KCB Group is parting ways with the National Bank of Kenya (NBK) approximately four years after its acquisition, signaling the challenges posed by the loss-making unit to the more than century-old lender.
The board of KCB had been exploring various options since September last year, including injecting additional capital, a strategy it had previously employed.
However, NBK only appeared to be a drain on resources. KCB bank has invested around Sh14 billion into NBK up to date since its acquisition in December 2019.
To maintain NBK, KCB would have needed to inject between Sh5 billion and Sh8 billion in additional capital to meet the Central Bank of Kenya’s (CBK) minimum capital requirements and sustain the lender’s operations, stated Paul Russo, CEO of KCB Group.
With KCB Bank Kenya, which contributed 67.8 percent of the group’s profit, nearing the limit on capital ratios, the board was reluctant to risk breaching CBK The board deliberated on three options: injecting funds, fully integrating NBK into KCB Kenya, or divesting from it. Ultimately, the board concluded that selling NBK at 1.25 times the book value, amounting to approximately Sh13.2 billion, was the most favorable choiceregulations by further supporting NBK.
