National Bank of Kenya (NBK) made a Sh717.6 million net profit in the first half of the year, helped by a lower tax bill and increased income from lending and transactions.
This was reversal of a Sh381.3 million net loss a year earlier.
The lender, a fully-owned subsidiary of KCB Group #ticker:KCB, saw its interest income jump 22 percent to Sh4.07 billion in a period in which the loan book expanded by Sh4.83 billion to Sh60.37 billion.
Pre-tax profit was Sh1.02 billion, making NBK the most profitable subsidiary of KCB Group. The South Sudan unit was the closest with pre-tax earnings of Sh551 million followed by Tanzania with Sh499 million.
NBK’s non-interest income, mainly derived from fees and commissions on loans, increased 12.3 percent to Sh1.08 billion, partly highlighting the impact of customers’ increased uptake of digital banking services.
The lender’s bottom-line was also supported by a smaller tax bill of Sh304 million in the review period compared to 567.9 million a year earlier.
Operating expenses remained at Sh4.12 billion, partly helped by the decision to cut loan loss provisioning by 28 percent to Sh297.36 million.
NBK is still in breach of minimum capital requirements, signaling that the subsidiary may need further financial support. KCB gave NBK capital in the form of a Sh5 billion equity injection in 2019 and a Sh3 billion subordinated debt earlier this year.
NBK’s adjusted core capital to total deposit liabilities ratio stood at 5.9 percent against CBK’s minimum of eight percent while adjusted total capital to total risk weighted assets was 0.7 percentage points below the required minimum of 14.5 percent.
KCB’s chief financial officer Lawrence Kimathi said the lender will carry out a review to determine if there is need to add NBK more capital.
“We have commissioned internal capital adequacy review on NBK and KCB Rwanda to see if there is need to add capital,” said Mr Kimathi.The actual capital support to NBK, if any, will depend on several factors, including the subsidiary’s ability to recover bad loans.NBK’s stock of gross non-performing loans declined to Sh27.45 billion in June from Sh28.66 billion in June last year, helped by repayments and recoveries.KCB acquired NBK in 2019 through a share swap in which shareholders were allotted one share in the big bank for every 10 they previously held in the subsidiary.The deal resulted in the National Treasury and the National Social Security Fund increasing their stakes in KCB.