KCB Group will inject additional capital into the National Bank of Kenya (NBK) in the coming days, with the cash going to help the subsidiary comply with minimum capital requirements.
The unspecified additional funds will take the total equity financing that KCB has put in NBK above Sh8.45 billion, having made an equity investment of Sh5 billion when buying NBK in December 2019 and then converting the Sh3.45 billion loan into equity.
KCB Group CEO Paul Russo told the Business Daily the exact amount to be added will be disclosed on March 16 when the lender is expected to release its results for the financial year ended December 2022.
“We must make NBK compliant with the capital requirements. We have made a decision that we will bring in capital and make NBK compliant. If you are running a bank, you have to make sure it is compliant,” said Mr Russo.
NBK's capital adequacy ratio, which rates a bank's financial stability by measuring its available capital as a percentage of its risk-weighted credit exposure, stood at 12.7 percent at the end of September 2022 against the required minimum of 14.5 percent.
The lender’s core capital to total deposits liabilities and core capital to total risk-weighted assets were each above the minimum ratios by one percentage point at the end of September.
KCB had previously said it would assess NBK’s growth in profitability to decide the need for more capital.
While NBK's performance has improved when compared with the numbers prior to the KCB deal, Mr Russo said profits alone are not going to be sufficient in making the lender meet the required capital level.
“The thing about profitability is that it varies so it may put you closer (to compliance) but if you take a hit on any particular month or your ECL (expected credit loss) goes up, it steers you away from it,” said Mr Russo.
NBK's net profit for nine months to September dropped from Sh1.07 billion to Sh807.06 million as operating profits rose.