Minority shareholders of Malawi Stock Exchange (MSE)-listed NBS Bank have expressed concern about the objective of the rights issue whose proceeds are expected to help the bank meet regulatory requirements.
The bank, which has been struggling to meet the minimum capital requirement under Basel II—a directive that requires that banks’ Tier 1 capital and total capital ratio be at 10 percent and 15 percent respectively—intends to raise K10 billion through the rights issue as it has inadequate funds due to outstanding non-performing loans.
The bank is also reeling from bad foreign exchange transactions encountered in 2012 when the kwacha was devalued by 49 percent and subsequently floated to be dictated by the market forces of demand and supply.
In the rights issue—an issue of rights to a company’s existing shareholders that entitles them to buy additional shares directly from the company in proportion to their existing holdings, within a fixed time period—the bank is issuing new shares of up to three billion.
A representative of the minority shareholders, Frank Harawa, who has shares in almost all the 13 listed companies, said in an interview on Friday the fear is mounting among NBS Bank shareholders on the consequences of the move to minority shareholders.
He said: “We are not pleased with the whole rights issue subject. Here comes a rights issue in which the bank is looking for an additional three billion new shares from the initial 727 million shares.
“Obviously, we the minority shareholders are going to be diluted because the percent of each share that we hold will likely be divided.
“For instance, instead of us holding the 20 percent shares, we will have maybe five percent or thereabout.”
Harawa said the fear is that many minority shareholders are not going to participate in this rights issue because there is not enough time to raise this capital at once.
“You may wish to know that it has taken us years to buy the current shares and now our fear is that we will be forced to buy the shares within a short period of time.
“As we speak, the price of a share is not yet known to us [and] our concern is on how we are going to raise money for these new shares within two or three months,” he said.
Harawa said the shareholders have been engaging the bank on the rights issue and other pressing issues but the bank has not been accommodating.
“We know our rights in regards to rights issues as minority shareholders and we have been engaging the bank so that they are not surprised with actions that we may take if not satisfied with the whole process,” he said, adding that they have written the bank and other relevant stakeholders.
At an emergency general meeting in Blantyre on December 29 2016, NBS Bank board chairperson Vizenge Kumwenda pledged to respect the rights of the shareholders regardless of size and shall ensure that they are treated equally.
“Other than raising funds to meet the Basel II requirements, we also want to have the capacity to grow and compete effectively on the market and deliver results that satisfy the expectations of the shareholders,” he said.
NBS Bank is 50.1 percent owned by Nico Holdings Limited with the public collectively owning 26.2 percent stake, International Finance Corporation (IFC), has 18.1 percent, National Investment Trust Limited (Nitl) holds 5.2 percent and 0.4 percent is for employees under share ownership plan.