CRDB BANK'S RIGHT OFFER APPROVED

CRDB Managing Director, Dr Charles Kimei.

CRDB Bank shareholders have unanimously approved the right issue to expand the bank’s business locally and regionally and maintain its top position in the market.

Almost all shareholders said the expansion drive is an opportunity that should be grabbed at all costs for the betterment of the bank and owners in the future.

CRDB Managing Director, Dr Charles Kimei said the right offer is geared to expand networks to serve better new clients under government business they recently won.

“We have taken into consideration the issue of those who will not want to buy. The underwriter will give 32/- per share for unbought shares” Dr Kimei said.

The right offer is designed to sale 435.5 million ordinary shares and raise over 150bn/- during the offer period not exceeding one month, where five shares has the right of one at a discount of 22 per cent.

Last Friday the bank share was sold at 420/- a piece but the discount agreed at the Annual General Meeting is a weighted average of 90 days from January this year, which comes to 350/- a share.

The Managing Director said those eligible shareholders who have the right of extra one share will be determined based on shareholders’ register book closing at a later specified date once getting approval from regulators.

The rights offer is figured-out to be conducted in June after receiving blessing from relevant authorities -- DSE and CMSA. However, the new share will not receive a 2014 dividend of 15/- a share rather it will receive its return in this financial year.

CRDB, the largest bank in term of balance sheet, the right offer is also designed to increase the bank’s capital after the Bank of Tanzania decision to increase core capital and total capital adequacy ratio by 2.5 per cent respectively.

Dhow Financial CEO, Prof Mohamed Warsame said beside the regulatory directive, the rights offer comes at the right time as the bank expansion could not be implemented without injection of a fresh capital. “CRDB now needs capital to effect BoT changes,” Prof Warsame said, “as growth is driven by capital.

“The rights issue will prop-up the profitability margin in near feature. It will not be seen in this year but in the years to come,” the finance professor, said during Shareholders seminar prior to AGM.

Salim Mbonde, a shareholder, said the management has prepared a good right offer scheme where it considered even those who failed to buy would get 32/- a share.

“Expansion needs extra capital and we (shareholders) have to make extra effort to facilitate the drive,” Mr Mbonde, a former broadcaster, said.

He added: “It is like a mother who give birth to triplets, though she didn’t expect that the family have to adjust and raise extra money for keeping the newborns—this is an opportunity.”

Another shareholder thought the right offer was the result of the bank going into a wrong direction but the financials are very pleasing to warrant the offers. ”Underwriter offers of 32/- a share is a good offer, since in the previous right issue (in 2009) those who failed to buy received nothing.

But this time around will benefit as well,” the shareholder said. The shareholders despite approving the dividend of 15/-, an increase of 7.0 per cent, said the bank’s operation costs should be reduced to conform with proposed the target of 50/50 ratio of net income and expenses.

Dr Dennis Mabeba said the current ratio of 60/40 in favour of expenses should be reduced as it denies shareholders good yield of their investment and non-performing loans ratio should also go below current 5.0 per cent. “NPLs ratio should go beyond 5.0 per cent. It is still high.

NPLs should go down to between 2.0 and 3.0 per cent,” Dr Mabeba said. CRDB Chairman Martin Mmari said “cost-cutting is agenda which is discussed in each board meeting”.

The industrial NPLs average rate in 2014 was between 6.0 and 7.0 per cent. Dr Kimei said “the NPLs have dropped significantly.

We are doing 5.0 per cent is still a good ratio and our impairment is only 2% of our profit. But we are still striving to go down even further.”

Though CRDB have a strong capital position at the moment, it still needs to raise an extra capital to sustain its growth and profitability in the future, especially after getting government business in this year.

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