NIC Bank set to retrench 32 senior-level employees

NIC Bank is set to retrench 32 senior level employees to contain operating costs even as the lender announced that its net profit for the nine months to September declined 6.3 per cent on higher bad loan provisions.

The tier two lender Tuesday reported that its quarter-three net profit stands at Sh3.3 billion, compared to Sh3.5 billion that it recorded during a similar period last year.

NIC’s provisions for bad loans rose five times to Sh3.1 billion following increase in loans that have not been serviced for more than three months to Sh14.2 billion from Sh6.8 billion as of September last year.

The bank’s management has resorted to downsizing its human resource to keep costs in check, becoming the latest lender to announce staff cuts following the recently enacted interest rates cap which is expected to narrow their margins.

“We expect 32 of our employees to leave as a result of restructuring,” a highly placed source in the bank, and who is privy to the restructuring plan, told the Business Daily.

The lender’s payroll rose by 2.3 per cent to Sh2.2 billion in the nine months to September, while its staff count at the end of last year was 1,111 —representing a growth of 400 since 2011.

NIC joins other lenders such as Family Bank, Sidian and First Community which have announced job cuts.

The capping of interest rates in August is expected to eat up the interest margins traditionally enjoyed by banks, forcing them to look at cutting costs to continue recording high profits.

READ: Anxiety for Kenya bank workers as 1,000 lose jobs in three months

NIC recorded a drop in loan book over the three-month period to September, allowing the bank to increase its lending to government.

The lender’s loan book declined by Sh2 billion to Sh110 billion in September while its investment in government securities rose by Sh6 billion to Sh21.6 billion.

The slowdown in lending saw its fees and commissions from loans remain flat ,resulting in its non-interest income remaining stagnant at Sh3 billion.

Its interest income rose by 22.5 per cent to Sh14.7 billion while interest expenses rose at a faster pace, 32.8 per cent to Sh5.3 billion.

Its deposit base declined by Sh4 billion in the three months from June to Sh108 billion despite the lender taking over some operations of the collapsed Imperial Bank.

NIC has operations in Uganda, Tanzania and operates an insurance agency, brokerage and advisory services. Its regional subsidiaries pulled up the group’s performance, with the Kenyan operation posting an 11 per cent drop in profit.

The subsidiaries contributed Sh178 million to the group’s performance up from Sh70 million last year.

NIC becomes the second listed lender to report a profit drop following Barclay’s six per cent decline.