Co-operative Bank will hold its dividend pay-out at about the same level as last year’s to finance growth and boost its capital ratios. Managing director Gideon Muriuki said Tuesday the bank will use retained earnings to shore up its capital base, after postponing a planned rights issue to 2013. Co-op’s capital adequacy ratio was 1.2 percentage points above the statutory minimum of 12 per cent in September. “Our strategy has been growth through retained earnings and we intend to continue with this next year without raising capital,” said Mr. Muriuki. “If the current interest rates continue to next year, we don’t expect high demand for credit to call for huge balance sheet changes,” he added. Co-operative Bank paid out 31.9 per cent of its earnings as dividend last year and 23.6 per cent in 2009. The bank had KES10.6bn in retained earnings as at end of September this year and had made KES4.5bn as net profits by the third quarter, equalling net earning of 2010. Banks have raised their minimum lending rates to an average of 24 per cent, suppressing market demand for credit. Rapid growth in the lenders’ loan books in the past three years has seen some of them squeeze their capital adequacy ratios to within the statutory minimum ratios. Standard Chartered Kenya’s management has said it is looking at a combination of profit retention, rights issue and, or, a subordinated debt to raise its capital base next year. StanChart paid out over 70 per cent of its profits last year. The lenders are expected to raise their retained earnings to boost the thin capital ratios. “It shows that the amount of money they need can be met by profits if they are retained. They may be seeing that next year is not the best time to raise capital in the market,” said Mr Francis Mwangi, an analyst with Standard Investment Bank. The bank’s management ruled out a rights issue next year. Kestrel Capital, in a research note last week, stated that the bank would avoid engaging the market next year due to political risks. “Given the various capital raising risks in 2012, management indicated that the bank will implement stop-gap measures and raise capital in early 2013,” said Kestrel Capital. Other companies have, however, said they will seek additional cash from the capital markets next year.