National Bank of Kenya sheds off Ksh.6.3 billion bad loans after buyout


National Bank of Kenya sheds off Ksh.6.3 billion bad loans after buyout

In Summary

  • The improved recoveries from defaulted loans is anchored on the bank’s sale to the KCB Group in September 2019 which has seen the lender leverage on its mother company assets to weed out the bad loan’s stock.
  • While questions have been raised on the viability of investing in the lender, KCB Group CEO Oigara believes the purchase of the bank at a Ksh.5 billion fee last year makes for a solid investment with the potential to deliver improved results in the near term.
  • KCB quest of becoming the first Kenyan bank to attain a Ksh.1 trillion balance sheet from the buyout of NBK now sits in the distance with the combined entity now boasting assets totalling to Ksh.898.6 billion

The National Bank of Kenya (NBK), a KCB Group subsidiary has trimmed its share of gross non-performing loans by Ksh.6.3 billion to Ksh.25.2 billion across 2019.

This marking an improvement in the asset quality of the lender who has historically been dogged by a higher than industry average rate of defaulted loans.

The improved recoveries from defaulted loans is anchored on the bank’s sale to the KCB Group in September 2019 which has seen the lender leverage on its mother company assets to weed out the bad loan’s stock.

“With a special asset recovery team, we have accelerated recovery efforts and strengthened our legal defences from the court cases facing NBK. We have been able to finance stuck up documents relating to loan issuance, working capital and letters of credit,” noted KCB Group Chief Executive Officer Joshua Oigara.

Nevertheless, the lender books a worse off Ksh.302.3 million loss for the year ending in December 31, 2019 on the back of higher provisioning costs and exceptional items on the bank’s balance sheet.

While questions have been raised on the viability of KCB’s investment in the National Bank of Kenya, Oigara believes the purchase of the bank at a Ksh.5 billion fee last year makes for a solid investment with the potential to deliver improved results in the near term.

“Nobody goes to buy a fat cow unless you don’t know how to do business. If you buy a business where the market value has already been exploited, you would be putting shareholder funds to waste,” he added.

“If you are to ask the same question on whether I would still buy NBK, the answer is a yes.

NBK under Managing Director Paul Russo has been out to draw up a strategic expansion plan for the lender arriving at the decision to open up at least five new branches in the near-term with an eye for a higher customer footfall.

KCB is keen on growing the value of its two banking brands in a quest for a greater market share in a crowded banking sector.

Combined, KCB and NBK have a gross non-performing stock of Ksh.63.4 billion or an equivalent 11.8 per cent share to gross loans and advances to customers.

KCB quest of becoming the first Kenyan bank to attain a Ksh.1 trillion balance sheet from the buyout of NBK now sits in the distance with the combined entity now boasting assets totalling to Ksh.898.6 billion.

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Story By Kepha Muiruri
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