By James Anyanzwa
Shareholders of the National Bank of Kenya (NBK) will receive a dividend payment of 20 cents per share even as the state-owned Bank registered the worst performance in an industry that has seen most players attract double-digit growth in full-year profitability.
NBK’s profit before tax (PBT) for the 12-month period to December 31 plummeted more than 50 per cent as high interest rates dimmed lending to the retail segment and the bank’s management scaled up investment in new branches, new products and new technological platform.
And even as the cost of funds more than doubled to Sh3.56 billion as a result of a high interest rate environment, NBK sought to cushion customers by absorbing the full costs.
“The performance is less than impressive in one sense but if you look at the profit figures they are certainly healthy,” Munir Sheikh Ahmed, the Bank’s managing director told The Standard yesterday.
Explain slowdown
Munir, who has been at the helm of the bank for only seven months, was hard-pressed to explain the performance of a bank whose slowdown began during the tenor of his predecessor, Reuben Marambii.
According to NBK’s audited financial statements released yesterday the bank’s pre-tax profit dropped 53 per cent to Sh1.14 billion from the previous year’s Sh2.44 billion. Munir said the decline is as result of high and volatile interest rates, which forced the bank to pay heavily for deposits.
He said the bank is aggressively targeting the Corporate and Small Medium Enterprise banking businesses to diversify its balance sheet and reduce risks arising from a rise in interest rates that heavily affected its traditional retail segment. Munir remained optimistic that the 44-year-old bank would remain profitable and as such would continue paying dividends.
According to the financial statements NBK’s interest on customer deposits more than doubled to Sh3.56 billion from the previous year’s Sh1.23 billion while total interest expenses grew by 166 per cent to Sh3.65 billion from Sh1.37 billion in a similar period.
Total operating income fell two per cent to Sh7.61 billion from Sh7.79 billion while total operating expenses rose 21 per cent to Sh6.46 billion from Sh5.35 billion.
Fees plunged
Fees and commissions on loans and advances plunged 32 per cent to Sh210.32 million from Sh312.66 million. Total non-interest income grew four per cent to Sh2.83 billion from Sh2.71 billion.
Net loans and advances to customers grew by one per cent to Sh28.34 billion from Sh28.06 billion while customer deposits fell two per cent to Sh55.19 billion from Sh56.72 billion.
Total shareholders’ funds, however, remained unchanged at Sh10.45 billion. Total interest income went up 30 per cent to Sh8.43 billion from Sh6.45 billion.
Interest on loans and advances rose 53 per cent to Sh5.37 billion from Sh3.51 billion while interest on government securities declined two per cent to Sh2.83 billion from Sh2.88 billion. Total insider loans, advances and other facilities grew 25 per cent to Sh3.62 billion from Sh2.9 billion.
The Government holds a 22.5 per cent stake in NBK directly and a further 48.06 percent through the state-owned National Social Security Fund (NSSF).
The Government plans to sell a 51 per cent stake in the bank to a strategic investor and 10 per cent to the general public after converting its preference shares.
