KENYA – National Bank of Kenya, a newly incorporated subsidiary of the KCB Group posted an after-tax profit of KSh407.15 million (US$4.07m) in for the three months ending September 30.

This represents increase from KSh21.968 million (US$0.21m) after tax profit for a similar period in 2018, that was however inclined to a transaction charge of KSh535.49 million (US$5.35m) in the bank’s balance sheet.

Interest income marginally increased by about 4.7 per cent to KSh6.6 billion (US$66m) in the nine months to September 30, 2019 compared to KSh6.3 billion (US$63m) during the same period last year.

Operating income for the period stood at KSh6 billion (US$60m), a 7 per cent increase from KSh5.6 billion (US$56M) over the same period in the previous year.

This was mainly due to growth in interest earned from loans and advances and other earning assets, coupled with continuing diversification of funding base, which resulted in reduction of interest expense by eight per cent year on year.

The net interest income from loans and advances increased by 11.6 per cent to Sh4.60 billion (US$46m) over the period.

Total expenses, however, increased by 4 per cent year-on-year to Sh5.4 billion (US$54m), mainly driven by increased loan loss provisions.

Customer deposits, reduced to Sh82 billion (US$820m) as at September 30, compared to Sh93 billion (US$930m) over the same period in 2018, driven by reduced customer flows and tight liquidity in the market.

Net loans and advances declined by Sh150 million (US$1.5m) to Sh47.8 billion (US478m) over the same period issued due to recoveries collections made on existing loans.

Total assets dropped marginally by five per cent to Sh107.2 billion (US$1.07bn) compared to Sh112.45 billion (US$1.12bn) in the same period last year.

The bank’s performance has been adjusting after a declared intention of a take over by KCB Group that was first made public in April.

In September, Central Bank of Kenya approved the takeover, giving KCB greenlight to acquire 100 per cent stake of NBK.

The bank’s managing director Paul Russo attributed the rise in profitability to growth in operating income during the period under review, adding that the future looks even more promising since it is now part of a bigger stronger family.

“With the improved capital base, our focus is now on integrating NBK into the group, while continuing to deliver innovative financial solutions that are attuned to the dynamic needs of our customers. We are optimistic about the bank’s fortunes,” Russo added.

The bank, which has a legacy of a huge non-performing loan portfolio, grew following rise in interest income. Despite the growth in its bottom line, the bank still faces daunting challenges key among them rising expenses and declining customer deposits.