NBK net profit dips 53pc on reduced interest income

The National Bank of Kenya’s profit for the year 2012 more than halved as its cost of funds grew at a faster pace than interest income.

The State-owned lender has posted an after tax profit of Sh730 million for the fiscal year ended December last year, a 53 per cent drop from the previous year’s net profit of Sh1.5 billion.

NBK managing director Munir Ahmed attributed the drop in earnings to the high interest rate and spiralling inflation that prevailed last year which resulted in the bank paying high interest rates on deposits.

“The bank paid high market rates on deposits but chose to cushion its borrowers by not passing the entire increase in the cost of funds to our customers,” said Mr Ahmed at an investor briefing on Monday.

“The high rates also depressed lending volumes in the bank’s significant retail portfolio.”

The listed bank’s cost of funds tripled to Sh3.7 billion compared to Sh1.4 billion in 2011 while interest income grew by a third to Sh8.4 billion.
NBK’s loan book stood at Sh28.3 billion as at the end of 2012, a flat growth compared to Sh28.1 billion a year earlier.

The bank, which has 60 branches countrywide, plans to move into corporate and SME lending to grow its loan portfolio. It also plans to bolster its agency banking network from the current 300 to 1,000 by the end of the year.

NBK shares were trading at Sh20.25 as at 0730 GMT, a 10 per cent dip from Friday’s average closing price as investors reacted to the fall in earnings and the profit warning issued on Saturday after markets had closed for the week.

The firm has halved its dividend pay-out to Sh0.20 per share compared to Sh0.40 per share in 2011.

NBK’s largest shareholder is the National Social Security Fund (NSSF) with a 48.06 stake followed by the general public which owns 29.44 per cent and the rest (22.5 per cent) held by the Treasury.