National Bank of Kenya Moi Avenue Branch in Nairobi. FILE PHOTO | NMG KCB Group #ticker:KCB has injected Sh5 billion in its newly acquired subsidiary National Bank of Kenya (NBK) #ticker:NBK enabling it to comply with capital requirements after suffering shortfalls for years.
“In addition to enabling NBK to comply with capital adequacy requirements, the injection bolsters NBK’s financial resources,” National Bank said on Thursday.
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.
As at March 2019, the bank held non-performing loan book at Sh27 billion, representing a growing NPL ratio of over 50 percent, to record at Sh32 billion as at the end of September.
NBK chief executive Paul Russo in November said the lender was pursuing top 30 debtors who owed it about Sh22 billion.
The gross non-performing loans is projected to drop to 20 percent in 2020 and 10 percent in 2023, as the bank will continue to operate as a stand-alone after KCB decided not to fully absorb 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.
-Additional reporting by Patrick Alushula