage current accounts which do not attract interest on deposits," Etemesi said