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Post Bank making Sh3 million loss per day

Kenya Post Office Savings Bank (Postbank) future is unknown after revelations emerged that it is making a Sh3 million loss every day.

In a memo by the National Treasury, the lending company is now eating into shareholders’ and depositors’ funds, which could get it into a crisis.

The financial institution is currently operating on a working capital of negative Sh15 million, up from negative Sh9 billion in 2016.

“It was noted that the bank’s working capital was negative over the review period and projected to worsen in the short and medium-term,” stated Treasury Principal Secretary Charles Muia through a memo to  managing director of Postbank Raphael Lekolol dated April 6.

The bank is yet to formulate a turnaround plan or a restructuring strategy for consideration by the authorities.

The Ministry has ordered Postbank to adopt an appropriate business model that has the ability to create high revenues and turn around the business to profitability.

Despite generating Sh2.34 billion in revenue in the financial year ending June 2020, the bank leaked Sh2.6 billion to administrative and operational costs.

The board held a meeting in January 2021 with the Ministry, and an agreement was struck that the committee would submit a business recovery strategy.

However, the committee has not done that to date.

“The submission of the startegy was intended to be a commitment by the aboard on actionable plans and to give assurance to the Treasury that the board is taking remedial actions to reverse the worsening financial performance of the bank,” read part of the memo.

KMPG, which was contracted to develop a strategy paper, has already done its part, but the board members are yet to agree on the numbers put forward.

Postbank is entirely owned by the government. However, chances for a bailout by the state are slim due to the prevailing conditions.

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