The Capital Markets Authority (CMA) has fined National Bank an undisclosed amount of money for failure to publicly issue a profit warning ahead of announcing a surprise loss.
National Bank reported an unprecedented Sh1.15 billion loss for the period ended December 2015 without notifying investors as stipulated by capital markets rule.
The CMA made a U-turn to punish troubled lender after the regulator had earlier said the lender was in compliance, after the Business Daily highlighted that the bank had flouted listing rules and risked shareholder investments.
“Following further discussions with the board and management of National Bank to assess the circumstances that led to the failure to publish a profit warning in a timely manner, the authority proceeded to impose an appropriate financial penalty for the lapse,” the CMA said in a statement.
“We will continue to work closely with National Bank to ensure that there is timely disclosure of information to inform investor decision making.”
The regulator had earlier said it “was duly notified” by National Bank of the earnings drop.
CMA rules demand that all announcements such as profit alerts and change in management be made public within 24 hours of the happening of the event.
National Bank on the morning of March 30, 2016 notified the CMA of a profit warning and later at midnight the same day released full-year results without first publishing in the dailies the profit alert.
The CMA requires firms to publicly issue a profit alert if they project earnings will fall by more than 25 per cent, to warn investors of the risks of capital losses and reduced dividend due to the profit fall.
The annual financial results, which were released two days after National Bank sent its managing director, Munir Sheikh Ahmed, and five top managers on compulsory leave to facilitate an internal audit, only deepened the mystery surrounding the authenticity of the lender’s financial health.
It made an after-tax profit of Sh871 million in 2014.
Mr Ahmed along the five suspended executives were Monday questioned by the Directorate of Criminal Investigations on alleged employee theft at the lender.
National Bank’s record loss was blamed on a mounting volume of sour loans which grew by nearly two-thirds to Sh11.7 billion in the period under review, reflecting deteriorating asset quality.
The earnings were hit by a sevenfold increase in loan impairment costs, which saw provisions to cover for bad loans hit Sh3.7 billion compared to Sh525 million as at December 2014.
National Bank posted a net profit of Sh2.25 billion in the nine months ended September 2015, in what the now suspended MD dubbed as “the best annual performances by the bank in its 48 years history”.
National Bank now joins a list of other players penalised by the CMA very failure to adhere to market regulations.
EBI Investment Corporation Kenya Ltd, the investment banking arm of Ecobank, was last year cautioned by the CMA for failing to publish full-year results in at least two daily newspapers of national circulation.
The markets regulator in June 2012 hit Centum with a Sh50,000 fine for failing to issue a profit warning when it announced net earnings had tanked 48.4 per cent.