National Bank of Kenya headquarters in Nairobi. MPs have resolved to halt a bid by KCB Group to acquire the lender due to undervaluation www.businestoday.co.ke
National Bank of Kenya headquarters in Nairobi. MPs have resolved to halt a bid by KCB Group to acquire the lender due to undervaluation. (Photo/Business Today]

National Bank of Kenya (NBK) has announced a pre-tax profit of Ksh 456 million before exceptional item for the period ending 31 December 2018, against a backdrop of difficult operating environment within the year as well as reduced lending due to capital constraints.

This represents a 42% decrease in profitability over the comparable period in 2017 at Ksh 785 million. During the year, the bank incurred a one-off exceptional cost relating to voluntary early retirement cost of Ksh 541 million.  

 “Our earnings for the period ended 31 December 2018 was affected by capital constrains and the loan impairment charges. We also had a one off restructuring cost resulting from the voluntary early retirement program as part of wider business alignment. We are however optimistic of an improved performance in 2019. We have implemented various initiatives to grow the business, improve efficiencies, reduce non-performing loans and contain costs,” said Wilfred Musau, National Bank’s Managing Director & CEO.

Total operating income for the period was Ksh 8.1 billion, a 12% drop from Ksh 9.2 billion recorded in the same period 2017 mainly due reduction in lending rates for loans and advances, challenging operating environment especially in first quarter of 2018 and reduced lending volumes due to capital constraints.

 Overall, total operating expenses declined by 10% to Ksh 7.6 billion from Ksh 8.4 billion over the same period in 2017 as the bank continued to realise benefits from implementation of cost management strategies and debt management.

 Customer deposits increased by 5% from Ksh 94.3 billion as at 31 December 2017 to Ksh 98.9 billion as at 31 December 2018 due to new business in public sector, micro-small and medium enterprises, agribusiness sectors and Diaspora business and successful deposit mobilization campaign in the year.

 Net loans & advances reduced by 9% to Ksh 47.8 billion as at 31 December 2018 from Ksh 52.4 billion the previous period as a result of one-off impact of IFRS 9 adoption and reduced loan volumes as the bank operated within the compliance capital ratios.

The principal shareholders have provided confirmation to the board of directors of their continued efforts to execute a comprehensive and long-term capital solution for the Bank. The Board and management continue to implement other internal initiatives to restore capital involving disposal of non-core assets, investment in new products and platforms to boost profitability, cost reduction initiatives and accelerated recovery of the non-performing book

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