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The recent listing of five billion Stanbic Bank shares through a bonus issue at the Uganda Securities Exchange is set to increase trading on the counter with analysts expecting a further drop in the bank’s share price due to a high supply.
Stanbic Bank resolved to issue new shares to members of the company as fully-paid for shares in the ratio of 1 share for every 1 share held as at the books closure on June 17.
Increasing the number of shares will also help Stanbic Bank raise its paid up capital to meet the banking sector requirements in Uganda where banks need to have a minimum of $10 million.
African Alliance Uganda were the sponsoring brokers to the bonus shares issue. The company’s chief executive officer, Kenneth Kitariko, told The EastAfrican that before the bonus shares, Stanbic Bank constituted 65 per cent of market the capitalisation and since the bank had listed five billion shares, it was going to greatly affect the liquidity in the market as well as increase Uganda’s capital market capitalisation.
Mr Kitariko said before Stanbic Bank listed, the bonus share total market capitalisation for locally listed companies was $730 million out of which Stanbic Bank constituted $462 million.
“Market capitalisation is going to double. The five billion share bonus is significant for this market. This is a mini initial public offering we are witnessing today in Uganda’s capital markets although we have not had an IPO in our market for the past one year. It is beyond a mere corporate action,” he said.
There are currently seven locally listed companies in the USE, plus seven cross-listed ones. In the fixed income securities, there are five corporate bonds.
Mr Kitariko said the development will undoubtedly lead to brisk trading in the coming days at the Uganda Securities Exchange.
Following the listing of the Stanbic Bank bonus shares, the company’s share prices have dropped to Ush140 (0.05 US dollars) per share.
The chief executive officer of Crested Stocks Securities, Robert H Baldwin said the share price of Stanbic Bank was likely to settle at Ush100 (0.04 US dollars). “We believe this is a good buying opportunity until the end of this year,” he said.
Raising capital through the capital markets is one of the cheapest means local companies can increase on the capital base.
Following developments in the international financial system and the expansion of the Uganda’s economy, the Bank of Uganda, like other central banks in East Africa, has increased capital requirements for banks to Ush25 billion ($10 million) which has to be met by all by 2013.
The managing director of Stanbic Bank Uganda, Mr Philip Odera, said the bank hopes to meet the Ush25 billion through the bonus shares and other avenues.
Statistics at USE show that in the third quarter of this year out of Ush9.5 billion ($3.6 million) turnover registered, Stanbic Uganda counter was the most actively traded stock with the counter posting 39.7 per cent of the total turnover, followed by the Bank of Baroda Uganda which accounted for 34.7 per cent.
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