National Bank of Kenya has announced a surprising Sh379.99 net profit for the year ending December 31, 2017.
This is an increase from Sh55.29 million recorded in 2016 to Sh379.99 million.
The lenders gross profit was Sh785 million within the review period.
The bank stated that the growth was recorded despite an unfavorable macroeconomic environment and a protracted electioneering process.
It also announced that its major shareholders – the Government of Kenya and NSSF – have made commitments to address its capital requirements by injecting Sh4.2 billion as tier two capital through a subordinated loan.
In a letter addressed to Central Bank of Kenya, Treasury has indicated its commitment to provide a comprehensive and long-term solution on the capital position to bridge compliance, support business growth and meet ICAAP requirements.
The letter indicates that the core capital injection will be fast-tracked and is expected to be completed within a period of 180 days.
“Our transformation agenda momentum continued unabated during the 2017 financial year as we made strategic strides in addressing NPL’s, cost management, improving operational efficiency and leveraging on technology to deliver solutions to customers.”the bank’s managing director, Wilfred Musau said.
Its net Interest income for the period was Sh6.7 billion , a 14 per cent drop from Sh7.7bn same period in 2016 mainly due to effect of interest rate capping law reducing interest earned from loans and advances.
This was partially compensated by an increase in interest earned from Government securities and improved funding mix which reduced interest expense by Sh0.9 billion.
Total operating revenues closed at Sh9.1billion compared to Sh10.6bn in 2016 representing 14 per cent decrease due to impact of interest capping and lower fees as volumes of new loans dropped.
As part of diversification of revenues, Revenues from subsidiaries (NBK Insurance agency limited and National trustee Investment services limited) grew 45 per cent year on year from Sh74 million to 108 million.
Loan provisions declined from Sh2.4 billion to Sh0.76 billion benefiting from reduction in NPL book and improved credit management ensuring minimal negative migration.
Total operating expenses declined by 6 per cent to Sh7.6bn from Sh8.1 billion over the same period last year due to improved cost management and rigour in operational controls.
Customer deposits grew 1 per cent from Sh93.8 billion to Sh94.2 billion on account of customer confidence in the bank and new products such as diaspora banking, enhanced natmobile and improved client service.
Net loan & advances reduced by 5 per cent over the same period driven by reduced loan volumes while its non-performing loans reduced to Sh2 billion from Sh30 billion to Sh28 billion
The capital injection is poised to bolster its focus on improving customer transactions, manage operational and market risks, whilst enhancing its drive to grow current customer transactions and acquisitions.