KCB throws National Bank Sh5b lifeline

KCB Group has injected Sh5 billion into the National Bank of Kenya (NBK) as the country’s largest lender moves to resuscitate its newest acquisition.

The capital injection will go a long way in shoring up the finances of NBK, which had been in the red.

NBK’s board of directors announced the new development in a paid-up advert dated December 31, 2019.

“In addition to enabling NBK to comply with capital requirements adequacy requirements, the injection bolsters NBK’s financial reserves,” said NBK  Company Secretary Joseph Kania.

The lender’s asset quality has been diluted by a tonne of bad loans that the troubled lender incurred, with its share of Non-Performing Loans (NPLs) to total loans estimated at 68.8 per cent in the nine months ending September 30, last year compared to 47 per cent in December 2018.

This is more than five times the banking industry’s ratio of 12.5 per cent.

Bad loans, estimated at Sh32 billion, have been the bane of NBK.

This means that more than half of the bank’s loans are non-performing, meaning they have not been serviced for more than three months. 

But with the Sh5 billion cash injection, it means the bank is now well capitalised.

“We take this opportunity to thank our shareholder KCB Group Plc for this support...,” said Kania.

Problematic loans

NBK’s new Managing Director Paul Russo said by June this year, they should have made significant progress in their bid to recover close to 80 per cent of the lender’s problematic loans, which translate to Sh25 billion. 

KCB Group Chief Executive Joshua Oigara revealed last year that effective this year, they will begin the process of recovering loans owed to NBK.

“It is true we will demand delivery of our contract for the borrowers, whether it is NBK or KCB. That vigour will continue. So we expect to recover a number of those loans,” said Oigara, when the lender listed an additional 143 million shares at the Nairobi Securities Exchange.