National Bank of Kenya (NBK) #ticker:NBK made a net profit of Sh106.3 million in the first quarter ended March, reversing a net loss of Sh278.5 million a year earlier.
The improved performance was driven by higher interest income and a drop in interest expenses.
Interest income rose to Sh2.3 billion from Sh1.9 billion, mainly supported by increased investment in government debt paper. Interest expense fell 17.8 per cent to Sh632.6 million from Sh769.4 million.
Non-interest income, mainly from fees and commissions on loans and advances to customers dropped 9.2 per cent to Sh501.7 million.
The lender, which is in merger talks with KCB Group #ticker:KCB, incurred Sh2 billion in operating expenses, up from Sh1.7 billion.
With key shareholders — National Treasury and National Social Security Fund — having failed to honour their pledge of injecting Sh4.2 billion into NBK by September last year, the lender remained in breach of regulatory ratios.
Its impending takeover by KCB, through a proposed share swap deal, is expected to resolve the lender’s capital crisis.
KCB is expected to acquire each NBK share at a price of about Sh4.19 each. NBK’s chief executive Wilfred Musau said that the lender’s board will study KCB’s offer and respond in due course.
Taking shares in KCB is expected to enable NBK’s shareholders, including the government and the NSSF to ride on KCB’s economies of scale that have delivered billions of shillings in earnings and dividends.