Financial services provider, NIC Bank has received regulatory approval to a rights issue days after listing an oversubscribed bond.
The lender is seeking to raise 2.1 billion Kenyan shillings. This is the banks third rights issue in a span of seven years.
“NIC Bank has actually taken an interesting aspect in terms of raising capital to expand. The element of combining both debt and equity is very interesting because of how the market is doing, [their] approach is basically trying to spread risk and balance their portfolio at the end of the day,” Steve Biko, director at Hidalgo Group told CNBC Africa.
The bank had earlier stated that it will raise additional funds in order to boost its core capital after its three billion Kenyan shilling bond issue was oversubscribed. The bank was offered 6.5 billion Kenyan shillings but took only five billion Kenyan shillings of that after exercising a two billion Kenyan shilling green-shoe option.
The listed lender said with the combination of debt and equity to finance business growth as is, it was looking to accelerate its regional expansion bid.
“I believe it is their strategy to realign their module for business because we have a lot of banks, when you look at the banking sector for example a few names pop up and I think what NIC is trying to do is ensure that they are one of the few names that pop up in terms of targeting the retail market, in terms of looking at their loan portfolio,” Biko said.
The approval by the country’s markets authority will permit the mid-tier bank to issue and list an additional 42,663,040 ordinary shares. In 2007, NIC raised 1.1 billion Kenyan shillings, to expand its footprint and that led to the bank’s entry into Tanzania, and acquired a majority stake in that country’s Finance Commercial Bank. In 2012, the lender successfully raised a further 2.1 billion Kenyan shillings through a rights issue.
In June, the bank posted a 2.9 billion Kenyan shillings profit compared to the 2.6 billion Kenyan shillings recorded during a similar period in 2013.