National Bank profit up 20 p.c.

National Bank of Kenya has beaten the bad debts burden to return a 20 per cent 2009 full year pre-tax profit as it cleans its balance sheet ahead of privatisation.

The bank, whose pre-tax profit increased from Sh1.8 billion in the previous year to Sh2.2 billion, says it will issue bonus shares rather than resume dividend payments.

Managing director Reuben Marambii at an investor briefing on Thursday said the bonus share is from a premium account operated by the bank’s shareholders adding that it was in order to clean the balance sheet before privatisation.

“We are not going to pay a dividend. The directors are pleased to recommend, subject to approval, a bonus issue in the proportion of two new ordinary shares for every five ordinary shares held,” said Mr Marambii.

The bank grew its lending to customers by 47 per cent from Sh8.9 billion to Sh13 billion as customer’s deposits went up from Sh34 billion to Sh42 billion, a 24 per cent increase.

Interest income rose by 19 per cent from Sh3.8 billion to Sh4.5 billion while interest expense increased by 40 per cent from Sh800 million in 2008 to Sh1.2 billion.

The bank is among a host of firms that the government is seeking to divest from in a privatisation round, although Mr Marambii says the process may be pushed to December rather than June as issues between principal shareholders are yet to be resolved.

“It was to be completed by June but it may spill over to December this year. So the target is now December,” he said.

The government holds a 22.5 per cent direct stake in the bank and 48.05 per cent through the state pension fund, National Social Security Fund.

The bank was a victim of huge losses during the last regime due to bad debts mainly taken by politicians. It has not paid any dividend in recent financial years despite reporting profits.

NBK after lagging behind its peers in expansion now intends to open up about 20 branches this year.

“We have not been expanding these last few years. We were simply consolidating, but now we are moving. We have been left behind by quite a few banks. Now we want to catch up,” said Mr Marambii.