The National Bank of Kenya blames tight Government budget on delayed Rights Issue

The Government’s busy schedule and tight budget has been cited as the key reason for the delay of National Bank of Kenya’s (NBK) proposed Rights Issue.

According to the bank’s Chief Executive Munir Ahmed, the bank had applied for the Rights Issue from market regulators through which it sought to raise Sh13 billion from shareholders, but with the Government as the main shareholder and having other pressing commitments, the issue had to be delayed until when time is right.

Airtel Kenya CEO Mr Adil El Youssefi (right) and NBK CEO Mr Munir Ahmed during the launch of the mobile banking product. (PHOTO: WILBERFORCE OKWIRI/ STANDARD)

“Our shareholder is largely Government. And as a Government, they are asking themselves: Should we inject capital into National Bank or build roads and hospitals?” he said, adding that the Government seems to be having difficulties trying to juggle between doing business and offering a service to its people.

Ahmed was, however, positive the issue will hit the market before the end of this year.

“The spectrum of responsibilities and commitments it (government) has means that if there is a flood somewhere the Government will not inject extra capital in National Bank but address the social problem,” said Ahmed as he tried to explain the delay in the much-awaited NBK’s Rights Issue.

The National Social Security Fund (NSSF) is the majority shareholder of the bank with a 48.05 per cent stake followed by the Government, which holds 22.5 per cent, taking the Government’s stake into the lender to 70 per cent.

He, however, acknowledges the fresh capital injection was meant to fast-track the lender’s recovery and move it from a mid-tier to a top-tier bank.

Earlier in 2015, NBK crafted a strategic plan to double its customer numbers, expand its market reach to neighbouring states and roll out new products by 2017. The bank wanted shareholders to approve the Rights Issue to enable it carry through with the strategic plan.

However, the Government developed cold feet, and now the lender will be forced to grow organically— by using its normal operating profits to meet immediate reform measures to grow its business. The lender is looking for about Sh7 billion to meet its growth prospects.

Ahmed estimated that without the additional capital from shareholders, it would take the bank three to four years to attain its growth prospects.

Mr Ahmed was speaking on a day when NBK entered into a partnership with Airtel that will see the bank’s customers access mobile banking services for free for the first three months with minimal charges after the three-month campaign. Dubbed NatMobile, NBK customers through Airtel Money will be able to view their accounts, manage their accounts, make bill payments, transfer money to their Airtel Money from their bank accounts and vice versa.

On his part, Airtel Kenya CEO Adil El Youssefi said, “Getting access to financial services via the mobile phone can make a massive difference to people’s lives. We at Airtel Kenya are very excited about the service and the partnership with National Bank.”