NBK owners approve plan to dilute Treasury, NSSF grip

National Bank shareholders have approved a plan to redeem 1.135 billion preference shares held by Treasury and National Social Security Fund (NSSF). The bank plans to use part of the proceeds from the forthcoming Sh13 billion Rights Issue to redeem the shares, a move expected to boost its capital base.

Speaking at the bank’s 45th Annual General Meeting on Friday, Chief Executive Officer Munir Ahmed, (pictured) said the redemption exercise would significantly improve the value to the owners of the company, especially the ordinary shareholders.

“In the current scenario, most of the dividends declared go to preference shareholders because they share the balance after preference dividends are paid in equal terms,” said Mr Munir. The redemption of shares equivalent to Sh5.675 billion of capital, he said, will be conducted immediately after the conclusion of the Rights Issue in July, subject to regulatory approval.

The remainder of proceeds of the Rights Issue will fund balance sheet growth required to enable the bank achieve its strategic ambition of becoming a top tier bank in 2017.

“Based on the principal shareholders stake in the bank we will pay them a premium that they feel is necessary and one that the bank can afford. Though we are yet to conclude negotiations on how the same will be achieved, we hope a solution will be arrived at in the next one month,” Munir added.

Redeeming the preference shares will take the lender closer to closing a rescue plan initiated in 1998 when it was almost insolvent, weighed down by non-performing loans that were advanced to political correct personalities by past regime.

“We have met all the regulatory requirements and we hope in the next on week, we will get the approval to conducted the Right Issue from the Capital Markets Authority (CMA). Then we will embark on the other steps required,” Munir added. The money will also be used to enhance statutory capital requirements, finance branch network within Kenya and the region and in product innovation.

“We plan to expand our branch network by opening 16 new outlets in the current financial year,” he added. The bank reported a pre-tax profit of Sh1.81 billion for the year ended December 31, 2013 up from Sh1.16 billion in 2012.