NBS Bank moves on rights issue

NBS Bank, a Nico Holdings Limited subsidiary listed on Malawi Stock Exchange (MSE), has commenced the processe of the rights issue to raise K11.8 billion to be used towards boosting the bank’s working capital.

In a statement co-signed by NBS Bank company secretary Marsha Machika and CDH Investment Bank chief investment banking officer Thoko Mkavea, the bank said the rights issue is being undertaken to recapitalise the bank to be compliant with the capital adequacy regulations applicable to banks in Malawi.  

According to the bank, as of September 30 2015, the company’s Tier 1 and total capital ratios were 7.3 percent and 8.6 percent, respectively and below the regulatory benchmarks of 10 percent and 15 percent respectively.

Through the rights issue—an issue of rights to a company’s existing shareholder that entitles them to buy additional shares directly from the company in proportion to their existing holdings, within a  fixed period—the bank is issuing over 2.18 billion new ordinary shares at K5.40 per share.

The bank has since December 2015 been struggling to meet the minimum capital requirement per Basel II, a directive that requires that banks’ Tier 1 capital and total capital ratio be at 10 percent and 15 percent, respectively.

The shares are being issued on the basis of three new ordinary shares for every one existing ordinary shares.

Come December 31 2016, the company’s Tier 1 and total capital ratios were -6.7 percent and -6.7 percent, respectively and as of 31 March 2017 the bank’s Tier 1 and total capital ratios were -7.38 percent, and -7.38 percent respectively.

But the bank is upbeat that the injection of K11.8 billion equity capital into the company is sufficient to render it compliant with the capital adequacy regulations applicable to banks in Malawi.

“The proceeds from the rights issue of K11.8 billion will be used to augment the bank’s working capital, thereby enabling the bank resume offering normal banking services including lending,” said the bank through the statement. 

Commenting on the development, a market analyst told Business News on Sunday that the move is a positive development for both the company and its shareholders.

Said the analyst: “The bank was on the verge of collapsing and right now anything that promises to bring the bank back on its feet but also has the ability to deliver value to its shareholders is welcome. Right now, a rights issue is the only way to go.

“Other than the rights issue, it is also pleasing to note that the bank’s management is putting on the ground a recovery plan to grow the company’s shareholder investment and to deliver better services to its customers.”

Meanwhile, an application is currently being made to the MSE to acquire the rights shares to be admitted to listing on the MSE’s official list and admitted to trading on the MSE.

The bank said it expects that the subscription period for the rights shares will open on May 29 2017 and close on June 23 2017.