- Besides loan loss provisions, most other operating expenses also rose, including staff costs that increased marginally to Sh1.4 billion.
- The increase in defaults saw the Nairobi Securities Exchange-listed firm raise its loan loss provisions 3.6 times to Sh2.1 billion, eroding income from lending and transactions.
NIC Bank reported a 2.8 per cent growth in net profit in the half year ended June, weighed down by bad debts which rose 42.5 per cent to Sh12.5 billion in the period.
The lender’s net profit in the period stood at Sh2.3 billion compared to Sh2.2 billion a year earlier.
The increase in defaults saw the Nairobi Securities Exchange-listed firm raise its loan loss provisions 3.6 times to Sh2.1 billion, eroding income from lending and transactions.
NIC declared an interim dividend of Sh0.25 per share, same as the payout for the same period the year before.
The dividend will be paid on or about October 17 to shareholders on the register as of September 22. The loan loss provisions were the main driver of the 51.5 per cent jump in total operating expenses to Sh5 billion. NIC’s loan book expanded by Sh3.8 billion to Sh112 billion, which helped to raise total interest income 27.4 per cent to Sh9.8 billion.
Non-interest income, including commissions and forex trading, rose 8.1 per cent to Sh2.1 billion.
Interest expenses increased 17.8 per cent to Sh3.7 billion, partly reflecting the 6.5 per cent rise in customer deposits to Sh112 billion.
Besides loan loss provisions, most other operating expenses also rose, including staff costs that increased marginally to Sh1.4 billion.
NIC said in a statement that branch expansion in the period partly contributed to the rise in operating expenses, noting that it opened six new branches in the period in what led to hiring of more staff. The branches opened are in Kisii, Kitengela and Nairobi (Upper Hill, Ruaraka, Ongata Rongai and Buruburu), with the new branches raising NIC’s total regional network to 41.
“This is in line with the bank’s strategy to increase its footprint to support more retail and SME customers across the region,” NIC said in a statement. The bank, which has subsidiaries in Uganda and Tanzania, said intends to create a non-operating holding company as part of its reorganisation.
The restructuring, which has been done by banks like Equity Group, is meant to address operational complexes, seal risk management gaps and overcome restrictions on capital allocation imposed on Kenyan multinational banks.
Kenyan banks are barred from lending to entities in which their shareholding exceeds 25 per cent, but the holding companies are allowed to source for funding for their subsidiaries.
Banks are also limited to lending a maximum of 20 per cent of their core capital to associate companies.
Non-operating holding companies are however still be subject to regulation by the Central Bank of Kenya.
NIC’s share price yesterday closed at a new low of Sh29.5, making it one of the cheapest banking stocks on the Nairobi bourse.