KENYA – KCB Group has injected US$50 million (KSh5 billion) in its newly acquired subsidiary National Bank of Kenya (NBK) enabling it to comply with capital requirements after suffering shortfalls for years.
The capital injection will go a long way in shoring up the finances of NBK, which had been in the red.
“In addition to enabling NBK to comply with capital requirements adequacy requirements, the injection bolsters NBK’s financial reserves,” said NBK Company Secretary, Joseph Kania.
The lender’s asset quality has been diluted by a tonne of bad loans that the troubled lender incurred, with its share of Non-Performing Loans (NPLs) to total loans estimated at 68.8 per cent in the nine months ending September 30, last year compared to 47 per cent in December 2018.
This is more than five times the banking industry’s ratio of 12.5 per cent. Bad loans, estimated at US$320 million (KSh32 billion), have been the bane of NBK.
This means that more than half of the bank’s loans are non-performing, meaning they have not been serviced for more than three months. But with the US$50 million (KSh5 billion) cash injection, it means the bank is now well capitalised.
“We take this opportunity to thank our shareholder KCB Group Plc for this support…,” said Kania.
NBK’s new Managing Director Paul Russo said by June this year, they should have made significant progress in their bid to recover close to 80 per cent of the lender’s problematic loans, which translate to US$250 million (KSh25 billion).
KCB Group Chief Executive Joshua Oigara revealed in 2019 that effective 2020, they will begin the process of recovering loans owed to NBK.
“It is true we will demand delivery of our contract for the borrowers, whether it is NBK or KCB. That vigour will continue. We expect to recover a number of those loans,” said Oigara, when the lender listed an additional 143 million shares at the Nairobi Securities Exchange.
While NBK’s profit for the nine months to September grew 20 fold to US$4 million (KSh407 million) compared to the same period last year, the lender’s core capital had dropped toUS$9.93 million (KSh993.7 million), below the minimum requirement of US410 million (KSh1 billion).
The bank was also in breach of other capital ratios stunting its ability to lend to customers and take deposits.