Family Bank has received approval from shareholders to offer up to 800 million new shares through a rights issue, increasing the Bank’s issued authorized Ordinary shares from 1.5 billion to 2.3 billion.
The funds raised will be used to strengthen Family Bank’s capital base, support local and regional growth plans, drive investments in IT infrastructure and new product initiatives, and support onward lending activities.
The rights issue will open on 19th October 2023 and close on 30th November 2023.
“Through this capital raise, we are positioning the Bank for the next phase of growth which will position the bank as a choice bank for our existing and potential clients through customer-first service delivery not only in Kenya but also in the region,” said Rebecca Mbithi.
“Our long-term objective as a bank is to become a tier one bank in balance sheet size. This is an ambitious plan which the Board and the Management is committed to. To fund this next phase of growth, it has become necessary to anchor our balance sheet with additional capital,” Dr. Wilfred D. Kiboro, Chairman of- Board of Directors said.
What is a rights issue?
A rights issue is an invitation to existing shareholders of a company to purchase additional new shares in the company. This type of issue gives existing shareholders securities called rights.
With the rights, the shareholder can purchase new shares at a discount to the market price on a stated future date Companies most commonly issue a rights offering to raise additional capital.
A company may need extra capital to meet its current financial obligations. Troubled companies typically use rights issues to pay down debt, especially when they are unable to borrow more money.
Companies with healthy balance sheets might also raise money through a rights issue to acquire a competitor or open new facilities.
Family Bank’s total assets saw a growth of 98%, increasing from KES 67 billion in December 2018 to KES 132.8 billion as of 30th June 2023.
The loan book also grew by 92% from KES 44.1 billion to KES 84.7 billion during this period. Customer deposits experienced a significant growth rate of 207%, surpassing KES 100 billion to stand at KES 100.8 billion by June of 2023, up from KES 48.5 billion in December 2018.
Family Bank says it has remained profitable over this period with the Profit Before Tax (PBT) improving from KES 435 million recorded in 2018 to KES 3.7 billion as of the end of December 2022.
During this period, the bank resumed dividends payment and over the last four years, the bank has paid a cumulative amount of KES 2.19 billion in dividends to its shareholders.
“This growth has been funded through a mix of (i) a KES 922 million rights issue in 2016, (ii) retained earnings, and
long-term debt issued through the Nairobi Securities Exchange KES 2 billion issued in 2016 and paid back in 2021
and KES 4 billion issued in 2021, which was oversubscribed and remains in our books is payable in 2026,” says the lender in the rights issue memorandum.