Background
I & M Bank is a leading private sector bank in Kenya, and has its footprint in Mauritius and Tanzania. Bank One Ltd, a commercial bank in Mauritius where I & M Bank has a 50% stake and increased regional presence through acquisition of CF Union Bank Ltd, now called I & M Bank (T) in Tanzania.
The bank is unlisted, but recently undertook a private placement and then has reportedly been some secondary market transactions in the shares. We believe that the bank is potentially likely to seek a listing on the Nairobi Stock Exchange in the next 12-24 months.
Private Placement
In November 2010, I & M Bank undertook a private placement of shares, to raise capital to augment its capital base and to support its expansion programme. The bank sought to raise an amount of KSH 2 billion through an issue of 2,139,040 shares, with a minimum subscription per applicant for 22,000 shares (KSH 20.57 million).
The purpose of the issue was to increase the Bank’s Tier 1 capital, which will enable it to increase its lending as well as to expand geographically to other East African countries such as Uganda and Rawanda.
The issue was over-subscribed and the bank accepted applications totaling to KSH 2.4 billion (2,566,845 shares), by taking up the Greenshoe option.
Share Capital of I & M Bank – Pre and Post Private Placement
| Number of Shares | Paid-Up Capital (KSH 000) | Reserves (KSH ‘000) | Shareholder Funds (KSH ‘000) | |
|---|---|---|---|---|
| Existing Capital – 30/9/2010 | 26,135,608 | 2,613,560 | 8,068,738 | 10,682,298 |
| New Issue | 2,566,845 | 256,685 | 2,143,316 | 2,400,000 |
| Capital post-issue | 28,702,453 | 2,870,245 | 10,212,054 | 13,082,298 |
Previous Share Issues by I&M Bank:
2006: Rights Issue of 2,400,000 shares at a price of KSH 100 per share
2007: Rights Issue of 1,740,000 shares at a price of KSH 100 per share
2007: Issue of 2,600,000 shares at a price of KSH 145 per share to institutional investors (DEG and Proparco)
2008: Rights Issue of 1,500,000 shares at an issue price of KSH 400 per share
2009: Issue of 2,895,608 shares at an issue price of KSH 450 per share to institutional investors (Proparco and DEG)
Historic Performance of I&M Bank
| PROFIT & LOSS (KES million) | 2010 | 2009 | 2008 | 2007 | 2006 |
|---|---|---|---|---|---|
| Net Interest Income | 3,832 | 2,473 | 2,097 | 1,709 | 1,242 |
| Other Operating Income | 2,197 | 1,010 | 915 | 628 | 464 |
| Operating Expenses | (2,203) | (1,582) | (1,253) | (917) | (692) |
| Loan Loss Provisions | (300) | (107) | (167) | (126) | (77) |
| Profit Before Tax | 3,526 | 1,795 | 1,592 | 1,294 | 936 |
| Profit After Tax & Minority Interests | 2,439 | 1,247 | 1,114 | 883 | 649 |
| BALANCE SHEET | |||||
| Loans & Advances | 50,273 | 30,480 | 29,775 | 19,215 | 14,702 |
| Total Assets | 86,897 | 54,434 | 42,858 | 29,426 | 22,348 |
| Customer Deposits | 68,208 | 44,759 | 34,421 | 23,626 | 18,220 |
| Shareholder Funds | 13,360 | 7,463 | 5,179 | 3,867 | 2,795 |
The Bank has had a compounded annual growth rate (CAGR) of 24.9% in total assets since 2006, with a 20% CAGR for advances and a CAGR of 25% in deposits. Profit before tax has grown at a CAGR of 17.7% from 2006 to 2009. In 2010, the bank’s profits have grown by 95.6% over the previous full year With EPS of 95 and DPS of KES 20.This puts the bank at the top in terms of sustained growth in profitability among its peers.
The bank has recently expanded beyond Kenya, with acquisition of 50% shareholding in Bank One, Mauritius and 55% shareholding in I&M Bank Tanzania Limited. Non-Kenyan operations currently account for about 28% of the Group’s assets and 15% of its Profit Before Tax. In 2010, Bank One Ltd recorded a 478% growth in PBT to USD 6.7mn while Tanzanian entity achieved a 37% growth in PBT to USD 3.7mn
Comparison of I & M bank with its peer listed banks – Price/ Book Multiples
The Price/Book multiples of peer-listed banks are given below:
| Bank | Market Cap KSH mn(23/3/2011) | Shareholder Funds(31/12/09) | Price/ Book Historic | Shareholder Funds (31/12/10) | Price/ Book Current |
|---|---|---|---|---|---|
| Diamond Trust Bank | 22,336 | 8,088 | 2.92 | 8,939 | 2.50 |
| NIC Bank | 16,962 | 6,792 | 2.64 |
7,938 | 2.14 |
The above Price/Book Multiples can be used to determine the imputed market capitalization and the share price for I & M Bank.
I & M Bank
| Number of shares | 28,702,453 | |||
| Shareholder Funds | KSH 13,360 million | |||
| Price/Book Multiple | 2.00 | 2.25 | 2.50 | 2.75 |
| Market Capitalization (KSH million) | 26,693 | 30,051 | 33,381 | 36,682 |
| Share Price | 930 | 1,047 | 1,163 | 1,278 |
We believe a fair value for I & M Bank is in the range 1045-1165 at a Price/Book range of 2.25-2.50
