National Bank of Kuwait plans 10% increase in capital to fund expansion

National Bank of Kuwait (NBK), the country's biggest lender, said it planned to raise its capital by 10 per cent through a rights issue by the end of the year to fund expansion.

The Opec member's oldest bank, which has 69 branches in Kuwait, said in 2009 it would scale back its foreign expansion. Instead, it focused on boosting its Sharia-compliant business by raising its stake in Kuwaiti Islamic lender Boubyan Bank.

"NBK's move is intended to support the bank's strategic expansion plans which succeeded lately in acquiring 40 per cent of Boubyan Bank," said NBK in statement released yesterday.

The bank said it would hold a rights issue, at a price of 500 fils per share including premium. There are 1,000 fils to the dinar.

NBK will raise its capital by KD29.73 million (Dh380.94m) to KD327.08m, according to Reuters calculations. Its current capital is KD297.35m.

The success of the issue is a sure bet with stock offered at roughly half the market price, said Naser Al Nafisi, General Manager for Al Joman Centre for Economic Consultancy in Kuwait.

"The bank is taking the current financial situation into consideration ... to guarantee a 100 per cent subscription for the rights issue," he said. The new shares will be offered to existing investors and the plan is subject to shareholders' approval, the bank said.

In September, NBK became the biggest shareholder in Islamic lender Boubyan Bank, after raising its stake to 40 per cent.

Boubyan Bank, which complies with Islam's ban on interest, competes with larger rival Kuwait Finance House and Kuwait International Bank. NBK has been expanding to offset rising competition at home by buying Al-Watany Bank of Egypt and a 40 per cent stake in Turkish Bank in 2007.

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