- State-Run lender delays growth plans due to lack of capital
- Bank requires 7 billion shillings to grow balance sheet
National Bank of Kenya Ltd. pushed back targets to strengthen its balance sheet after the government failed to approve proposals by the state-controlled lender to raise capital, Chief Executive Officer Munir Sheikh Ahmed said.
National Bank, which has total assets of 118 billion shillings ($1.2 billion), requires 7 billion shillings in fresh capital to enable it to compete with lenders including Barclays Bank of Kenya Ltd., Ahmed said in an interview Wednesday in the capital, Nairobi. Barclays is Kenya’s fifth-biggest bank by assets, while National Bank currently ranks 10th, according to data compiled by Bloomberg.
“The bank needs capital to grow at a rapid pace, but this has been delayed,” Ahmed said. “We are relying on profit generated month-on-month to grow the balance sheet. Trading profit becomes part of capital. It’s pure organic growth and that’s a slower pace.”
The lender intended to raise additional capital through a rights offer that the board approved in 2014, but the “government had to come through” on the plan, he said. Pursuing a growth program financed by its own resources delays the bank’s ambitions of becoming one of the leading banks next year to 2020, Ahmed said.
Kenyan Treasury Secretary Henry Rotich said in October the government is considering merging National Bank with Consolidated Bank of Kenya Ltd., Development Bank of Kenya Ltd. and other state-owned lenders as part of a plan to sell government assets to private investors. Rotich also proposed in his annual budget in June that minimum capital requirements be raised to promote consolidation in the banking industry, though that plan was rejected by lawmakers after opposition from the central bank.
The proposed merger of the state-owned banks “doesn’t take away our strategy to grow to top-tier status,” Ahmed said.
“The other banks mentioned are small,” he said. “It doesn’t alter the scale of our business that much. The merger concept is being pursued by shareholders. There hasn’t been any formal communication on this."
Kenyan Treasury Principal Secretary Kamau Thugge didn’t answer calls seeking comment.
National Bank was founded in 1968 and its shares were listed in 1994, when the government sold part of its stake. In 1996, the state whittled down the shareholding to 22.5 percent. The state-owned National Social Security Fund owns 48.1 percent of the lender.
National Bank shares climbed 1.2 percent to 16.85 shillings on Wednesday, bringing it’s gain to 6.3 percent this year. The lender’s price-to-earnings ratio stands at 2.64, compared with 6.29 at Kenya Commercial Bank Ltd., the nation’s biggest lender by assets.