Savers with deposits of more than Sh2 million are entitled to seven percent interest while those with between Sh50,001 and Sh2 million will earn five percent interest.
Those with between Sh5,001 and Sh50,000 will be paid one percent interest on their deposits.
NBK’s deposits have been falling after it became embroiled in governance issues that led to dismissal of top executives.
National Bank of Kenya (NBK) #ticker:NBK is offering depositors generous interest rates of up to seven per cent as it seeks to turn around its fortunes that have been dwindling in recent years.
The bank, which has been in breach of the set minimum capital to deposit ratio, has core capital to total deposit liabilities ratio of 1.8 per cent against the minimum requirement of eight percent.
NBK, which is listed at the Nairobi Securities Exchange (NSE), said it was offering higher interest on deposits to offer better rates of returns to its customers and attract new ones.
“More recently, the Banking Act was amended by repealing the requirement for a minimum interest on deposits. However, as a bank, we have chosen to provide full benefits to our existing and new Savings Account customers by giving them up to seven per cent interest on all savings as we celebrate our 50th birthday,” Wilfred Musau, the bank’s chief executive, said.
This will make it possible for customers to know upfront the interest payable on their savings account in the absence of the law that had capped interest on deposits at a minimum of 70 per cent of Central Bank of Kenya benchmark rate.
Premium base rate
The high interest rates meant to boost its customer deposit base are a premium payment for deposits and will cut its margins in view of loan rate cap of 13 per cent.
Previous deposit floor rate stood at 6.3 per cent.
National Bank has been counting on capital injection from the major shareholders, including the National Social Security Fund (NSSF) and the government, to help turn around its fortunes but that has yet to materialise.
Under the new deposit mobilisation plan, customers will earn between one percent and seven percent depending on the amount of deposits.
Savers with deposits of more than Sh2 million are entitled to seven percent interest while those with between Sh50,001 and Sh2 million will earn five percent interest. Those with between Sh5,001 and Sh50,000 will be paid one percent interest on their deposits.
The bank’s deposits stood at Sh95.99 billion at the end of June 2018, the lowest in four years. In 2015, NBK’s deposit base touched a high of Sh110.62 billion, having grown from Sh55.19 billion in 2012. But a change of fortunes in the past three years seems to have reversed the trend leading to the decline that has left the lender with Sh96 billion deposits.
NBK’s deposits have been falling after it became embroiled in governance issues that led to dismissal of top executives, including managing director Munir Sheikh alongside other senior managers.
The bank’s ability to lend money has also been constrained by lack of strong capital base. NBK cut the size of its loan book by 16 per cent or Sh9.2 billion between June 2017 and June 2018, culminating to its posting of a Sh282.7 million loss compared to last year’s Sh179.8 million half year profit.
Statutory capital
NBK held Sh1.73 billion in core capital at the end of June 2017 – an 83 per cent decline from Sh10.19 billion in a similar period the previous year.
At the current level of core capital, NBK stands above the minimum statutory capital of Sh1 billion by Sh738 million, a situation that has made it hard for the bank to grow its lending.
National Bank remains in breach of the Central Bank of Kenya’s core capital to total deposits liabilities ratio as well as total capital to total risk weighted assets ratio as it awaits Sh4.2 billion boost from the National Treasury and the NSSF.
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