Proceeds from the sale of government’s 25 percent stake in Bank of Kigali (BK) from the Initial Public Offer (IPO) planned mid this year will support the expansion of the bank’s credit portfolio, according to management.
The IPO will make BK the second local company to be privatised through capital markets as government seeks to facilitate the development of the stock exchange and increase the alternative sources of long-term capital for business entities.
According to BK’s Managing Director, James Gatera, the bank intends to use proceeds from the IPO to expand its investment portfolio, including expanding its loan book.
Specifically the bank wants to provide more credit to Small and Medium Enterprises (SMEs) and mortgage businesses that are currently starved of long-term financing.
BK’s loan book registered an increase of 21 percent from Rwf77 billion in December 2009 to Rwf92 billion in September, last year, accounting for 86 percent of the total banking sector growth in net loans.
While BK’s IPO is expected to draw solid investor interest given the bank’s strong market position, Gatera underscored that priority will still be given to Rwandan investors.
“We do not have any doubt as far as take-up is concerned because many foreign investors are looking for solid investment opportunities. Therefore, there’s no issue of not being fully subscribed. But our view is that we should have a lot of local participation,” Gatera said, Tuesday, in an interview.
He added: “We need to do more of ground work, making sure there’s enough investor education, marketing and public relations to ensure that there’s a lot of participation and interest from the Rwandan population.”
The bank is in the process of hiring a lead transaction adviser and book runner of the proposed IPO, with deadline for the final selection on the board set for March 10.
Olivier Kamanzi, Deputy Executive Director of Capital Markets Advisory Council (CMAC), told Business Times:
“Transparency and governance are a virtue for Rwanda. As we develop our capital markets, it is very important that, step by step, we continue to build ownership society. It is very natural for Rwandans to own their business.”
BK registered a profit after tax of Rwf4.1 billion for the first nine months of 2010, accounting for 53 percent of the total profits of the overall banking sector while deposits grew by 15 percent from Rwf125 billion to Rwf143 billion.
Government is the largest shareholder in BK with 66.33 percent stake followed by Social Security Fund of Rwanda (SSFR) with 33.66 percent. Other shareholders include Prime Holdings, Ocir-Café, Ocir-Thé, the National Post Office and RAMA.