NSSF, Treasury to inject Sh4.4bn to shore up National Bank capital base

National Bank of Kenya (NBK) has reached out to the National Social Security Fund (NSSF) and the National Treasury for funds to boost the bank’s liquidity.

The bank is in danger of breaching central bank of Kenya legal requirements for the bank to keep its assets 14 times above what it lends to its customers

National Bank Chief Executive Officer Wilfred Musau said the two main shareholders are expected to inject Sh4.4 billion into the bank by mid December.

NSSF and the treasury have been non committal in the bank’s plans to raise Sh13 billion through a rights issue leaving the lender under financial duress.

“The capital raising through a rights issue is still on course but the timing may not be right so we have engaged our main shareholders to get a debt capital of Sh4.4 billion on a pari passu basis and the talks are going well,” Mr Musau said during an investor briefing.

NSSF is the largest shareholder in National Bank with a 48.1 percent stake while the Treasury owns 22.5 percent of the bank.

In its financials released on Monday, the bank’s total capital to risk weighted assets ratio stood at 12.6 percent, below the Central Bank of Kenya’s statutory requirement of 14.5 percent.

This has limited National Bank’s ability to grow its loan book and boost income.

However Mr Musau said, the decision to reduce issuance of loans and advances was deliberate to avoid putting the bank under pressure and remain close to the CBK requirements.

“One of the things we’ve done is deliberately reduce our loan book to be in compliance to the required capital. Of course the capital injection will be able to shore up our balance sheet so that we can be able to grow in line with our vision to tier two status,” Mr Musau said.

Another worrying stat for the bank was its sharp growth of nonperforming loans which hit Sh29 billion between January and September.

This saw the bank allocate Sh1.9 billion as loan loss provision.

The bank attributed the surge to a tough operating environment with most of its customers unable to meet their payments.

National Bank is expected to start a mediation process with customers falling behind on their payments, with a plan to reduce the figure within 18 months.