NBK opens door for more early staff exits to protect its margins

What you need to know:

The bank, which paid off 200 employees two years ago to take an early exit at a cost of Sh1.1 billion, has opened the door again for all the staff who have worked for at least a year, underlining the desire to release a large number of them.
Employees who take up the offer will exit the bank at the end of March.

The National Bank of Kenya (NBK) has asked employees to apply for early retirement as it resorts to staff cuts to protect profit following recent introduction of a law capping interest rates.

The bank, which paid off 200 employees two years ago to take an early exit at a cost of Sh1.1 billion, has opened the door again for all the staff who have worked for at least a year, underlining the desire to release a large number of them.

READ: NBK sends home 190 employees to tame wage bill

“In consideration of the prevailing market conditions as well as the necessity to leverage on the investment that the bank has made towards automation of processes and business re-engineering, I would like to announce an attractive offer for voluntary early retirement to all staff,” said the bank’s chief executive, Wilfred Musau, in an internal memo seen by the Business Daily.

Employees who take up the offer will exit the bank at the end of March.

It includes a severance pay equivalent to one month basic pay for every year of service, month’s salary in lieu of leave and a six month access to medical cover from the date of termination.

Those with running staff loans will also get a loan rebate of 15 per cent on condition that they clear the outstanding amount in six months.

In the first round of early retirements the bank had opened the door only for employees who were aged 50 years and above.

The NBK reduced its staff numbers to 1,600 following the early exits with its payroll down to Sh3.5 billion last year from Sh3.6 billion a year earlier.

Salary freeze

In the nine months to September the bank, which reported a profit of Sh737 million, had retained its staff costs flat at Sh2.6 billion, signalling additional job cuts over the year or a salary freeze.

The NBK announced a recruitment freeze in 2014.

The capital position of the lender has been below regulatory requirement for a year giving it little headroom to expand business.

Introduction of interest caps in August sliced the revenue margin previously enjoyed by banks forcing them to turn to cost cutting to protect profits.

Several other lenders including NIC Bank, First Community, Sidian and Family Bank, have announced job cuts since the interest cap law took effect and more are expected to do so from next month.

Earnings slow down

Harsh economic conditions have seen banks, which have enjoyed more than a decade of robust growth in profits and assets, see their earnings slow down forcing them to start looking at cutting costs.

The industry, which has been a key source of new jobs for the economy, is currently shedding jobs with adoption of technology being a key contributor.

Equity Bank and Co-operative disclosed their job counts had shrunk following adoption of technology, especially mobile platform.

Ecobank has announced plans to close some of its branches as it seeks to ride more on technology.

Ride on technology

National Bank upgraded its IT platform last year.

The bank was early this year rocked by claims of reckless lending, which saw it shock the market with a full year loss of Sh1.1 billion, down from a Sh2.2 billion profit three months earlier.

It fired six of its top managers including its former chief executive Munir Ahmed following the disclosures of financial impropriety.