National Bank of Kenya(NBK) considers closing some of its 86 branches to cut cost following its track record as a financial service provider with the biggest bad-loan book in the Kenyan banking industry stated Wilfred Musau, Chief executive officer.
Despite having started job cuts in 2017, staff costs went up by 98 million, partly due to retrenchment costs, the bank is still having difficulty keeping up is now considering shutting its branches.
The cost-cut, attributed to the capping of interest rates that reduced banks’ premium on loans, was accompanied by interest income from loans and advances to customers dropping by Sh3 billion, 55 per cent to Sh2.45 billion. Lenders in the country are left with no choice but to lower their expenses as consumers embrace digital banking.
Unfortunately, NBK is not alone in its branch closure plans as other banks in the East African country have closed a total of at least 39 branches and cut 1,620 jobs since the caps were announced in 2016 stated Cytonn Investment Management Ltd, a Nairobi based money lender.
As of December 2013, National Bank of Kenya’s asset base was valued at approximately US$1.07 billion (KES:92.5 billion), with shareholders’ equity valued at about US$137.2 million (KES:11.85 billion). At that time, National Bank of Kenya was ranked number eleven, by assets, among the forty-three commercial banks licensed in the country.
However, NBK with 64 percent of its stakes owned by the Kenyan Treasury and the state-run National social security, has been recorded as the worst non-performing loan book in Kenya despite customer deposits growing by Sh3.2 billion to Sh98.8 billion.
In 2017 NBK’s, Gross non-performing loans stood at Sh29.4 billion, up by 7.7 per cent compared to June 2016. Its loan book shrank by Sh7.8 billion from Sh64.8 billion to Sh57 billion and by the third quarter of 2017, the bank’s non-performing loan stood at 44 percent of total loans. Stated Cytonn Investment.
In 2018, NBK’s shares have dropped 12 percent, under-performing the Nairobi Securities Exchange All Share Index, which has risen 5.9 percent over the same period noted Bloomberg. the number of branches to be shut down would be disclosed by NBK in the second quarter of the year noted Musau. According to him, “This is a decision based on the strategic positioning and profitability of a branch”