From a sacco that was advanced Sh893 million just a few hours after opening an account to the oil company that was given Sh236 million after holding an account for just one month, the source of trouble at Nation Bank of Kenya is clearly toxic loans.
The Standard today reports how NBK management engineered insider lending that reversed the bank’s fortunes from over Ksh2 billion profits in Sept. 201 to a net loss of Ksh1.2 billion it reported few days ago.
According to the Standard investigations, an individual received Sh38 million barely two months after opening his account at NBK. Aside from these funds being advanced in haste in clear violation of banking regulations, these customers had no time to build a track record, raising the risk of their defaulting on repayments.
These and more shocking details have been revealed in a dossier put together for Standard by a group of the bank’s employees, mostly from the risk and credit departments. The insider document adds that 95 per cent of mortgage loans were approved without site visits by bank officials, contrary to the lender’s credit policy on business and mortgage products.
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The employees found that the bank has several accounts that were opened purely for the purposes of borrowing, and were thereafter abandoned, making recovery of the cash nearly impossible. The document shows NBK has in excess of Sh5 billion of such toxic loans on its books, money that was advanced to newly registered companies and a few well-connected, high net worth individuals.
The dossier is understood to have been prepared to be shared with a team of investigators who are combing through the bank’s books. Last week, the bank announced its biggest loss in eight years of Sh1.2 billion. It blamed this on a 62 per cent jump in non-performing loans — cash advanced that it does not expect to get back.
The results raised eyebrows for two reasons. First, the listed lender had issued a profit warning just a day before it reported its financials. Second, the bank reversed in just three months what it had earlier termed its best performance in 48 years — a Sh2.25 billion profit in the nine months to September 2015.
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