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NBK Q3 pre-tax profit drops 68pc

NAIROBI, Kenya, Nov 20 – The National Bank of Kenya (NBK) has posted a 68 percent drop in pre-tax profit to Sh577 million for the third quarter ending September 2012.

NBK Managing Director Munir Ahmed attributed the poor performance to the high interest rate environment that prevailed in the period under review, combined with the bank’s investment in overhauling its technology platform and branch expansion.

Ahmed said that during this period, the bank chose to cushion its borrowers and therefore did not pass the entire increase on the cost of funds to them.

Interest income grew to Sh6.42 billion during the period under review from Sh4.79 billion in the same period last year, representing a 34 percent increase.

However interest expense increased by a significant 279 percent from Sh766 million in 2011 to Sh2.9 billion this year, due to the high cost of funds that began in the fourth quarter of 2011, eroding the income growth.

Gross non-performing loans and advances increased by 41 percent to Sh1.6 billion, while total assets increased by seven percent to Sh74.9 billion in 2012 from Sh70.2 billion in the corresponding period last year.

Customer deposits increased by 13 percent to Sh63.9 billion from Sh56.5 billion in 2011.

Ahmed said that the falling interest rates will help lift the performance for the rest of the year though unlikely to significantly alter the overall results for the year.

However, if sustained, he added that the low interest rate regime, coupled with the investments made on technology and distribution network will position the bank for a good performance into 2013.

The bank has also embarked on an aggressive business growth program which will leverage the new banking platform to enhance service delivery, efficiency and innovation.

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Ahmed took over from former MD Reuben Marambii, who turned around the debt-ridden bank’s fortunes during his 14-year tenure; returning it to a growth path from major losses in the late 1990s.

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