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Postbank’s Ksh3 Million Daily Loss Eating Into Shareholders, Despositors’ Funds


Kenya Post Office Savings Bank (Postbank) is facing an uncertain future following revelations that it is making a Ksh3 million loss every day.

According to a memo by the National Treasury quoted by the Star, the lender is now eating into shareholders’ and depositors’ funds, which could land it into a crisis.

Currently, Postbank is operating on a working capital of negative Ksh15 billion up from negative Ksh9 billion in 2016.

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

Read: Treasury Approves Sh810 Million For Posta Kenya Employees 7 Month Salaries

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

The Ministry has directed Postbank to adopt an appropriate business model that has the potential to generate high revenues and turn around the business to profitability.

Despite generating Ksh2.34 billion in revenue in the financial year ending June 2020, the lender leaked Ksh2.6 billion to administrative and operational costs.

In January, the board held a meeting with the Ministry and an agreement was struck that the board would submit a business recovery plan. However, the board has not done that to date.

Read: DCI To Probe Posta Over Unpaid Sh159 Million Welfare Money

“The submission of the plan was meant to be a commitment by the board on actionable strategies and to give assurance to the Treasury that the board is taking remedial measures to reverse the deteriorating financial performance of the bank,” the memo read.

KPMG, 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 wholly owned by the government. However, chances for a bailout by the government are slim due to the prevailing conditions.

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Written by Francis Muli

Follow me on Twitter @francismuli_. Email

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