National Bank of Kenya (NBK) has issued a profit warning for the financial year ended December 2018 citing higher loan impairment charges and restructuring costs.
The Nairobi Securities Exchange listed lender now expects to post at least 25 percent lower earnings for the year ending December 2018 than the previous year.
The anticipated drop means its net profit for the period is unlikely to surpass Sh308 million.
“(This is) primarily due to increased loan impairment charges beyond initial projections due to a revision of valuations and values recoverable from the non performing loan portfolio,” said the firm in a cautionary statement.
“During the year the group incurred a one off restructuring cost (voluntary early retirement programme) as part of wider business alignment, the full benefit will be realized in 2019,” the statement added.
NBK has in the recent past registered a series of poor performance that has pushed its survival into an uncertainty mode.
The lender is in the grip of an operational crisis, stuck in a negative liquidity position as at the end of the first nine months of the year even as plans to sell it remain in limbo.
The NBK’s nine-month profit dipped by 84 per cent to Sh21.97 million owing to reduced lending.
Loans and advances to customers dropped by Sh9.9 billion or 17 percent to Sh48 billion compared to last year’s nine month position of Sh57.88 billion.
Treasury has approved for sale of NBK among other two State owned lenders Consolidated Bank (CBKL) and the Development Bank of Kenya (DBK) along with a number of other parastatals.
The plans are, however, yet to take off even after the State sought to hire a chief manager in charge of transactions as it moved to unlock the stalled sale.
The NBK’s core capital stood at Sh2.34 billion at the end of September 2018, about four times thinner than the Sh9 billion it had in September last year, leaving it significantly in breach of regulatory capital ratios and therefore constrained in its ability to lend.
Although its liquidity ratio is above the minimum requirement of 20 percent, the NBK’s total capital to total risk-weighted assets stood at a deficiency of or negative 10.4 percent as at the end of the first nine months of the year.
The NBK’s core capital to total deposit liabilities stood at a negative or deficiency of 5.5 percent while core capital to total assets stands at negative 7.9 percent.
Faced with such a dicey situation, the lender has a constrained room to take in more deposits.
The Treasury has injected limited amounts of capital into the lender which has not been sufficient to put the banks in the right legal position on the ratios.
The NBK was compelled to continue running on constrained capital after the Treasury and National Social Security Fund (NSSF) missed own-imposed deadline of injecting Sh4.2 billion fresh capital.
The NBK said late last year that it was still awaiting the money that ought to have come in by end of September, according to the formal commitments made by the Treasury and the National Social Security Fund (NSSF) in March last year.
“In March 2018, the principal shareholders gave formal commitment for a comprehensive capital solution. The board notes that this process is ongoing,” said CEO Wilfred Musau.
“The capital injection will unlock and bolster the key pillars of our growth and place the bank in even a better probability path in the long-term.”
But the delay leaves the NBK in a precarious situation given that the same government has for long been mulling over merging the bank with DBK and Consolidated Bank.
The NSSF owns 48.1 percent of the NBK while Treasury holds 22.5 percent stake, making them the two principal shareholders.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.