National Bank of Kenya to enable payments on the Kodris Africa Learning Platform

The National Bank of Kenya (NBK) has announced a profit after tax of KES 1.06 billion for the Financial Year 2024, signaling a significant turnaround from a KES 3.3 billion loss recorded in 2023. This recovery is attributed to improved operational efficiency, cost optimization, and digital transformation initiatives that strengthened the bank’s financial performance.

Financial Performance Overview

NBK’s financial results highlight a strategic shift toward balance sheet optimization, technological enhancements, and cost-cutting measures, allowing the bank to navigate a tough macroeconomic environment.

Key Financial Metrics:

Operating Income grew 12% to KES 12.65 billion, driven by non-funded income, which contributed 23% of the total.
Net Interest Income increased 24% to KES 9.8 billion, up from KES 7.9 billion in 2023, reflecting improved lending margins.
Interest Expenses rose 18% to KES 6.4 billion, impacted by increased borrowing and higher funding costs.
Operating Expenses dropped 22% to KES 9.1 billion, primarily due to reduced one-off expenses and cost-efficiency measures.
Credit Impairment Charge declined 21%, showcasing improved risk management strategies.
Customer Deposits fell to KES 98 billion, down from KES 118 billion in 2023.
Borrowings surged to KES 23 billion, up from KES 15 billion, as the bank sought alternative funding sources.
Net Loans and Advances declined to KES 75 billion, down from KES 79 billion, reflecting a more cautious lending approach.

Strategic Transformation: Efficiency & Digitalization

The bank’s transformation has been driven by investments in technology and operational efficiency. NBK implemented a new core banking system and enhanced its digital payments platform, improving customer experience and automating key banking processes.

Managing Director George Odhiambo emphasized the role of these strategic improvements, stating:

“The year 2024 has seen the Bank bounce back to profitability despite the rough macroeconomic environment that we encountered. This is highly attributed to the improved efficiency in our systems, diversifying revenue streams, and continuous improvement in customer service and experience.”

NBK’s cost optimization initiatives contributed significantly to the profit turnaround, reducing expenses while maintaining service quality. The bank also focused on expanding its digital banking ecosystem, offering more seamless transactions and innovative financial products.

Challenges and Market Conditions

Despite the strong financial rebound, NBK faced several challenges:

High-Interest Rate Environment: Increased interest expenses due to a tightening monetary policy led to higher borrowing costs.
Deposit Decline: Customer deposits fell significantly, necessitating an increase in external borrowing.
Lending Caution: The bank exercised a more risk-averse lending strategy, leading to a reduction in net loans and advances.

However, the bank’s ability to reduce credit impairment charges and improve risk management has positioned it well for sustainable growth.

Looking Ahead: NBK’s Growth Strategy

NBK remains committed to leveraging technology, operational efficiency, and customer-centric service delivery to sustain its recovery. The bank plans to continue:

Investing in Digital Banking: Enhancing mobile and internet banking capabilities to attract more customers.
Diversifying Revenue Streams: Strengthening non-interest income sources.
Sustainability-Driven Initiatives: Aligning financial solutions with long-term economic and environmental sustainability.

With these strategies in place, NBK is poised to strengthen its market position and sustain its profitability in the coming years.

Conclusion

NBK’s return to profitability in FY 2024, following a challenging 2023, is a testament to its resilience, strategic realignment, and focus on operational efficiency. The KES 1.06 billion profit after tax marks a significant milestone, setting the stage for future growth in Kenya’s competitive banking landscape.