National Bank dives into Sh1.2 billion loss


National Bank of Kenya

The National Bank of Kenya has announced a Sh1.2 billion loss for 2015, despite having posted strong results in its third quarter.

The loss was driven by a rise in loan impairment charges of Sh3.2 billion after the bank saw its non-performing loans portfolio grow.

“The Bank’s non-performing loan portfolio increased sharply towards the end of 2015 undoing the gain of Sh3.3 billion in profit before tax reported by the bank for Q3 2015,” Interim CEO Wilfred Musau said.

The massive drop in earnings however gives a glimpse as to why the bank is carrying out an internal audit over its financial performance.

The bank has been conducting a series of audits including by the Central Bank of Kenya that found massive gaps in the bank’s books.

 

On Tuesday the board sent six senior managers including CEO Munir Ahmed on compulsory leave to give room for an internal review.

On Tuesday the CBK welcomed the move by the NBK board to suspend its senior management.

“The CBK welcomes these timely actions to strengthen the NBK while maintaining smooth operations, and that will protect the financial system,” the regulator said in a statement.

Analysts point out that the bank had massive under provision for its non-performing loans that stood at Sh11.7 billion shillings.

The shocking loss by the bank again puts focus on the banking sector and possible breach of corporate governance.

The Central bank placed Dubai Bank and Imperial Bank under receivership in the space of two months in 2015.

CBK governor Dr Patrick Njoroge, who joined in June,  said there was needed to strengthen bank supervision to avoid similar occurrences.

National Bank’s net loans and advances grew to Sh67.8 billion but its net interest income declined by Sh400 million to Sh6.4 billion.

This was on the back of growth in total interest expense that shot up by 50 percent from Sh3.8 billion in 2014 to Sh5.8 billion, wiping out earnings.

By 9:48am the bank’s share was trading at Sh14.40 at the Nairobi Securities Exchange.

Shareholders will be a disappointed lot after the board failed to recommend a dividend following the massive loss.

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Story By Michael Karanja
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