NIC Bank Group has announced that it will focus on consumer driven credit growth after the lender reported a decline of 9.3% in pre-tax profit for the first half of 2017 to Sh 2.92 billion from Sh 3.22 billion the previous period.
The decline was driven by a reduction in lending margins as a result of the Banking Amendment (2016) Act (“Rate Cap”), which came into effect in September 2016.
Total assets increased to Ksh189.5 billion, a 12.1% year on year increase from KES 169.1 billion the previous year. The Bank’s total liabilities closed at KES 156.9 billion driven by a strong growth in customer deposits. Customer deposits increased by 18.9% during the period.
The Bank’s loans and advances to customers increased by 4.1% year on year to Sh 116.8 billion. The growth was primarily led by lending to SME’s and Asset Finance customers.
Non-performing loansgrew slightly from Sh 13.8 billion as at December 2016 to KES 14.3 billion as at June 2017, in what the company said was as a result of a challenging operating environment.
The Bank’s cost to income ratio increased to 41% from 35% reported a year ago. This has been impacted mainly by lower total operating income as a result of the interest rate cap introduced in September 2016. Total operating income declined by 10% year on year to KES 7.4 billion from KES 8.2 billion while total operating expenses (excluding loan loss provisions) increased year on year.
During the period under review, the Bank saw its customer account numbers increase by 11%. The Bank attributes this growth to its continued investments in new branches.
Group Reorganization:
Having obtained all required approvals, the Bank Reorganization will become effective on 31st August 2017. Following the Reorganization, the Bank will be known as NIC Group PLC and the Kenyan banking operation will be under NIC Bank Kenya PLC. The Group Reorganization is expected to have minimal impact on shareholders, customers and employees.
Outlook:
The Bank expects consumer driven credit growth to remain muted in view of the prevailing economic environment. Despite these headwinds, the Bank intends to open 8 new branches in key centres along the Coast, Nairobi, Nanyuki, Narok and Kitale.
