National Bank of Kenya has today announced a pre – tax profit of KES 785 million for the period ending 31 December 2017. The bank stated that the growth was recorded despite an unfavorable macroeconomic environment and a protracted electioneering process.
In a further boost, the Bank also announced that its major shareholders – the Government of Kenya and NSSF – have made commitments to address its capital requirements. In a letter addressed to the Financial Services regulator (CBK), Treasury has indicated its commitment to provide a comprehensive and long-term solution on the capital position to bridge compliance, support business growth and meet ICAAP requirements.
The letter indicates that the core capital injection will be fast-tracked and is expected to be completed within a period of 180 days (six months).
Commenting on the results, the Bank’s Managing Director, Mr. Wilfred Musau said; “Our transformation agenda momentum continued unabated during the 2017 financial year as we made strategic strides in addressing NPL’s, cost management, improving operational efficiency and leveraging on technology to deliver solutions to customers.”
He added; “The solid commitment made by our major shareholders to tackle the recapitalization is an overt approval of the measures taken in the financial year under review to sustain growth. The capital injection will unlock and bolster the key pillars of our growth going forward.”
FY 2017 Results
Net Interest income for the period was KES 6.7bn, a 14% drop from KES 7.7bn same period previous year mainly due to effect of interest rate capping law reducing interest earned from loans and advances. This was partially compensated by an increase in interest earned from Government securities and improved funding mix which reduced interest expense by KES 0.9bn.
Total operating revenues closed at KES 9.1bn compared to KES 10.6bn in 2016 representing 14% decrease due to impact of interest capping and lower fees as volumes of new loans dropped.
As part of diversification of revenues, Revenues from subsidiaries (NBK Insurance agency limited and National trustee Investment services limited) grew 45% year on year from Kshs 74m to 108m
Loan provisions declined from KES 2.4bn to KES 0.76bn benefiting from reduction in NPL book and improved credit management ensuring minimal negative migration.
Total operating expenses declined by 6% to KES 7.6bn from KES 8.1bn over the same period last year due to improved cost management and rigour in operational controls.
Customer Deposits grew 1% from KES 93.8bn to KES 94.2bn on account of customer confidence in the Bank and new products such as diaspora banking, enhanced natmobile and improved client service. Net loan & advances reduced by 5% over the same period driven by reduced loan volumes. The group deployed effective recovery strategies resulting to reduction in gross Non-performing loans by KES 2bn from KES 30bn to KES 28bn.
As a result of growth in customer flows and deliberate rebalancing of the bond portfolio, the bank improved its liquidity with ratio closing at 36.3% compared to 32.6% in the previous year.
Other Fundamental Developments
To drive operational efficiency, the Bank upgraded its core banking system from Fusion Banking Essence [FBE], the fifth and latest version of which in time will drive revenue growth, reduce operating expenses and improve on the Customer Experience. The group implemented a voluntary early retirement in January 2018 aimed at optimization and has intentions, through branch rationalization, to consolidate some existing Bank branches.
Going Forward
The capital injection is poised to bolster its focus on improving customer transactions, manage operational and market risks, whilst enhancing its drive to grow current customer transactions and acquisitions.
In addition, the financial year 2018 will mark the Bank’s 50th year since inception having been formed in 1968 with the objective of offering access to financial services to all Kenyans.
