KCB Group #ticker:KCB expects its newly acquired subsidiary National Bank of Kenya to turn a corner and deliver a billion shillings in profits by the end of the year.
Chief executive Joshua Oigara said the lender had won back old corporate and government accounts as a result of market confidence and business reorganisation and recovered the market share they had lost.
Capital injection by KCB had also boosted the lender’s capacity to issue loans following a disbursement of Sh5 billion out of the Sh8 billion new capital expected to be pumped in by the end of the year.
“We are seeing very good progress in the subsidiary we bought, NBK is doing well contributing significant profit. So this year we expect NBK will cross Sh1 billion in profits which is a very strong contribution,” Mr Oigara told the Business Daily.
“The customers who had not banked with NBK the past two to three years have come back and most of them are very good clients for NBK for very many years, public sector clients.
There were customers who were a bit nervous but now with capital and KCB coming in that has given them an opportunity to come back, branches are up, customer service delivery and we have seen growth in our customer numbers at NBK in the last one year.”
KCB’s confidence comes despite a Sh381 million net loss reported in the half year on a Sh567.9 tax payment.
For KCB the trade off to capture one of Kenya’s leading corporate and state bodies banker came with a trail of bad loans at NBK which had grown from Sh2.2 billion in 2012 to Sh32.4 billion by the June 2019. Upon acquisition it pushed KCB non-performing loans ratio up to 12 per cent.
The new management has made notable progress in recovery of some of the NPLs in the last few months to Sh25 billion in March but was set back during the coronavirus pandemic, a difficult environment that has edged dud loans back up to Sh28.6 billion in June.
NBK had also taken up Sh7.4 billion emergency loan from CBK. In June KCB now reported Sh4.9 billion deposits owed to the apex bank.
“So they had that temporary facility to meet their own liquidity shortfall but NBK is very liquid today so they do not have that issue anymore,” Mr Oigara said.