Picture of National Bank banking hall Harambee Avenue branch taken on 1st September 2015 . [PHOTO:WILBERFORCE OKWIRI] National Bank of Kenya and mortgage financier Shelter Afrique are the first lenders to post losses in the six months to June this year.
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NBK posted a Sh282 million net loss from a Sh179 million profit last year – but that was the least of the lender’s problems.
The bank has wiped out its core capital by 83 per cent in just one year from Sh10.1 billion to Sh1.7 billion, and has run afoul of some key Central Bank of Kenya (CBK) ratios that measure business viability.
“The adjusted capital ratios include the expected credit loss provisions added back to capital in line with the CBK guidance note issued in April 2018 on implementation of IFRS 9,” the lender’s management said in statement accompanying the results.
NBK’s core capital – equity capital plus reserves as a ratio of deposits – was at 1.8 per cent against CBK recommendation of eight per cent.
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The strength of the bank has also been whittled down as core capital against assets was down to two per cent against the recommendation of 10 per cent.
“In March 2018 the principal shareholders gave a formal commitment for a comprehensive capital solution. The board notes that this process is ongoing,” said the bank.
Another pointer to how much the lender has been strained is that if it chose to write off all the Sh30.1 billion non-performing loans, it would still be unable to meet a Sh606.7 million portion. ALSO READ: How NBK lost cash in suspect scheme That is, if it suspended the Sh4 billion interest, used up the Sh13.1 billion set aside for insurance or provisioning and sold all its securities at the discounted value of Sh12.2 billion.In fact, the lender tried to protect its earnings by taking Sh14 million out of the insurance account, unlike last year when it was able to set aside Sh235 million.NBK also seems to have traded some securities to survive, exposing it to a liability of Sh1.9 billion it owes to CBK.The bank has reduced loans to customers by 17 per cent from Sh57 billion last year […]