Financial services holding company KCB Group has injected an unidentified amount of capital into its subsidiary National Bank of Kenya (NBK) in an effort to fill the capital deficits that have affected the bank in recent years.
The funding according to KCB Group will augment the lender’s balance sheet and allow it to expand its financial operations.
“We provided the funds last week. NBK is now compliant in terms of capital,” Lawrence Kimathi, KCB’s Chief Financial Officer said in a statement as he hinted that the amount of the capital injection would soon be made public.
According to the Business Daily, KCB had projected that a capital injection of Ksh. 7.5 billion would be needed to overturn the bank’s performance, with the genuine amount pegged on the realization of NBK’s bad debt recovery process. As of September 2019, the bank’s core capital had declined to Ksh.993.7 million, below the least possible prerequisite of Ksh.1 billion. Recapitalizing NBK became a vital itinerary for KCB particularly after it resolved to keep the subsidiary as an individual entity as opposed to fully acquiring it as previously intended.
“We have to time our capital injection to ensure we don’t erode it and that is why the NPLs clean-up is important. We also need to create momentum on the business front,” NBK Chief Executive Paul Russo said in Novemeber 2019 when he announced that the lender was tracking debtors who owed the bank a combined Ksh. 22 billion in arrears.
In the third quarter of 2019, NBK announced a pre-tax profit of Ksh. 675 million which represents a 45% increase over the Ksh. 561.69 million profit the bank registered in a similar in 2018.
The bank’s operating income for the period stood at Ksh. 6.0 billion, an increase from the Ksh. 5.6 billion recorded over a similar period in 2018. Total expenses similarly increased by 4% to KShs 5.4 billion, mainly driven by increased loan loss provisions. The bank’s operating expenses excluding loan provisions on the other hand remained relatively flat at Ksh. 5.4 billion.