The National Bank of Kenya (NBK) has confirmed acting boss Wilfred Mutuku Musau as the chief executive of the lender for a five-year term effective on Monday.
Mr Musau, previously the bank’s director for retail and premium banking, has been acting CEO at National Bank since April following the acrimonious sacking of Munir Sheikh Ahmed.
The appointment of Mr Musau comes at a time National Bank is in a storm punctuated by declining earnings, capital inadequacy, mounting volume of bad loans, and corporate governance queries.
“The board of directors of NBK is confident with Wilfred Musau’s leadership credentials,” said the NBK’s chairman Mohamed Abdirahman Hassan in a notice.
The incoming CEO will now be tasked with turning around the mid-sized lender back to profitability, raising fresh shareholder capital, reviewing risk control, and enforcing strict governance rules.
National Bank’s net profit in the half year to June tumbled to Sh311.2 million from Sh1.7 billion in 2015. The volume of bad loans at the State-owned lender more than quadrupled to Sh27.3 billion in the period under review.
Mr Musau is expected to push talks on getting a Sh4.4 billion shareholder loan from the National Social Security Fund(NSSF) (Sh3 billion), and Sh1.4 billion from the Treasury to help capitalise the bank.
The NBK’s total capital to total risk-weighted assets ratio stood at 13.2 per cent against as at June 2016, which is 1.3 percentage points below the Central Bank of Kenya statutory minimum of 14.5 per cent.
The NSSF is the bank’s largest shareholder with a 48.05 per cent stake while the Treasury directly owns 22.5 per cent of the bank.
The capital ratio constraints have been compounded by a three-year impasse on a planned Sh13 billion rights issue.
Shareholders approved a cash call in June 2013, but the capital raising plan ran into headwinds after the Treasury refused to take up its rights and differences on the fate of the preference shares.
The capital breach poses a headache for Mr Musau as he may be forced to freeze lending and stop taking deposits, as the Central Bank of Kenya prudential guidelines require lenders to maintain set adequacy ratios.
The Capital Markets Authority in April fined the NBK for failure to publicly issue a profit warning ahead of announcing a surprise full-year 2015 loss, and also probed the bank on allegations of belatedly reporting the exits of its CEO and two other senior managers.
The NBK reported an unprecedented Sh1.15 billion loss for the period ended December 2015 despite having been profitable as at end of September; and a fortnight later sacked Munir and two other executives.