Family Bank has put on hold plans to list at the Nairobi Securities Exchange (NSE) fearing that the bearish run at the bourse will cut its share price and hurt owners.
Family Bank CEO Peter Munyiri said that listing of the bank will take place next year if the market recovers from the meltdown.
Family, which began as a building society in 1984, was set to list by end of the year by introduction meaning it does not aim to immediately raise cash from sale of shares but offer its shareholders a platform to unlock the value of their shares.
Share price erosion at NSE has seen investors lose Sh279.6 billion since the beginning of the year and the market index shed 25.5 per cent of its value to stand at 3,348 points in the period. “The macroeconomic environment is not favourable. We don’t want investors to lose money in this bearish run,” said Mr Munyiri on Tuesday in an interview with Business Daily. “We believe that the bank’s shares should come at a premium based on the growth trajectory. We however believe that the economy will improve next year, giving us an opportunity to list.”
The delay in listing is set to disappoint hundreds of investors who have rushed to buy the bank’s shares, which have been trading over the counter, in recent months hoping to reap capital gains at the bourse. Increased demand has seen Family Bank’s shares trade at between Sh36 and Sh40 up from between Sh27 and Sh30, signaling increased appetite for the stock at a time when NSE is experiencing reduced demand for stocks.
Unlikely to peak New listings at the bourse such as insurance firm Britak and investment firm TransCentury have not escaped share price erosion as both counters shed about 41 per cent since their debut. This means that the two firms have shed more value than the entire market which has lost less than 20 per cent since the listing of the two.
Inflation, which currently stands at 18.91 per cent, has reduced interest from foreign and high-net worth investors with analysts saying that the stock market is unlikely to return to its peak next year. “The depression in the market is likely to persist into next year. While inflation may ease and the shilling strengthen, the General Election will have a negative impact on the market,” said Gregory Waweru, an analyst at Kestrel Capital.
The bank’s plan to list is aimed at boosting liquidity and offering its investors an exit route. Last year, Tunis-based Africinvest, Netherlands’ FMO, and Norway’s Norfund made a joint equity investment of Sh1 billion in the bank that gave them a 22.4 per cent stake. Its net profit dropped 26 per cent to Sh285 million in the nine months to September on high operating expenses that grew to Sh2.4 billion from Sh1.7 billion.
The jump in cost was attributed to higher provisions for bad debts and a bigger wage bill due to pay increments, hiring of new executives, and compensation of 24 senior managers who left the bank in September. Mr Munyiri said the bank was counting on new product lines, expansion to new markets, and increased capital to return to profit growth.
The bank, whose products have targeted the low end of the market, aim at widening its product offering to include home loans, corporate banking, and forex trading with focus on corporate lending. Raise funds Mr Munyiri said the lender woud raise at least Sh3.8 billion within the first half of 2012, with half of the money coming from existing shareholders through a rights issue and the other half from an international loan.
The move would double Family Bank’s core capital to Sh7.6 billion, allowing it to lend Sh1.9 billion to a single customer from the current Sh950 million. A stronger Family Bank is looking at lending more to companies and big ticket projects in the property market to grow its lending book and push it to the top tier of Kenya’s banking sector.
Family Bank has been modeling its strategy on that of Equity Bank, which has upset Kenya’s conservative financial sector with the rollout of products that are popular with the low end of the market traditionally considered high risk.
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