KCB Group plans to borrow $200 million (Sh26.5 billion) to help rebuild the balance sheet of its Kenyan banking subsidiary that has seen its loans grow faster than the capital base.
The plan to fortify KCB Bank Kenya’s capital comes amid the group’s sale of its entire stake in National Bank of Kenya (NBK), its second subsidiary in the country which has breached minimum capital requirements despite having received Ksh14 billion support from the parent firm.
NBK will be sold to Nigeria’s Access Bank for a moving value –based on a multiple of 1.25 times of net assets— that currently stands at Sh13.2 billion.
The activities point to a race to resolve the problems plaguing the Kenyan operations that have generated most of the group’s non-performing loans besides posting weaker earnings compared to other subsidiaries.
KCB Group’s Chief Executive Paul Russo says Kenya subsidiary will be recapitalised through retained profits and additional borrowings from development finance institutions.
“KCB Bank Kenya will increase its core capital through growth of retained earnings,” Mr Russo said.
“To enhance its total capital, the bank aims for subordinated debt of $200 million, which qualifies for Tier II capital, from development finance institutions.”
The subsidiary saw its net profit fall 26.8 percent to Sh25.4 billion in the year ended December 2023, reducing capacity to build retained earnings.
Its core capital rose to Sh114.3 billion in the period from Sh85.9 billion a year earlier. Deposits and loans, however, grew at a faster pace that resulted in a small buffer above various minimum capital requirements.
