Family Bank Plans Share Sale to Fund East African Expansion

  • Lender says time isn't yet right for IPO on Nairobi bourse
  • Company to shun takeovers, mergers in Kenyan consolidation

Family Bank Ltd., a closely held Kenyan lender, plans to raise 4 billion shillings ($40 million) in a share sale to existing investors by June that will be used to fund an East African expansion.

The company wants to make a “cautious entry” into markets in the region over the next year, outgoing Managing Director Peter Munyiri told reporters in Nairobi on Friday, without identifying any countries. The lender, which has 1.7 million customers and assets totaling 81.2 billion shillings, is “not in the market” to be bought or to make purchases in Kenya, he said. A replacement for Munyiri, whose contract expires in June, hasn’t yet been named.

A series of bank failures -- and oversupply of lenders that outstrip the number of institutions in Nigeria and South Africa -- is set to trigger a wave of mergers and acquisitions in the industry as depositors seek safety in the biggest banks, according to Cytonn Investments Management Ltd., a Nairobi-based money manager. KCB Group Ltd., Kenya’s biggest bank by assets, this week agreed to consider a takeover of Chase Bank Kenya Ltd., once it has nursed the company back to health and studied its books.

Chase Bank, the nation’s 11th-largest lender, was taken over by regulators on April 7, a day after its chairman and group managing director resigned as the company issued restated results that received a qualified opinion from auditors. Imperial Bank Ltd. was seized by regulators in October, while Dubai Bank Kenya Ltd. collapsed in August after it breached daily cash-reserve-ratio requirements.

On Hold

Family Bank, which got shareholder approval to create Family Group Plc as a holding company for its different units, is speaking to a number of institutional investors to raise a mix of debt and equity as part of its five-year funding plans, Chairman Wilfred Kiboro said in an interview. The African Development Bank is among partners the lender is in talks with for financing, Kiboro said in Family Bank’s annual report.

The company, which trades its stock over the counter, isn’t ready to sell shares on the Nairobi Securities Exchange and will only do so “when the market is right,” he said.

“The reason we keep on dithering about a listing is because companies listed are not entirely successful,” he said, citing volatility in the equities of the country’s 11 listed banks. National Bank of Kenya Ltd., the second-worst performer in the FTSE NSE Kenya 25 Index, has dropped 42 percent this year and Barclays Bank of Kenya Ltd. has slid 19 percent, while Co-operative Bank of Kenya Ltd. has gained 8 percent.