Ecobank Kenya has just received a capital infusion of Sh780 billion from its parent company. Photo/ANTHONY KAMAU By JOHNSTONE OLE TURANA Ecobank Kenya has received a fresh injection of Sh780 million from its parent company in a bid to shore up its capital base and position it for intense competition. The bank's core capital currently stands at Sh1.1 billion. The injection of the new capital will push the capital base to nearly Sh1.9 billion, comfortably surpassing the new limit of Sh1 billion to be attained by all banks by the year 2012. At present, the statutory capital base requirement is Sh250 million which is to rise to Sh500 million by the end of this year and subsequently to Sh1 billion by 2012. "The injection will give us the leverage to grow our lending business, reach new markets through branch expansion, and roll out alternative delivery channels," said the bank's managing director Tony Okpanachi. Mr. Okpanachi said the bank was scouring the local stock brokerage market for an acquisition through its investment arm, Ecobank Development Corporation. The bank is also readying itself to set up shop in Tanzania, its 29th operation in the continent. The bank has already acquired the necessary approvals from the country regulatory authority to start operations and intends to open doors by year end. Other markets the bank plans to foray into include Zimbabwe, Equatorial Guinea and Angola. Cross-border trade Mr Okpanachi said the bank would ride on its footprints in the continent to enhance cross-border trade. Since Ecobank took over the former East Africa Building Society, it has added 8 branches and rolled out 24 Automated Teller Machines (ATM) points. t plans to open 3 more branches before the end of the year and push its ATM outlets to 60. The investments have to date largely been funded by ploughing profit back into the operation. Capital expenditure, says Mr. Okpanachi, was the reason behind the dip in pre-tax profit for the first half of the year. The bank's pre-tax profit performance dipped by 33 per cent to Sh43 million from Sh65 million realised in a similar period last year. During the same period the bank grew its loan book by 2 per cent to Sh5.03 billion. However, the bank made up the subdued earning from the core business of lending to the private sector and households by increasing its investment in government treasury bills and bonds. The bank increased its buying into government risk-free paper by 183 per cent toSh2.98 billion from Sh1.05 billion. This huge investment resulted in a threefold increase in return to Sh147 million from Sh46 million on a year on year basis. Despite the banking industry increasingly carrying the weight of non-performing loans (NPL) as default swell due to the subdued economy, Ecobank's NPL book has improved on a quarter on quarter basis from Sh3.9 billion to Sh3.1 billion. However, the bank raised its loan loss provision three fold to Sh111 million from Sh38 million in the first quarter in line with expectations of increased loan defaults as the economy continued to experience a slowdown. Ecobank sees consolidation of its recent investments as key to its unlocking value and keeping overhead costs down for the rest of the year. The move is in line with the sentiments of financial analysts who say companies need to contain costs order to improve their bottomlines in view of the prevailing uncertain market conditions. "Banks need to limit growth of their overhead costs especially in the current constrained environment to have healthy bottom lines", said a financial analyst with African Investment Bank.