KCB wires new funds into National Bank

A National Bank branch in Nairobi. FILE PHOTO | NMG 

By PATRICK ALUSHULA
More by this Author

Summary

• KCB Group
has provided new capital of undisclosed amount to its newly acquired subsidiary National Bank of Kenya (NBK)
• which had suffered capital shortfalls for years.
• The country’s biggest bank says NBK is now well capitalised, with the new funds provided towards the end of last year.
• KCB had initially estimated a capital injection of up to Sh7.5 billion, with the actual figure pegged on the success level of NBK bad debt recovery.

KCB Group has provided new capital of undisclosed amount to its newly acquired subsidiary National Bank of Kenya (NBK) which had suffered capital shortfalls for years.

The country’s biggest bank says NBK is now well capitalised, with the new funds provided towards the end of last year.

“We provided the funds last week. NBK is now compliant in terms of capital,” said Lawrence Kimathi, KCB’s chief financial officer. He declined to reveal the size of the capital injection, saying it will soon become public.

KCB had initially estimated a capital injection of up to Sh7.5 billion, with the actual figure pegged on the success level of NBK bad debt recovery.

KCB earlier said it was in a position to recapitalise NBK while maintaining its dividend payout of about 50 percent of net earnings. Recapitalising NBK became key agenda for KCB especially after it decided to keep the subsidiary as a stand-alone operation as opposed to fully absorbing it as earlier planned.

NBK’s core capital had dropped to Sh993.7 million in September 2019, below the minimum requirement of Sh1 billion.

The bank was also in breach of other capital ratios regulating its ability to lend to customers and take deposits.

KCB’s move to strengthen NBK’s balance sheet is expected to allow the subsidiary to expand its business easily.

NBK chief executive Paul Russo last November said the lender was aggressively pursuing top 30 debtors who owed it about Sh22 billion. This is about 70 percent of the Sh32 billion of gross non-performing loans at the end of September.

“We have to time our capital injection to ensure we don’t erode it and that is why the NPLs clean-up is important. We also need to create momentum on the business front,” Mr Russo said.