NBK net profit sinks to Sh138mn as rate caps bite


National Bank managing director and CEO Wilfred Musau (left) and Chairman Mohamed Abdirahman Hassan during the lender's AGM on May 19, 2017. PHOTO | DIANA NGILA | NMG

National Bank of Kenya's (NBK) #ticker:NBK after-tax profit plunged 73.5 per cent in the nine months to September after its interest income from loans was halved.

NBK’s net earnings dropped to Sh138 million from Sh521 million in a similar period last year, as a rate capping law regime slashed its earnings from loan interest by half to Sh3.77 billion.

The year-old interest rate caps, coupled with a drought and prolonged electioneering, has hurt banks’ business this year with most of them reporting lower or marginal growth in profitability.

NBK has, however, had its fair share of financial woes preceding the rate caps that hurt its capitalization and forced it to seek a Sh2.9 billion shareholder loan from the National Social Security Fund (NSSF).

NSSF holds a 48.05 per cent stake in the bank.

READ: National Bank bets on mobile app upgrade to boost loan book

The embattled State-owned lender is also an acquisition target by KCB Group #ticker:KCB, which also has a significant government shareholding.

KCB, the largest bank by assets in Kenya with operations in neighbouring countries, said in June that it was looking to take up a majority stake in the lender but the deal is yet to be concluded.

In the nine months to September, NBK posted a 6.9 per cent drop in customer loans to Sh57.9 billion, while customer deposits inched up 1.8 per cent to Sh97.4 billion.

The bank’s volume of net non-performing loans stood at Sh19.8 billion during the period under review, slightly lower than what they were last year.

Its investment in securities, mainly government debt, increased 42 per cent to Sh38.7 billion, which helped its earnings government securities jump 36.7 per cent to Sh3.2 billion.

Kenyan banks have been piling on government securities over the last one year after their main source of income, interest on loans, was hurt by the rate cap law that limited interest rates on loans at four percentage point above the Central Bank rate (CBR).

The CBR was held at 10 per cent at a rate setting meeting last week.

READ: NBK faces biggest hit in KQ debt deal

ALSO READ: Banks lay off 1,933 staff on rates cap