Sharia-compliant lender First Community Bank (FCB) has laid off a third of its workforce as effects of the recent capping of interest rates continue to manifest and shake the banking industry.
The lender, which has just over 300 employees, has issued 106 of them with redundancy letters, which explained that they would receive their terminal dues on Monday.
The letters, dated November 30 and signed by the bank’s chief executive Fazal Saib, indicate that the affected employees would receive their salaries to December 4 and receive one month pay.
Mr Saib added that the affected staff will receive severance pay computed at the rate of two weeks’ pay for every year worked as well as compensation of any accrued or unutilised leave days.
FCB had early last month indicated that it would lay off an unspecified number of people as part of cost-cutting measures.
The lender’s move to cut its staff count by a third is a pointer to how far banks are willing to go in order to cushion their bottom lines which have come under strain with reduced interest margins.
“A computation schedule of your terminal dues, including the deductions made thereof, and your certificate of service will be available for collection from your branch/head office after December 15,” one of the letters, which the Business Daily has seen, states.
“Note that your final dues will be payable after deduction of taxes, other statutory deductions and outstanding bank loans. The payment shall be effected via bank transfer by close of business on December 5.”
The lender’s staff costs stood at Sh241.4 million as at June 2016 which rose to Sh365.2 million at the end of September, prompting action by the bank’s management.
The bank, which received a regulatory approval in May 2007 to start Sharia-compliant banking, last week reported a 16.2 per cent jump in quarter-three net profit to Sh74.4 million.
FCB is one of four banks that recently announced staff cuts as a reaction to the biting interest regulations on loans and deposits.
Sidian Bank has completed the laying off of about 108 employees, an action which has cost the company slightly more than the Sh70 million originally planned.
Family Bank has also announced plans to lay off an unspecified number of staff.
Ecobank will also retrench an undisclosed number of employees following the recent decision to close nine of its 29 branches in Kenya, cutting its outlets by a third.
Standard Chartered, Kenya’s fourth largest bank by assets, is expected to render 300 employees redundant following a decision to outsource non-core functions to India.
Equity Bank also let go of 400 employees in the nine months to September which the tier one lender explained as “natural attrition” and not sackings.