Family Bank denies mass layoff plan

Family Bank has clarified that it is not planning a mass layoff after an internal memo asking workers in the bank to take early retirement was leaked over the weekend.

Responding to Money & Markets questions, the bank’s management said what it had in mind was not a retrenchment exercise but a voluntary early retirement incentive programme.

The bank does not have a predetermined number of workers it wants to let go in the early retirement programme or how much it will save once it is completed.

norman-mudibo

“This voluntary process is intended for staff some of who may already be considering early retirement and is not driven by a predetermined target number. The programme is entirely elective and only those who meet the programme’s eligibility criteria are welcome to participate. Due to the fact that the programme is entirely elective and there is no predetermined target number, it is early to quantify what this voluntary process will cost. At the appropriate time, we should be able to appropriately respond to the specifics of this question,” said the bank’s Senior Manager for Corporate Communication and Public Relations Norman Mudibo (pictured).

Tension was high among Family Bank staff over the weekend after the bank management asked them to apply for early retirement. In the internal memo seen by Money & Markets, the management has given the bank’s workers 14 days starting October 1 within which those willing to accept an early retirement package should have submitted their applications.

Bank workers who spoke to us feared this was a wider plan for a mass layoff pushed by Chairman Wilfred Kiboro to maximise shareholders returns. The board has been under pressure from institutional shareholders to deliver better returns in line with other banking industry players, which have a 30 percent average return on equity.

Family Bank is ranked the 12th biggest bank in Kenya in both market share and profitability. However, the bank has struggled to maintain an attractive return on investment. Last year, the bank return on equity was 16.8 percent from 16.4 percent in 2014. But this performance is still below the bank’s potential given that the same ratio was at 20 percent in 2013.

In responses to our questions, the bank management alluded to the pressure to turn around its performance on this ratio. Mudibo said the early retirement programme is part of a transformative move that entails assessment of the bank’s business model with a focus on deploying capital efficiently to improve overall performance and growth of the bank.

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