@wa_ithaka no need to call anyone SLOW... first of all i'm not @VVS and secondly i know NIC needs capital but a rights issue wouldnt work because shareholders would not take up those rights and they wouldnt even approve it... since they already had one 2 years ago..
NIC knows this and thats why they were INTELLIGENT enough not to do it...

guru267- i guess we got 2 slow ones today. Its nothing to do with whether shareholders want to take rights issue or not. NIC will need to raise its capital this yr or next.
Btw, in case you were unaware, several UK/US banks (ever heard of Lloyds TSB?) have done 2 huge rights issue in the last 18months.
As a shareholder, you either get dimunation of your stake's value or you take up your rights.
PS-an investor has to be able to look through the noise and pick out the fundamentals

General Provisions (1% of all loans) are incremental (based on loans adjusted for risk) over prior periods. The details in Annual Reports provides that information but most of the increase in Specific Provisions are what drives the LLPs for most banks. Equity might be the exception where Loan Growth has been very impressive!

Last shot at this. NIC will need to increase its capital. Potentially, the cheapest way for it would have been to do a rights issue which would increase number of shares but also raise capital. A bonus share issue just increases the number of shares in issue but has no capital impact.
A stupid move. Well looks like a duck, quacks a like...

@wa-ithaka i beg to differ. Issuing a bonus has a capital implication. During a bonus issue the company capitalises the profit reserves hence issuing fully paid shares on the profit reserves! If this doesn't increase capital, then i must also be slow. On issuing rights, the amount of cash raised in a rights issue depends on the price of shares and uptake from shareholders. If nic were to issue rights now, the issue would have to be less than the market price of 35. If the share rises to 50, it can issue rights at close to sh 50. Its logical to issue rights when the market is high.

OK... so they need to raise capital by a Right Offer... That is not what you said when you referred to me as slow...

But that still does not answer my questions... So explain to me like I am a 6 year old so what if NIC gave a bonus (re-shuffle between line items in the Capital Structure)? Why are your knickers in a tight about the bonus?

@Waithaka it was a bit callous to call VVS slow knowing rather well the he is one of the more informed ones on this forum regarding matters of stocks

On the issue, Bonus shares are to be issued from reserves which are already capital in themselves. So this is just a matter of changing the nomenclature of a section of capital from reserves to share capital.

The point you have raised and which I think is valid, is that NIC will need additional capital going forward. This could be raised through rights (as you have suggested) or through debt.

From their announcement, the directors do not agree that this is the timing to raise such capital. What you should provide here is reasons and analysis (ratios) why you feel fresh capital is required!!

ps: dont call me slow, am rather fast!

@waithaka. There's a bigger picture, how do shareholders benefit from NIC’s share premium? Can you distribute dividends from them? And just look at NIC Bank’s cash reserve holdings up by 1 bn in 2009 alone (they need cash), the share premium reserve can cover the bonus easily without impacting cash reserves.

In 2007 the share premium surplus resulting from the rights issue was distributed as a bonus, 2009’s bonus was paid from the share premium, 2010’s premium reserve will likely pay the current bonus and any proposed rights issue in 2010 will create a surplus premium reserves on which future bonus can be made...these payments enhance capital retention.

So in reality this is a clever idea on three fronts (1) cash don’t leave the business (2) unproductive reserves are utilized and (3) investors are happy with a stock dividend. If the issue is capital adequacy it can be raised by retaining earnings or a fresh injection. There is no capital implication in the bonus, so retained earnings remain unchanged and the reason why KCB and NIC (who need capital the most) maintained the same final dividend.

The bonus will lower the market price giving potential investors in any rights issue more incentive to buy them as the capital outlay on the discounted price is less. All in all the payment of a bonus doesn’t not hinder the management’s ability to raise funds.

Mmmmh hint taken, but back to the basics - How do you re-distribute the reserves once capitalised?
Have you heard of the law against reduction of capital (basic company law stuff)and am not talking of capital as per your hint.

My point-at this particular time the best that NIC can do is to "capitalise" the reserves pending a good time to issue rights.

This counter traded over 1 Million shares (1,263,700) today at high of 45 and low of 43 with an average of 44.75. A whooping 4.07 % gain!!! What am I missing here?? Anyone with projected 1H results. Anything in the offing?