NCBA Group #ticker: NCBA spent Sh700.7 million to trim its workforce in the year ending December, as the lender sought to reap the cost-cutting benefits of the merger of its constituents – the former NIC Group and the Group CBA.
The Nairobi Stock Exchange-listed firm says the job cuts were implemented in Kenya, its largest market.
Its total staff count dropped to 2,392 in the review period from 2,598 the previous year.
“We restructured the Kenyan business to create a more efficient target operating model that can meet our strategic ambitions,” says CEO John Gachora in the bank’s latest annual report.
“As part of this process, we ran a voluntary exit program for employees who wanted to consider opportunities outside of the organization. Through this process, several of our senior executives chose to leave the organization. “
Those who withdrew from the NCBA in the review period included former CEO Jeremy Ngunze.
In addition to reducing its workforce, the bank also closed excess branches in several locations.
“In June 2020, we rationalized our branch network in Kenya. The rationalization saw 14 branches that were placed or in close proximity merge into one of the selected branches, ”said Mr. Gachora.
“Staff members from the affected branches were reassigned across the bank’s network and business units.”
NCBA is among the top banks that spent hundreds of millions of shillings last year on staff restructuring amid reduced profitability and increased investments in digital banking infrastructure.
Standard Chartered Bank of Kenya #Ticker: SCBK laid off 200 employees at a cost of Sh1.35 billion, while Absa Bank Kenya #ticker: ABSA spent Sh1 billion in a financial year that saw its workforce drop by more than 150 .
The job cuts came amid declining profitability in the era of the Covid-19 pandemic, which increased defaults. Banks also faced increased provisions for bad debts, the suspension of charges on mobile banking transactions and accommodation of borrowers, including repayment holidays.
NCBA reported a 73.8 percent increase in net income in the first quarter ending March, helped by higher interest income and lower loan loss provisions.
The lender’s net profit stood at Sh2.8 billion in the review period compared to Sh1.6 billion in the prior year.
It marks the highest earnings growth among publicly traded banks and is followed by Equity Bank’s #ticker: EQTY 63 percent earnings jump to Sh8.6 billion in the same period.
The NCBA provision for defaults decreased by Sh1.1 billion to Sh2.6 billion even though non-performing loans increased by Sh722.3 million to Sh39.5 billion.
Interest income on loans and investments in government debt increased 8.1 percent to 11 billion shillings as the lender increased its purchase of risk-free assets.
NCBA’s results were also driven by a $ 479.1 million deferred tax in the review period.
Deferred taxes are obligations that arise in the current period but will be paid in the future.