By James Anyanzwa
“We absorbed the shock of the high interest rates by not passing the costs to our customers but we had to pay heavily to retain our depositors,” out-going Managing Director Reuben Marambii told an investor briefing in Nairobi, yesterday.
According to the bank’s unaudited financial statements, interest income grew 45 per cent to Sh4.49 billion from Sh3.09 billion while interest expense increased five times to Sh2.02 billion from Sh423 million in a similar period last year due to the high interest rate regime.
Loans and advances to customers grew 12 per cent to Sh27 billion from Sh24 billion while customer deposits increased 20 per cent to Sh60 billion from Sh50 billion in a similar period last year. NBK also suffered a nine per cent drop in profitability last year and blamed the decline on taxation on realised bond earnings and increased provisions for bad and doubtful debts.
Its profit before tax plummeted to Sh2.4 billion from Sh2.6 billion in the previous year. The bank plans to open 10 new branches this year and increase lending to customers, as it seeks to diversify from its previous reliance on lending to the Government.
The Government holds a 22.5 per cent stake in NBK directly and a further 48.06 per cent through the National Social Security Fund (NSSF). The Sate plans to offload 51 per cent stake in the bank to a strategic investor and 10 per cent to the general public after converting its preference shares.
But a consensus is yet to be reached for the workers’ pension body to convert its preference shares into ordinary shares. The new investors are expected to bring on board some managerial experience and inject new capital to resuscitate the bank, which had failed to reward its shareholders in more than a decade.
NBK received a boost in 2007 after the Government settled a Sh20 billion debt that had been pending since the 1990’s through four special bonds to be settled by 2022.