NAIROBI, Kenya, Mar 28 – The Government has planned to inject capital into the National Bank of Kenya in a bid to support the growth of the bank.
In a letter addressed to the Financial Services regulator (CBK), the Treasury has indicated its commitment to provide a comprehensive and long-term solution on the capital position to bridge compliance, support business growth and meet ICAAP requirements.
The letter indicates that the core capital injection will be fast-tracked and is expected to be completed within a period of 180 days (six months).
The bank says the capital will bolster its focus on improving customer transactions, manage operational and market risks, whilst enhancing its drive to grow current customer transactions and acquisitions.
“The solid commitment made by our major shareholders to tackle the recapitalization is an overt approval of the measures taken in the financial year under review to sustain growth. The capital injection will unlock and bolster the key pillars of our growth going forward,” the Bank’s Managing Director, Wilfred Musau said.
The move comes even as the bank posted a pre – tax profit of Sh785 million for the period ending 31 December 2017 compared to Sh147 million profit in 2016 and Sh1.1 billion loss in 2015.
Net Interest income for the period hit Sh6.7 billion, a 14 percent drop from Sh7.7 billion same period previous year mainly due to effect of interest rate capping law reducing interest earned from loans and advances.
This was partially compensated by an increase in interest earned from Government securities and improved funding mix which reduced interest expense by Sh900 million.
Total operating revenues closed at Sh9.1 billion compared to Sh10.6billion in 2016 representing 14 percent decrease due to impact of interest capping and lower fees as volumes of new loans dropped.
Revenues from subsidiaries (NBK Insurance agency limited and National trustee Investment services limited) grew 45 percent year on year from Sh74 million to Sh108 million.
Total operating expenses declined by 6 percent to Sh7.6 billion from Sh8.1bn over the same period last year due to improved cost management and rigour in operational controls.
Customer Deposits grew 1 percent from Sh93.8 billion to Sh94.2 billion while Net loan and advances reduced by 5 percent over the same period driven by reduced loan volumes.
The bank implemented a voluntary early retirement in January 2018 aimed at optimization and has intentions, through branch rationalization, to consolidate some existing Bank branches.