Plans by the National Bank of Kenya to raise additional capital to ease its financial constraints suffered another setback last week after the National Social Security Fund, the bank’s major shareholder, turned down a proposal to sell part of the lender to a strategic investor.
The medium-sized bank is desperately looking to raise funds following a botched Ksh13 billion ($126.32 million) cash call from existing shareholders, which was rejected by the government and the Capital Markets Authority (CMA).
The bank’s board is now looking for alternative sources of financing, including from foreign creditors.
NSSF, which owns a 48.06 per cent stake in the bank, is opposed to the proposal to bring in a strategic partner over fears that vested interests may destroy the state-owned lender.
“We don’t want a strategic partner. The bank should sell more shares to the public through an initial public offering. Kenyans will buy these shares,” Francis Atwoli, secretary-general of the Central Organisation of Trade Union (Cotu) told The EastAfrican.
Sources said besides the merger proposal, the government is also considering a strategic partner to turn around the fortunes of the struggling lender, which houses the accounts of most parastatals.
Barely two weeks ago, the bank’s board applied for a loan of Ksh3 billion ($29.15 million) from the pension fund to boost its capital adequacy ratios and lending business whose underperformance has seen its share price drop to as low as Ksh10.6 ($0.1) per share on the Nairobi Securities Exchange.
“This is an issue that requires a lot of consultation with the government and the central bank because this is workers’ money. We have not refused to give them money but we have not yet reviewed and discussed their proposal,” said Mr Atwoli.
Ownership
The National Treasury owns a 22.5 per cent stake; it and the NSSF, have a combined 70.56 per cent stake in the bank.
NBK’s net profit for the three months to March 31 declined 32 per cent to Ksh334.57 million ($3.25 million) from Ksh494.95 million ($4.8 million).
Non-performing loans (NPLs) increased by 59 per cent to Ksh16.97 billion ($164.9 million) from Ksh6.96 billion ($67.63 million); while loan loss provisions grew by 44 per cent to Ksh3.94 billion ($38.28 million) from Ksh2.18 billion ($21.18 million).
Source: The East African
