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State banks bleed as privatisation beckons :: Kenya



Consolidated Bank has been earmarked for sale.

State lenders continued on a troubled streak for most of this year, losing money even as the government eyes privatisation of the banks.

National Bank of Kenya (NBK) saw an 84 per cent decline in net profits for the nine months to September to Sh21 million from Sh138 million at a similar period last year, while forking out Sh2.9 billion to pay its staff.


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Its bad loans book grew from Sh29 billion to Sh30 billion but the bank still clawed back loan insurance for up to Sh232 million – which meant that it did not provide for any event of default from the money made during the period.

The bank’s management attributed this to aggressive loan recoveries.

“In the last nine months of 2018, the bank has made good progress on remediation and recoveries of non-performing loans, which is likely to get better in the final quarter as operating conditions improve in the country,” said Managing Director Wilfred Musau.

However, NBK has recently been rocked by a scandal of writing off bad loans where some officials are said to ask for kickbacks in return for the debt reprieve.

Another State lender, Consolidated Bank, sunk into a Sh404.9 million net loss from Sh301 million loss last year.

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The bank has come closest to being sold with the Privatisation Commission even seeking a transactional advisor.

Consolidated Bank, which needed a Sh500 million boost from the Government this year to stay at 20.8 per cent liquidity – just marginally above the 20 per cent minimum required by Central Bank of Kenya – is in no better shape than the nine failing lenders that were lumped together in 1989 to form it.

The nine included Jimba Credit Corporation, Union Bank of Kenya, Kenya Savings and Mortgages, Estate Finance Company of Kenya, Estate Building Society, Business Finance Company, Citizen Building Society, Nationwide Finance Company and Home Savings and Mortgages.


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State lenders have often been allowed to test the limits of regulation, breaching Central Bank statutory requirements as the Government rescue is usually slow in coming due to bureaucratic bottlenecks.

Potential sale

NBK has recently been linked to a potential sale to Kenya Commercial Bank, which would benefit from banking the government and thus secure huge deposits.

However, the latter has opted to buy failed rival Imperial Bank and is therefore less likely to turn to NBK.

Housing Finance, in which Government has trimmed down its shareholding to 2.4 per cent and ceded ground to Britam and Equity Bank as leading owners, also made a loss of Sh332 million, down from Sh159 million profit last year.

The mortgage subsequently issued a profit warning yesterday, saying earnings for the full year would be “potentially 25 per cent lower” than that reported last year.

It cited downward revisions of the Central Bank Rate that led to reduction in lending rates and increased staff costs to a redundancy exercise during the year.


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