Questions raised over proceeds of NBK branch sales

Questions have emerged over the proceeds of the 2015 sale of National Bank of Kenya (NBK) branches to meet regulatory requirements.

The National Assembly’s Finance Committee probing the impending sale of the bank to KCB Group heard on Tuesday that the NBK board sanctioned the sale of the 13 branches in February 2015 to improve on the bank’s liquidity. NBK Chairman Mohamed Hassan told the committee the lender booked Sh759 million from disposing of the assets, which allowed it to write new loans worth Sh4 billion.

“The bank realised proceeds of Sh759 million from the sale, which contributed to Sh501 million to core capital, unlocking the writing of new loans and deposits worth Sh4 billion and Sh6 billion respectively,” Hassan told the committee at Parliament buildings.

But court papers earlier filed by the Capital Markets Authority (CMA) against the bank’s management showed that the branches fetched Sh847.9 million to reflect a variance of Sh88.9 million. Prodded by the committee members on the decision to dispose of such a huge number of branches at a go, Mr Hassan defended the move, saying besides shoring up the lender’s core capital, it also helped meet guidelines on investments in non-core assets.

Under the guidelines, banks are not supposed to have more than 25 per cent of their core capital invested in other businesses. “The reduction in non-core assets also reduced the levels of non-compliance to regulatory guidelines on investments,” he said.

According to CMA fillings, the said gains on disposal of assets were reduced to Sh111.3 million in December 2015 after adjustments were made pursuant to external auditor recommendations. Hassan said that the board should be credited for ensuring the bank stayed afloat on borrowed tier I and II capital that helped it to post a profit before tax of Sh80 million in 2016, Sh785 million in 2017 and Sh456 million in 2018. A look at the lender’s book shows that it made a net profit of Sh736 million in 2012, which rose to Sh1.1 billion the following year, before dipping to Sh870 million in 2014.