NBK in asset sale to raise Sh1.2b for restructuring

National Bank of Kenya CEO Munir Ahmed

State-owned National Bank of Kenya (NBK) has said it will sell off a number of assets among them properties around the country to raise some Sh1.2 billion needed to drive its restructuring agenda, grow its loan book and profitability as well as push up customer numbers.

The move comes amid reports that National Treasury is back-pedalling on giving a nod for the bank’s Sh5 billion rights issue. While the proposal appeared in the draft budget, there was no mention of NBK when the actual Budget was read before parliament last week. NBK Chief Executive Munir Ahmed Monday said he has his focus among the top five most profitable banks in 2017 - the reason behind a push to liquidate 12 of the bank’s properties to finance its next phase of growth. The bank’s shareholders had approved the planned rights issue during the lender’s 2013 annual general meeting, However, Treasury is still mute as well as National Social Security Fund, the two largest shareholders at NBK.

“We are still waiting for approval of the rights issue, which received a nod from the annual general meeting in 2013, the NBK shareholders have in the meantime approved the sale of low earning buildings owned by the bank,” said Munir.

“The sale will not affect our operations as it accounts for only 12 per cent of the total branch network. The bank which currently leases 88 per cent of its branch buildings will now be leasing all its branches except the Head Office,” explained Munir. Since commencing the transformation plan, the bank has seen its assets grow to Sh55 billion (35 per cent in two years), from Sh68 billion in 2012 to Sh123 billion in 2014. Growth of the bank’s assets portfolio was nearly stagnant before 2012 when the new management took over.

“The bank transformation journey is on course. We have achieved excellently the goals of the foundation phase in our strategy. Besides modernising our information technology, increasing access to the bank services through innovative mobile, web and agency delivery platforms, we have rationalised our human assets and increased their capacity through training to deliver to the bank a team with the right attitude for growth,” he said.

Financial services

This new proposal to sell off and instead lease branches is consistent with international best practice in financial services. “There is no reason for a well-run bank to own buildings. We are in the business of owning financial assets and not real Assets. As a bank, we will generate more income from financial assets rather than from owning low earning buildings and this also explains why leading banks in Kenya and around the world prefer to lease their branches and in most cases their Head-Offices,” said Munir.

The move is also in compliance with the Banking Act of Kenya which restricts the amount of real assets a bank is allowed to hold.

NBK’s operating profits grew at 45 per cent from Sh1.15 billion in 2012 to Sh2.43 billion in 2014. In the first four months of this year, NBK’s trading profit grew 20 per cent year on year. In addition to a successful rebranding exercise, NBK has grown its brick and mortar presence countrywide with over 25 new branches, and invested in 40 off site ATMs, while introducing Internet and Mobile Banking.