Kenya Bank | Capital Injection Gives Fresh-Faced Kenyan Bank Room to Expand

NAIROBI, Kenya, Capital Markets in Africa: A series of capital injections is giving a small Kenyan bank the space to expand at a time when many lenders in East Africa’s largest economy are struggling to overcome the fallout of three failures in the industry in the space of eight months.

Equatorial Commercial Bank Ltd. renamed itself Spire Bank and plans to grow its market share to 1 percent by 2019 from 0.5 percent, Chief Executive Officer Tim Gitonga said in the capital, Nairobi, on Tuesday. The company will piggy back the 13 branches operated by its parent, Mwalimu Savings and Credit Cooperative Society Ltd., while rolling out 15 of its own outlets in shipping containers that are cheaper to set up by 2017, doubling its network, he said.

Spire has increased its customer base to 31,000 from 22,000 in December even as depositors seek safety in Kenya’s largest banks since regulators had to step in three times since August, taking over the management of Dubai Bank Kenya Ltd., Imperial Bank Ltd. and Chase Bank Kenya Ltd. 

The lender is also seeking to expand as Kenyan Treasury Secretary Henry Rotich drives new rules that will increase the amount of capital banks must set aside as safety buffers by fivefold over the next three years to 5 billion shillings ($49 million).

Ambitious Growth
“If you are ambitious and you want to grow, you have to inject capital,” Gitonga said. “For us, our shareholders have committed to provide capital as we grow, including meeting regulatory requirements.”

Mwalimu Savings and Credit — which according to Gitonga is the country’s largest company of its kind with 73,000 members — owns 75 percent of the bank, with the balance held by Sameer Africa Ltd., a tire maker and distributor. The shareholders injected 1 billion shillings into the bank this year, bringing their total investment to 2.6 billion shillings since buying the company in 2014.

This has lifted Spire’s core capital to 2.8 billion shillings at the end of June from 934 million shillings in 2014. The lender is targeting 6 billion shillings by 2019, the CEO said.

Source: Bloomberg Business News