Mid-tier lender NIC Bank’s #ticker:NIC net profit slid by 1.3 per cent to Sh3.32 billion in the first nine months of the year due to a slump in interest income, the bank’s financial result show.
The implementation of the interest rate capping law introduced slightly over a year ago cut its income from loans by 16.7 per cent to Sh9.86 billion.
Increased uptake of government securities cushioned NIC Group from a slump in interest income from loans in the nine months to end of September.
The bank’s investment in government securities held to maturity more than doubled in the period under review, which helped its earnings from the papers jump 29.4 per cent to Sh3.59 billion from Sh2.77 billion previously.
Kenyan banks have been piling on government securities over the last one year after their main source of income, interest on loans, was hurt by a rate cap law that limited interest rates on loans at four percentage points above the Central Bank Rate.
NIC Group is one of the bank’s that have posted lower or marginal growth in profits this year as the rate caps takes its toll on the sector.
There are expectations by industry players, including the Kenya Bankers Association and the International Monetary Fund that the law will be reversed in 2018 once the effects have been studied closely.
Despite the slump in earnings from lending to its customers, NIC’s loan book grew 7.3 per cent to Sh118.5 billion.