Banking crisis sees National Bank of Kenya lose Sh15b in customer deposits

National bank Ukunda branch in Kwale County.

[PHOTO BY GIDEON MAUNDU/STANDARD].

Customers withdrew more than Sh15 billion from National Bank of Kenya (NBK) in the six months to June this year.

The bank, majority-owned by the National Social Security Fund and the Government of Kenya, is now holding Sh95 billion worth of deposits, down from Sh99 billion in March and Sh110 billion in December on a sustained hemorrhage.

A confidence crisis staged by the collapse of three small and medium-tier banks last year led to panic withdrawals, despite assurance from the Central Bank of Kenya (CBK).

With the decline in deposits, NBK yesterday announced Sh308 million in net profits, which was lower than the January-March results, indicating a tough second quarter.

The bank had reported Sh324 million in net profits for the first quarter.

The dip in profits was attributable to lower realised revenues from non-interest sources, including fees and commissions.

NBK is also struggling with the effect of massive reclassification of outstanding loans earlier this year where the health of the loan portfolio was found to have been overstated and several facilities restated as non-performing.

A direct consequence of the finding was widespread write-offs and a corresponding increase in the provisions for bad loans – typically treated as an expense for the bank.

Despite the shrinking balance sheet, NBK was able to increase it interest income helped by a spike in lending rates since September last year in a surge that is yet to be fully reversed.

The banks will this morning issue a statement detailing difficulties of the second quarter, and give projections for the rest of the year.