NBK offers workers early retirement to tame wage bill

National Bank of Kenya (NBK) has asked employees to apply for early retirement as it resorts to staff cuts to reduce its wage bill which last year grew 14 per cent to hit Sh3.7 billion.

The bank with 1,800 employees has now asked workers aged 50 and above to apply to leave the bank in exchange for a “handsome” pay package.

NBK Wednesday announced that its net profit for the full year to December grew 50 per cent to Sh1.1 billion from the previous year’s Sh731 million.

The bank declined to reveal the amount of money it had reserved for the voluntary retirement, only saying the exercise would help it reduce its employee count by “several hundreds”.

“We started the process about three weeks ago and the response has been overwhelming,” said Munir Ahmed, the managing director, adding that the 22 per cent State-owned bank would not force anybody to leave.

READ: National Bank net profit up 50pc to Sh1.1 billion

“Over 65 per cent of our employees are unionisable and they get double-digit salary increment every year irrespective of how the bank or the industry performed. That means our costs go up every year irrespective of an individual’s productivity,” he said.

Last year, NBK froze employment of new staff to tame its wage bill that has more than doubled since 2008 when it paid out Sh1.69 billion in salaries and wages.

The bank had hoped last year’s recruitment wage freeze would cut staff numbers through “natural attrition” at a time its net profits dropped 52.8 per cent to Sh729 million.

Despite this intervention, NBK’s wage bill has still risen, forcing it to resort to voluntary retirements to help trim its staff cost to income ratio which stands at around 44 per cent, the highest amongst its peers.

NBK is also mulling closing branches that are under-performing and also staff new branches with current employees instead of hiring new people.

“There are branches which are way below their productivity level over six years after they were set up. We are giving them a chance but some of them will have to be closed down,” the bank noted.

NBK saw its total income for last year grow 11 per cent to Sh8.5 billion while net interest income grew 18 per cent from Sh4.7 billion in 2012 to Sh5.6 billion.

Mr Ahmed said lower lending interest rate regime of last year compared to the previous year saw its interest expenses reduce 31 per cent to Sh3.6 billion.

However, operating expenses went up 11 per cent to Sh6.4 billion, a rise the bank attributed to “restructuring of business operations, expansion of branch network, and investment in technology.”

NBK will pay half of its net profit to shareholders through a dividend of Sh0.33 a share. Last year, it paid a dividend of Sh0.22 per share.