Capital-starved National Bank of Kenya’s (NBK) deposit base shrank by Sh9.76 billion in the three months to March despite offering generous interest rates of up to seven percent to attract cash-rich depositors.
The lender’s latest quarterly report shows that it had Sh89.1 billion in customer deposits, which was a 10 percent dip from Sh98.87 billion at end of December last year.
NBK chief executive Wilfred Musau last October said depositors would enjoy interest rates of up to seven percent in efforts to turn around its fortunes that have taken a hit in recent years.
“As a bank, we have chosen to provide full benefits to our existing and new savings account customers by giving them up to seven percent interest on all savings as we celebrate our 50th birthday,” he said in October.
The offer increased interest earned on customer deposits from 6.3 percent.
Depositors of more than Sh2 million were to get seven percent interest while those with between Sh50,001 and Sh2 million were to earn five percent interest. Those with between Sh5,001-Sh50,000 earn one percent on their deposits.
The fall in customer deposits combined with constrained capital saw the bank cut lending to customers from Sh47.77 billion as at December last year to Sh45.92 billion in March.
Top shareholders the National Social Security Fund and the Treasury had promised to inject Sh4.2 billion by last September but did not provide the funds, putting the bank in continued breach of the Central Bank of Kenya ratios linked to capital.
The bank’s core capital fell from Sh2.84 billion in March 2018 to Sh2.02 billion to March, which is significantly lower than that of its peers.
KCB Group is set to acquire NBK in a share-swap deal by October in efforts to stay afloat and protect its more than 650,000 customers.