National Bank of Kenya has announced a profit before tax of Ksh785 million for the period ending 31st December 2017 despite an unfavourable 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 Central Bank of Kenya, 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 Internal Capital Adequacy Assessment Process (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).
The bank’s Managing Director Wilfred Musau said the bank’s transformation agenda continued during the 2017 financial year as it made strategic strides in addressing non-performing loans, cost management, improving operational efficiency and leveraging on technology to deliver solutions to customers.
“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,” he said. “The capital injection will unlock and bolster the key pillars of our growth going forward.”
Highlights of the results
Net interest income for the period was Ksh6.7bn, a 14% drop from Ksh7.7bn 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 Ksh0.9bn.
Total operating revenues closed at Ksh9.1bn compared to Ksh10.6bn in 2016, representing 14% decrease due to impact of interest capping and lower fees as volumes of new loans dropped. As part of diversification, revenues from subsidiaries (NBK Insurance Agency Ltd and National Trustee Investment Services Ltd) grew 45% year on year from Ksh74m to Ksh108m.
Loan provisions declined from Ksh2.4bn to Ksh0.76bn benefiting from reduction in NPL book and improved credit management ensuring minimal negative migration.
Total operating expenses declined by 6% to Ksh7.6bn from Ksh8.1bn over the same period last year due to improved cost management and rigour in operational controls.
Customer Deposits grew 1% from Ksh93.8bn to Ksh94.2bn on account of customer confidence and new products such as diaspora banking, enhanced Natmobile and improved client service. Net loans and 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 Ks2bn from Ksh30bn to Ks28bn.
As a result of growth in customer flows and deliberate re-balancing of the bond portfolio, the bank improved its liquidity with ratio closing at 36.3% compared to 32.6% in the previous year.