Listed lender HF Group is seeking to raise Sh5.9 billion through a rights issue to boost its capital and lending.
The cash call will see the bank issue 1.49 billion new shares at three per person, with each share priced at Sh4 apiece, reflecting an 11.5 percent discount to the current trading price of Sh4.52.
The shares to be offered include a green shoe option (additional share sale) of up to 30 percent or 346.1 million shares worth Sh1.37 billion.
A green shoe option allows additional shares of a company to be sold to meet high demand from investors.
Pritam, which has a 48.2 per cent stake in Housing Finance, has indicated its intention to defend its rights, which will require spending Sh2.88 billion.
“The group is raising capital as part of its strategy to increase investments in expanded business sectors and support its capital base,” HF said in a statement after receiving regulatory approval for the rights issue – which begins on November 11 and closes on December 9. the money”.
“The capital injection will also allow the group to continue executing its growth strategy through its investments in growing business segments and strengthening its digital offerings.”
The bank’s latest financial statements, covering the quarter ending March 2024, show that it had core or tier 1 capital of Sh1.9 billion and total capital (tier 1 plus supplementary or tier 2 capital) of Sh3.39 billion. in the end. From this period.
The bank had indicated in its annual report for 2023 that it intends to increase its core capital during 2024 to support the growth of its business.
HF last did a rights issue in 2015, issuing 116.67 million shares at Sh30 per share, a ratio of one share for every two shares. The offer raised Sh3.5 billion from investor bids worth Sh9 billion.
Funds were allocated to expand branches and increase mortgage lending capacity.
Banks typically raise Tier 1 capital from existing shareholders, but can also do so through share sales through either a private placement or an initial public offering (IPO).
According to the Banking Law, core capital represents permanent shareholders’ equity in the form of issued and fully paid-up shares, plus all disclosed reserves, minus goodwill or any other intangible assets, while second-tier capital (supplementary capital) mainly consists of Revaluation reserves, subordinated debt and statutory loan reserves.
Low capital ratios limit a bank’s ability to lend and obtain more deposits, which ultimately affects profitability.
It recorded profit growth of 46.3 per cent to Sh266.2 million in the year to June due to higher income from transactions and lending. It returned to profit in 2022 after recording losses in 2018.
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