KENYA – Financial services group KCB, has given the National Bank of Kenya a US$28 million long-term loan to help the subsidiary meet minimum capital requirements.
The Nairobi Securities Exchange-listed lender made the disclosure in its latest annual report.
“In Kenya, the group injected US$47 million into National Bank of Kenya, the subsidiary the group acquired in 2019. In 2021, KCB has increased the capital in NBK via tier-II debt of approximately US$28 million to enable the subsidiary to meet the capital adequacy requirements and also to bolster its resources,” the lender said in the report.
The NBK had continued to breach statutory capital levels despite receiving the initial equity capital support of US$47 million from KCB in December 2019.
The breaches had constrained NBK’s capacity to take more deposits and expand its loan book.
NBK’s core capital to total risk-weighted assets stood at 8.7 percent in the year ended December, 1.8 percentage points below the statutory minimum of 10.5 percent.
Total capital to total risk-weighted assets was 10.3 percent against the set threshold of 14.5 percent, a gap of 4.2 percentage points.
The lender’s core capital to total deposit ratio stood at 6.2 percent, trailing the minimum requirement of eight percent by 1.8 percentage points.
“We are also committed to the back-office integration with the NBK which shall remain a separate legal entity serving its own target market”
KCB Group
KCB says the increase in NBK’s capital through the US$28 million loan, together with recoveries of bad debt, will alleviate the subsidiary’s capital constraints experienced in the past and position it for growth into the future.
NBK reported a net profit of US$1.7 million in the year ended December, reversing a net loss of US$3.2 million a year earlier.
The subsidiary will continue to operate independently but its systems will be linked with those of the parent company to boost efficiencies, customer service and risk management.
“We are also committed to the back-office integration with the NBK which shall remain a separate legal entity serving its own target market,” KCB said.
Recapitalisation of NBK is part of what prompted KCB to cut its dividend pay-out in the review period.
The Kenyan banking multinational’s net profit declined 22 percent to US$184 million, with the dividend slashed to US$0.0094 per share from the usual US$0.033 per share.
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