National Bank Financial Woes Bank posts a 1.6 billion drop in profits as bad loans hit 26.1 billion

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The results have seen the lender’s capital ratios fall further below what is required by CBK regulations.

National Bank has announced a drop in net profit of 76.8 percent in its third quarter results.  The banks current net profit for the nine months ended September 2016 is Ksh. 526 million.

This is a massive drop from the 2.2 billion it recorded over the same period in September 2015.The bank’s Chief executive blamed this largely on provisions of bad loans and higher operating costs.

play National Bank of Kenya CEO Wilfred Musau (Courtesy)

Operating expenses increased by 37% from Sh5.6 billion last year to Sh 7.7 billion.

This year over the same period. Provisioning for the bad loans accounted for 1.9 billion of the expenses, tripling the amount it posted last year of 586 million shillings.

This was after the bank saw its non-performing almost quadruple to 26.1 billion this year accounting for about 42% of its loan book.

play Pedestrians stream past a National Bank of Kenya branch on Harambee Avenue in Nairobi. The bank was among those hit with financial mismanagement this year

 

Other expenses were attributed to investment in technological systems and product innovations.

Total interest income grew slightly from Sh9.8 billion to Sh10 billion while net interest income was up 16% from Sh5.7 billion to Sh6.6 billion.

Customer deposits increased by 6% to Sh96.4 billion from Sh90.8 billion over the same period in 2015 on the back of increased volumes from customers.

Non interest income fell by about 40% to Sh1.86 billion compared to Sh 3.12 billion posted in Q3 2015

The Bank’s Earnings Per Share (EPS) fell from Sh 8.05 to Sh 1.69.

The results have seen the lender’s capital ratios fall further below what is required by regulations.

NBK’s total capital to total risk weighted assets ratio is at 12.6% as at September 2016 while CBK’s statutory minimum is at 14.5 percent.

This is a 1.9% percent drop which continues the trend from March this year when the bank first went below the statutory caps dropping by 1.4%.

The troubled bank is however undertaking a massive transformation programme after it was hit by an accounting scandal earlier in the year.

The scandal saw the sacking of several members of management and a new team including board members was set up. It is now looking for a loan from its shareholders.

NSSF is the largest shareholder at the bank with a 48.05 stake while the national government owns a 22.5 stake at the bank.

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