Baroda seeks Shs125b from bonus issue to shore up capital base
Bank of Baroda expects to mobilise at least Shs125b through a bonus share due for listing next Monday. Photo / Edgar R Batte
What you need to know:
- Bank of Baroda has indicated that CMA has already approved its application to list additional shares, a move that had also been endorsed by USE
Bank of Baroda will next Monday (June 5) list at least 12.5 billion ordinary shares after Capital Markets Authority (CMA) approved its Bonus Issue Prospectus.
In a notice shared through the Uganda Securities Exchange (USE) at the weekend, Bank of Baroda indicated that CMA had approved its application to list additional shares, a move that had also been endorsed by USE.
The listing is expected to mobilise at least Shs125b, which will shore up the bank’s capital position ahead of the 2024 Bank of Uganda deadline.
“USE has approved listing of additional 12.5 billion ordinary shares of par value [Shs10] on the official list. The listing date for the additional ordinary shares is June 5,” the notice reads in part, noting that shareholder notification would be done before the listing date.
A bonus issue is an offer for additional shares to existing shareholders of a listed company. Bank of Baroda was the first company to list its shares on the USE in 2002.
In March shareholders approved Bank of Baroda’s bonus offer, which it indicated would be key in mobilising funds to boost its minimum capital requirements.
The move came just three months after Finance Minister Matia Kasaija had signed a statutory instrument, which increased capital requirement for banks from Shs25b to Shs150b.
The increase, Bank of Uganda had indicated earlier, sought to align with other East Africa member states as well as increasing commercial bank’s capacity to absorb shocks.
The new regulations also increased capital requirements for micro finance institutions to Shs25b from Shs1b.
The new capital requirements seemed to have impacted the market with some financial institutions such as Afriland First Bank seeking voluntary exit while others such as Top Finance Bank was acquired by Djibouti-based Salaam African Bank after the original owners failed to infuse capital. Orient Bank was acquired by I&M Group.
Uganda had last revised paid-up capital for commercial banks in 2010 while that for credit and deposit-taking institutions was last revised in 2004 and 2003, respectively.
Mr Tumubweine Twinemanzi, the Bank of Uganda director supervision, recently said the “increase in paid-up capital is long overdue and is intended to match the dynamism in the economy, incentivise shareholder commitment and enable institutions to withstand shocks,” adding the increase also sought to converge with regional member states among whom Uganda effectively has the lowest paid-up capital.
