Stanbic issues sh30b note

Jul 23, 2009

STANBIC Bank is to issue a sh30b note that will be used to borrow from the market to finance mortgage lending and asset financing.

By David Mugabe

STANBIC Bank is to issue a sh30b note that will be used to borrow from the market to finance mortgage lending and asset financing.

A note is a debt instrument institutions use to raise capital.

The note will be at both floating and fixed rates, which means it can be repriced and a person earns interest above the government treasury bills’ fixed rate.

It will also be issued in tranches with the first tranch expected this week. The minimum subscription will be sh5m and is open to retail and institutional investors.

“The tenure of the first tranch, which should be a minimum of sh20b, will be seven years. The critical thing is that the bank is trying to raise capital and maintain liquidity,” Anne Aliker, the Stanbic director and head of investment banking, said.

The bank expects institutions to take up the issue more than retailers as has been the norm.

Mortgage financing, which is a long-term undertaking, has according to Stanbic Bank been steadily growing in the last two years and is set to dominate the market for the next few years.

“We still feel we are only scratching the mortgage market. It will be a key product segment in the next five years,” said Aliker.

The note will have maturity dates of up to five years and one-day, while interest payment will be semi-annual as stipulated by the rules.

Stanbic is confident the note will be taken up despite the financial downturn. There are reports that a corporate bond quietly issued by a top bank flopped due to little interest.

“There is high liquidity in the market, (people are looking for where to invest). The bank has a strong balance sheet and this is an alternative investment option,” said Aliker.

The bank’s chief operations officer, Sydney Mpipi, said the note issuance was a great opportunity for the bank to grow its loan book, be more flexible and continue to structure lending appropriately.

Stanbic is Uganda’s largest bank. Owned by the Standard Bank Group, which had assets of over $161b by December 31, 2008. The group employs more than 48,000 people worldwide.

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