Seven months after acquiring National Bank through a share swap deal, the Kenya Commercial Bank (KCB) Group is set to inject Ksh3 billion into National Bank, an independent subsidiary, for it to meet the statutory Capital Adequacy Ratio. (CAR).
The funding to be funneled in the second quarter of 2020 will also be used to expand National Bank’s business operations in the country which includes strengthening its footprint in the country.
As its stands, National Bank still does not meet CAR required by the regulator despite a Ksh5 billion injection by KCB in December hence prompting a re-look.
“When we acquired NBK, we estimated we will provide the subsidiary with capital of Sh7.5 billion to Sh8 billion,” said KCB CEO Joshua Oigara. “We will soon give the balance of Sh2.5 billion to Sh3 billion,”
When NBK’s takeover was completed in September last year, KCB was facing the mammoth task of pressuring NBK to recover Ksh31.4 billion Non-Performing Loans (NPLs) that had threatened to cripple the company dodged by corporate governance issues before the takeover.
However, the funding does not come without strings attached as NBK will have to demonstrate that it can recover the NPLs.
As reflected in the last financial results, NBK’s core capital to total deposit ratio stood at 7.3 percent as of December, 0.7 percentage points below the statuory requirement of 8%.
In the full year ended December 2019, National Bank posted a Ksh302 million loss after tax.
NPLs stood at Ksh25 billion, down from Ksh31 billion in 2018, a slight reduction from the Ksh31 billion posted during the takeover.
“We spent the last quarter of the last financial year, following the acquisition, building a firm foundation for the bank’s recovery and takeoff. We have also been on an aggressive loan recovery drive. We are optimistic of a better year ahead,” said NBK Managing Director Paul Russo while releasing the results.