Shareholders of the Malawi Stock Exchange (MSE)-listed NBS Bank yesterday endorsed a resolution of the bank’s board of directors to raise K10 billion through a rights issue.
Proceeds from the transaction are expected to help the bank meet capital and regulatory requirements.
In recent years, NBS Bank has been struggling to meet the minimum capital requirement in line with Basel II, a directive that requires that banks’ Tier 1 capital and total capital ratio be at 10 percent and 15 percent respectively.
Through 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—NBS Bank projects to raise K10 billion.
Speaking during an emergency general meeting in Blantyre yesterday, NBS Bank board chairperson Vizenge Kumwenda said the bank is faced with inadequate funds due to non-performing loans.
He also said NBS Bank was reeling from bad foreign exchange transactions encountered in 2012.
Kumwenda was upbeat that through the rights issue, the much needed funds to put the bank back on its feet will be realised, assuring its shareholders that rights of all shareholders, regardless of size, will be respected.
He said: “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.
However, some shareholders feel the move is a raw deal, especially for the minority shareholders.
Frank Harawa, a Blantyre resident who holds shares in the bank, feared the move would have negative ripple effects on minority shareholders.
Another shareholder, Geoff Gondwe, hoped that the rights issue will turn around the performance of the bank going forward.
He said: “We have not been getting dividend since 2013, but now we have been asked to give the mandate to the board to make decisions regarding the price and we have confidence in our board and only hope for the best.”
NBS Bank is owned 50.1 percent by Nico Holdings Limited which the public collectively having 26.2 percent shares, International Finance Corporation (IFC) 18.1 percent, National Investment Trust Limited (NITL) holds 5.2 percent and 0.4 percent is for employee stock ownership plan (Esop). n