Restructuring Strategy and Performance of Kcb Bank Limited

Abstract

Banks have had to restructure their business operations by downsizing, focusing on customers care, through tailored products and restructuring of non-performing loans in order to improve their financial performance and shareholder value. KCB has been restructuring successfully over the last 5 years. The objective of the study was to determine how restructuring strategy influence organizational performance This study adopted a case study design meant to determine the effects of organization restructuring on organizational performance at Kenya Commercial Bank. The interview guide was administered through personal interviews with the directors, managers and departmental heads of Kenya Commercial bank who were 15 in number. Content analysis was used to analyze data collected The study restructuring strategies had led to increase in loan recovery through debt and portfolio restructuring reducing non performing loans, lower costs in the banks led to increase in profit earnings in the banks, restructuring made loan tracking easier hence lower default rate and merger and acquisition between S& L and KCB Bank led to increase in mortgage borrowing hence increase in bank returns on assets. The financial restructuring strategy enhance liquidity in the bank, lower the cost of capital, reduce risk in the bank, avoid loss of control and improve shareholder value, introduction of improve debt cards and increase lending performance. The study revealed that portfolio restructuring led to asset quality management, enhances decision making, eliminate role duplication, improve internal efficiency, risk loss reduction and increase bank return on assets and return on equity. The study concluded that Kenya Commercial Bank had adopted restructuring strategies such as downsizing, debt restructuring, portfolio and financial restructuring strategies. The study concluded that restructuring strategies had led to increase in loan recovery through debt and portfolio restructuring, reducing non performing loans, lower costs in the banks led to increase in profit earnings in the banks, restructuring made loan tracking easier hence lower default rate and merger and acquisition between S& L and KCB Bank led to increase in mortgage borrowing hence increase in bank returns on assets. Restructuring strategies should involved top management deciding what the bank sought to achieve with the new structure such as to increase productivity, increase sales, improve financial service ,control costs, eliminate overlaps in responsibilities, maximize utilization of critical staff skills and expertise, establish clearly defined functional units or decentralize the decision making process. the study recommend that bank management should adopt restructuring strategies as it would result into increase in loan recovery through debt and portfolio restructuring, reducing non performing loans, lower costs in the banks led to increase in profit earnings in the banks, makes tracking easier hence lower default rate and increase in bank returns on assets. The study has established that restructuring strategies has significant effects on bank performance. The policy makers and government should sought measures formulate and develop regulatory framework to enhance financial restructuring strategy, debt restructuring, downsizing, merger and acquisition restructuring and portfolio restructuring in commercial banks to improve on bank performance