Family Bank turns to layoffs to manage costs

NAIROBI: Family Bank, which recorded 40 per cent drop in half year earnings, will lay off unspecified number of workers in the next two weeks as part of the lender’s move to cut cost.

The mid-tier lender has already called for voluntary early retirement for employees who are on permanent and pensionable terms to submit the applications by October 14.

“The voluntary early retirement programme is one aspect of the wider transformation programme that the bank launched in June this year,” said the bank’s CEO David Thuku.

The latest restructuring plan entails assessment of the business model, with focus on deploying capital efficiently to improve performance, according to a statement by the bank. The bank currently has 1,900 employees.

Internal memo

In an internal memo sent to all staff yesterday, those who opt for the voluntary redundancy will be given golden handshake of one month’s pay for each year of service. The bank, which was awarded as fastest growing in 2015, has told the staff who opt out that they will be allowed to clear all outstanding loans in line with the bank’s human resource policy.

Beyond the two weeks, the bank will review applications received and communicate its final decision. It is not clear whether the bank would still continue with retrenchment if the voluntary proposals fail to get the required numbers.

Its half year financial results upto June 2016 show that operating expenses increased by 31 per cent to Sh3.81 billion. This was partly driven by staff costs that shot up by 18.6 per cent to Sh1.4 billion.

Despite emerging the 12th most profitable bank in full year to December last year, the bank’s return on assets was 3.55 per cent, being beaten by less profitable lenders such as Prime Bank, Habib Bank, Bank of Baroda and Gulf African Bank.

The news comes less than a year after nine managers were sacked last December in connection with the Sh791 million National Youth Service scandal.