Kenya Commercial Bank (KCB) converted a Ksh3.45 billion loan to the National Bank of Kenya (NBK) into equity in the subsidiary, the bank’s latest financial disclosures confirm.
The move enabled NBK to meet core capital ratio requirements after being in default in recent years. It increases the total cash injection by KCB into Equity to Ksh8.45 billion.
KCB injected Ksh5 billion into NBK when it purchased the bank in 2019.
“During the year, the parent company KCB Group approved the conversion of subordinated debt (Sh3.45 billion), which was classified as Tier II capital to equity. The conversion resulted in NBK complying with regulatory ratios with regards to core capital as at 31 December 2021.”
“The bank is implementing other internal strategies aimed at raising organic capital including rigorous bad debt collection and balance sheet growth to boost profitability which will ensure full compliance with the capital ratios,” NBK noted.
NBK posted Ksh1.1 billion in profit after tax for full year 2021. It represents a 431 percent increase from 2020.
The growth was driven by increased income from loan interest and foreign exchange trading, coupled with lower loan loss provisions.
NBK’s core capital to total risk-weighted assets rose to 12.9% by the end of 2021, 2.4 percentage points above the statutory minimum of 10.5 percent. In 2020, it stood at 8.7 percent.
Total assets grew by 16 percent to Ksh146 billion in 2021, majorly from net loans and advances, which rose by Ksh12 billion to hit Ksh67 billion.
“We are on a steady growth trajectory and anticipate continued growth by supporting our clients and finding opportunities within the current environment. The Bank has a strong capital and liquidity base to support growth of business and especially through our digital offering. We have therefore, embarked on a calculated strategy towards ensuring that we provide customer centric and timely solutions to our client segments especially in the SME sector,” stated NBK Managing Director Paul Russo.