THREE listed commercial banks will soon be seeking to raise Sh7 billion through the Nairobi securities Exchange. NSE chairman Eddy Njoroge said the financial institutions are exploring issuing corporate bonds to support their balance sheets and grow operations.
Njoroge said this during the listing and start of trading of Consolidated Bank's bond on the fixed income market segment of NSE.
"We are pleased to announce that there are three listed banks who intend to raise Sh7 billion of capital to support their balance sheets and grow their business in the near future," said Njoroge. There has been increasing interest in corporate bonds as a financing tool with good response from the market.
According to the Capital Markets Authority statistics, various institutions have raised Sh45.5 billion in the corporate bond markets over the last three years. Over the last five years, both corporate and government bonds have raised Sh54 billion. "However, secondary activity remains low in corporate bonds with average monthly trading volumes of Sh60million traded compared to Sh36 billion of government bonds traded per month," CMA chairma Kung'u Gatabaki said.
The low level of bond market development in Africa accounts for just 2 per cent of the global bond turnover. Gatabaki said the local market is however much ahead of its peers with others like Nigeria using Kenyan debt market as a case study for its under developed debt markets.
In Kenya, 91 per cent of outstanding stock of corporate bonds is held by local institutions with retail investors participation level at 0.01 per cent. Foreign investor holding in corporate bonds is just over 1 per cent. The Consolidated Bank bond offer however saw increased retail participation at 20 per cent. The issue raised 1.7 billion of the Sh2 billion target. This is first tranche of the planned Sh4 billion issue in the medium term.