NIC Bank’s profit flat as bad debts rise 46.2 per cent
A branch of NIC Bank on Wabera Street in Nairobi. PHOTO | FILE
NIC Bank’s bad debts rose 46.2 per cent to Sh13.3 billion in the first quarter ended March, leaving its net profit flat as provisions for loan losses tripled.
The bank’s net profit stood at Sh990.7 million in the period compared to Sh993.8 million a year earlier. This came as loan loss provisions jumped 212.2 per cent to Sh1.3 billion from Sh421.1 million.
The provisions were the main driver of the 53.6 per cent increase in total operating expenses to Sh2.6 billion.
NIC’s loan book expanded by Sh6.4 billion to Sh111.9 billion, which helped to raise total interest income 32.8 per cent to Sh5 billion. Non-interest income, including commissions and forex trading, rose 15.3 per cent to Sh1.1 billion.
Interest expenses increased 30.1 per cent to Sh2 billion, partly reflecting the 14.7 per cent rise in customer deposits to Sh110.3 billion.
Interest rates in Kenya, its most important market, rose from the second half of last year to touch highs of 27 per cent.
The interest rate jump is expected to have raised income from loans but also funding costs for lenders such as NIC that rely heavily on deposits from cash-rich firms that have the muscle to negotiate for better rates.
While the jump in loan loss provisions raised the total operating expenses, there were reductions in a number of items including staff costs that dropped to Sh637.8 million from Sh681.8 million.
The lower payroll cost is a signal that NIC either reduced its staff count or cut their aggregate compensation in the review period.
NIC continues to rely heavily on Kenya for its earnings besides pursuing an aggressive regional expansion over the past few years.
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