Plans by NIC Bank to raise Sh2 billion through a rights issue to fund expansion into Uganda are in the pipeline, said the bank which has reported 31 per cent growth in its full-year after tax profits.
The mid-tier lender said its net profits in the year ending December 31 rose to Sh2.5 billion from the Sh1.7 billion it reported in 2010, helped by growth in its loan book.
The bank, which has been aggressive in asset financing, said it will seek approval from its shareholders in its next annual meeting to allow it raise the money to set up a subsidiary in Uganda at a cost of Sh961 million.
“The directors will be seeking approval from shareholders to conduct banking business in Uganda through a wholly-owned subsidiary. The capital injection required for this investment is Sh961 million (Uganda shillings 25 billion). Establishment of the new subsidiary is subject to regulatory approvals,” the statement sent to the Nairobi Securities Exchange read.
Interest earned on its loan book grew by 37 per cent to Sh5.5 billion from Sh4 billion reported in a similar period last year.
But its operating expenses grew 13 per cent to Sh2.5 billion. Its earnings per share rose 46 per cent to Sh6.41.
Despite the rise in profits, the bank said it would retain the final dividend of 25 cents, the same it paid the previous year. This is a signal that it wants to increase its retained earnings and comes at a time when the prevailing high interest rates have made it difficult for lenders to raise deposits locally, a move that saw it turn to foreign financiers to get cheaper money for onward lending.
Large depositors have been demanding high returns from banks, squeezing their interest rate spreads.
The bank last year secured a Sh1.8 billion from a foreign financier, a route that has also been pursued by equity, Consolidated and ABC Banks.
It now joins CfC Stanbic Bank and Standard Chartered Bank, who have also announced their intention of doing rights issues, in what will heat up competition for investor funds.
Copyright © 2012 The Nation. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.