This archive report was first published on 10 May 2021.
Published on May 10, 2021, KCB Group has provided a crucial lifeline to its subsidiary, National Bank of Kenya, by advancing a Sh3 billion long-term loan.
The loan aims to help the subsidiary meet its minimum capital requirements, which had been a major constraint on its operations.
According to KCB's latest annual report, the group had initially injected Sh5 billion into National Bank of Kenya in December 2019, following its acquisition of the subsidiary in the same year.
However, despite this initial support, National Bank of Kenya continued to breach statutory capital levels, which had constrained its capacity to take more deposits and expand its loan book.
As a result, the subsidiary's core capital to total risk-weighted assets stood at 8.7 per cent in the year ended December, 1.8 percentage points below the statutory minimum of 10.5 per cent.
"In Kenya, the group injected Sh5 billion into National Bank of Kenya, the subsidiary the group acquired in 2019. In 2021, KCB has increased the capital in NBK via tier-II debt of approximately Sh3 billion to enable the subsidiary meet the capital adequacy requirements and also to bolster its resources," KCB said in its report.
The loan, combined with recoveries of bad debt, is expected to alleviate National Bank of Kenya's capital constraints and position it for growth into the future.
As part of the recapitalisation efforts, National Bank of Kenya will continue to operate independently but its systems will be linked with those of the parent company to boost efficiencies, customer service, and risk management.
