A day after the Central Bank of Kenya backed management changes at troubled National Bank, NBK has announced that 2015 profit will drop by at least 25 per cent.
The lender, which also came close to declaring a profit warning last year with a 21.7 per cent drop in net earnings for 2014, said yesterday increase in bad loans would greatly reduce 2015 profit.
NBK made a net profit of Sh870.7 million in 2014 after it suffered higher operating costs and a one-off cost of Sh1.1 billion paid to 190 retrenched employees.
The bank warned investors that 2015 profits will be lower due to bad loans, which caused an increase in impairment charges.
Impairment charges are factored in a company’s books when an asset – which in this case is mostly loans – is evaluated to be worth less than what a company paid for it.
“The projected sale of one key low-yielding asset (approved by the board) was not completed in the year thereby reducing the projected income from the same,” the bank said.
On Tuesday evening, NBK announced the suspension of six managers, including CEO Munir Ahmed, pending an internal audit into its financial performance.
The five managers were not named.
The CBK confirmed the move, which it said was taken after a meeting with the bank’s board on Tuesday morning.
CBK said the board had raised some “emergent concerns” hence the suspensions.
“The CBK welcomes these timely actions to strengthen the NBK while maintaining smooth operations, and that will protect the financial system,” the regulator said.
NBK’s financial performance has been up and down in the last few years, following the departure of thelate Reuben Marambii who joined in 2000 from the CBK to help transform the bank which was facing collapse under the weight of accumulated bad loans.
In 2011, while still under Marambii’s guidance, it announced a dividend pay of Sh0.50 per share ending a 12-year earnings drought for shareholders.
Three years ago, it also issued a profit warning before reporting a 52.8 per cent drop in net profit to Sh729.7 million in 2012 from Sh1.54 billion recorded in 2011, due to accrued bad loans.
Shareholders are staring at another year without dividends based on the declining performance.
In 2014, NBK was among five banks that violated some of the CBK guidelines.
Financial statements up to March 2015 show that state-owned NBK had not met the minimum statutory total capital to total risk weighted assets ratio of 14.5 per cent.
NBK’s was at 12.88 per cent.