For Immediate Release

Thursday, August 18, 2011

NIC BANK GROUP PROFITS UP BY 33 PER CENT

…Shareholders to receive an interim dividend of Shs0.25 per share 

NIC Bank Group has reported a 33% increase in its half-year Profit Before Tax to Shs1.6b, up from Shs1.2b reported for the same period last year. 

Announcing the results today, the Group Managing Director, Mr. James Macharia,  said: “Despite the challenging operating environment characterized by persistent inflationary pressures driven by the cost of fuel, food and other commodities, high interest rates, and exchange rate volatility, the Group has reported a satisfactory performance”.

Net interest income grew by 33% to Shs1.9b, an increase of Shs483m, which was attributed to the growth in the loan book. The loan book grew by Shs11.6b [or 32%] from Shs35.7b to Shs47.3b by June 2011. To fund this growth in advances, the deposit base increased to Shs55.5b as at June 2011, reflecting a 26% growth from Shs44b reported in June 2010.

Total operating income grew by 23% to Shs3.0b, an increase of Shs562m, with non-funded income contributing 35% of the total income. The Group Managing Director noted that the growth in income was in line with the balance sheet expansion as underpinned by the total assets growth of 24% to Shs68b.

Total operating expenses excluding provisions for loan losses increased by 18% to Shs1.4b mainly due to increased staff costs. The Group MD noted that the additional expenditure was necessary to support the growing business and the ongoing branch expansion program.  Despite the expansion of the business and the current inflationary pressures, the Group’s cost income ratio declined year on year from 50% to 46%.

The provision for loan losses reduced by 27% from Shs107m in June 2010 to Shs78m in June, 2011. “This reflects our robust credit selection, appraisal and approval processes.  A significant improvement in our operational efficiencies and risk management framework has also contributed to the reduction in the provisions for loan losses,” said Mr. Macharia.

Service Delivery Outlets and Products

On the branch expansion programme, Mr. Macharia explained that the Bank will continue to invest on an expanded footprint and thus enhance the accessibility of the Bank’s services to the current and prospective customers

 As part of its endeavors to improve service delivery and accessibility by customers, the Bank successfully expanded its branch network by opening 3 additional branches: 2 within Nairobi and its environs ( The Village Market; and Galleria Mall, Langata), and one in Eldoret.  Plans are underway to open additional branches later in the year, including the Sameer Business Park, Karen Business Park and Taj Mall in Embakasi.

NIC Bank has also leveraged on technology to enhance its key service delivery channels.  “The enhancement of our delivery channels through the use of technology remains a key thrust for us,” commented Mr. Macharia. “Indeed, as a response to our needs we have now linked the M-Pesa functionality to our delivery channels: customers can now deposit money straight from their bank account to their M-Pesa account and vice versa from their M-Pesa back into their NIC Bank account through NIC Mobile Banking.  Customers can also send money to any M-Pesa account directly from their NIC Bank account using NIC Online Banking.”  Mr. Macharia added that the Bank has also enhanced its ATMs by adding an M-Pesa withdrawal functionality.

In order to further boost the Bank’s service delivery, Mr. Macharia reported that the Bank was in the initial stages of implementing a new core banking system. “We expect to realize a superior customer experience regionally, and achieve a significant enhancement of the efficiency of our operations leading to better customer service and cost savings,” said Mr. Macharia.

 “We continue to review our offering to be in step with customer needs. In Business Banking/SME segment, we have so far conducted a number of workshops throughout the country with the aim of equipping entrepreneurs with business tools and information that can help further enhances their businesses,” added Mr. Macharia. These workshops, the first set of which has already taken place in Nairobi, Nakuru, Kisumu, Meru and Mombasa in the first 6 months of 2011, also gave entrepreneurs an opportunity to meet and network with each other. The Bank also intends to run another set of Entrepreneur Club workshops regionally before the end of the year.

 “Our aim is to continually provide a rich value proposition to customers as a One–Stop Shop financial services provider in the market,” concluded Mr. Macharia.

NIC Subsidiaries

The growth and development of the subsidiary companies has remained a key strategic thrust and is aimed at broadening both the range of financial services offered to customers and enhancing diversity within the NIC Bank Group.

The subsidiaries, NIC Bank Tanzania, NIC Capital [Investment Banking], NIC Insurance Agents [Bancassurance] and NIC Securities [Brokerage] contributed 7% of the year on year increase in the Group’s Profit Before Tax.

NIC Capital, the Group’s Investment Banking arm, is a key player in both equity and debt capital markets, having been retained as the transaction advisor in a number of significant mandates locally and regionally, including a large Initial Public Offering.  “NIC Bank Tanzania has enabled us to serve our Kenyan customers who have operations in Tanzania with relative ease and convenience”, said Mr. Macharia. He also indicated that plans are in process to establish another banking subsidiary in the region.

In recognition of the Group’s improved performance, the Board has declared an interim dividend of Shs 0.25 for every ordinary share of Shs.5 held. Dividend warrants will be posted on or about 5th October, 2011 to all members on the register at the close of business on 15^th September, 2011. The register of members will therefore be closed on 16^th September, 2011 for purposes of preparing dividend warrants.

END

Under the pact, both parties will cooperate in the fields of corporate advisory and securities trading. Collaboration will also extend to investment research, an area of strength for Imara considering its base of international investors receives constant updates on developments and opportunities within Sub-Saharan markets.

NIC Bank Group Managing Director, James Macharia welcomed the cooperation as a strategic development that would give NIC Capital clients a window on a wide range of African markets.

“We are eager to pursue synergies with Imara, as our new partner has a strong reach into numerous markets across Southern, Central and West Africa,” said Mr Macharia.

The agreement comes at an important juncture as both parties anticipate growing investor interest in Africa ‘frontier markets’ as risk appetite revives following the international credit crunch.

“Since January 2008, an East African offering has had a key place in our Africa series of equity funds focused on specific Sub-Saharan markets. Kenyan securities are a core offering within the East Africa fund,” said Imara Group chief executive, Mark Tunmer as the two parties signed a memorandum of understanding.

“Furthermore, we are mindful of Nairobi’s important role as regional hub. For us, developing a close understanding with a strong Kenyan partner was a strategic imperative. We are delighted to have found such a partner in NIC Capital.”
Editor’s notes:
About NIC Capital
NIC Capital Ltd is a wholly owned subsidiary of the NIC Bank Group which is listed on the Nairobi Stock Exchange and is one of the largest banks in Kenya.

NIC Capital Securities is a member of the Nairobi Stock Exchange and provides brokerage services in Kenya and offers investors publicly traded shares and bonds; a change from the normal broker.

The brokerage draws heavily from NIC Bank and NIC Capital placing high priority on corporate governance structures and ethics, adequate paid in capital and experienced management.
About Imara
Imara Group is medium sized and has offices in Botswana, Malawi, South Africa, the UK and associate offices in Malawi and Zimbabwe. The Group has a working relationship with Stockbrokers Zambia, Namibia Equity Brokers and Mac Capital in Dubai.

The group is also independent and privately owned, enabling objective decision-making in the service of our clients.
Imara Group is an active participant in the region’s financial markets and maintains one of the largest research coverage of regional equities. Funds under management exceed US$ 135m and funds under administration exceed US$ 750m.

The new Gold Account offers a host of benefits to personal banking customers including a pre-qualified credit card as well as negotiated rates of interest and foreign exchange rates.
Gold Account holders will also get an easy and convenient way of trading stock at the Nairobi Stock Exchange through NIC Bank’s stock-broking subsidiary-NIC Capital Securities.
The bank said the product is tailored for the ‘discerning customer’ adding that it was developed after extensive research of what customers want in terms of financial services.

NIC Bank’s Director of Personal Banking Mr. James Wainaina said customers’ lifestyles are rapidly changing and getting busier. Customers are, therefore, looking for easier ways of transacting and are actively seeking to spend the least time possible doing so.

“A key component of our Gold Account offering is the automated channels for banking: NIC Online and NIC Mobile which allow customers to transact anytime from anywhere in the world through the internet and mobile phone respectively.
Customers will also be able to receive SMS alerts for transactions hitting their accounts, ensuring they are able to track account transactions through the convenience of their mobile phones” said Mr. Wainaina.

Even as competition stiffens in the industry, Mr. Wainaina said opportunities exist across all segments, each being at its own level of evolution from a product offering and market acceptance perspective.

“The retail (Personal and SME) segments have scope for higher penetration and growth although it takes a longer time to realise commercial benefits within these businesses. Overall success will be driven by service providers consistently delivering on their promise to their respective target markets with a value for money offering operating within a strong commercial model,” he said.

The Gold account launch follows up on the re-launch of the recently revamped and highly successful Move Account, which was the pioneer flat fee bundled offering account in the market.

Mr. Wainaina said to satisfy changing demands by customers, banks should to understand various needs by demographic segmentation.
“With this as a base, products and services need to be structured to meet the customer need. Increasingly today, convenience, control and personalisation which reflect value for money to the customer are critical considerations for transactional banking,” he said.
NIC Bank’s Managing Director Mr. James Macharia, said in order to remain competitive, NIC Bank is continually investing in its service delivery outlets.

“We recently upgraded our branches in Nairobi into modern more aesthetic outlets – Harambee Avenue, Prestige, City Centre and Mall in Westlands. We also remodelled our Harbour House and Nyali branches in Mombasa,” said Mr Macharia.

He said the bank has moved its Masaba Road Branch to the front to “offer a more spacious and comfortable area. It is also now easier for customers to access the branch.”

The account is a unique proposition targeting the more affluent clientele. They will also enjoy an enhanced loan product offering among other benefits and a Gold debit card.

NIC Bank has carved out a Gold Corner for exclusive banking for its VIP customers at its NIC House Branch on Masaba Road. It is also set to roll out the same at its branches at the Junction on Ngong Road, Mall in Westlands and at its Harbour House Branch in Mombasa. Customers will pay a flat fee of Shs 1,400 monthly for the account.

The bank recently set off on a rebranding process with a one-stop banking proposition bringing stock-broking and bancassurance into the ambit of traditional banking.

NIC is also expanding outside Nairobi and intends to open up to 10 branches in the next 2 years. Recently, the bank opened doors in Kisumu and Thika branches bringing its total number of branches to 12.

Its East African footprint is also set to expand with the acquisition-and subsequent approval by shareholders-of a 51 percent stake in Tanzania’s Savings and Finance Commercial Bank.

“We have also received all statutory approvals and also from our shareholders in the recently held AGM and therefore the transaction is now complete,” said Mr. Macharia. The Tanzanian bank has branches in Dar-es-Salaam, Mwanza and Arusha.

NIC Bank Group has reported an 18% increase in its half-year Profit Before Tax of Shs 784 million, up from Shs 664 million registered during the same period last year.

Announcing the results today, Mr. James Macharia, the Group Managing Director, said: “Despite the challenging operating environment and depressed markets arising from the global financial crisis and the sluggish economy, the Group reported satisfactory performance on all the key financial indicators”.

Total operating income grew by 27% to Shs 1.8b, an increase of Shs 393m, with non-funded income increasing by 26% to Shs 681m. The net interest income which has grown by 28% to Shs 1.2b, an increase of Shs 253m, has been favorably impacted by the improved return on earning assets and a relatively stable cost of funds.

“The non-funded income at Shs 681m is 37% of the total operating income and continues to contribute significantly to the overall profitability of the Group. At this level, it is an indicator of a reduction in the overall underlying risk of the Bank,” said Mr. Macharia.

The Group MD noted that the Group’s total assets had recorded a growth of 22% to reach Shs 46b, with the loan book recording a 15% growth from Shs 25.7b to Shs 29.6b by June 2009. To fund this growth in advances, the Bank’s deposit base as at June 2009 stood at Shs 37.8b, reflecting a 26% increase over that reported in June 2008.

Total operating expenses excluding provision for loan losses increased by 32% to Shs 219m mainly due to increased staff costs on account of branch and regional expansion.

Branch Expansion
On the branch expansion programme, Mr Macharia explained that the Bank will continue to establish its presence in new, strategic and commercially viable locations.
In the past six months, the Bank successfully expanded its footprint countrywide by opening 2 additional branches in Kisumu and Thika as part of its endeavors to improve service delivery and accessibility by customers. Plans are underway to open a branch in Meru later in the year.

NIC’s Investment in Technology and Delivery Channels
At NIC Bank, we are adding further choices or channels to serve our customers by making the banking experience more convenient. We also want to reach customer segments in a more efficient way, and embracing modern Information Technology is the way to go.

With the arrival of the first fibre optic cable along the East African Coast, the Bank is optimistic that its integrated internet banking service – NIC Online – and its soon to be launched mobile banking solution, will offer the Bank a competitive edge in the market.

“We are expanding our IT-based products in order to increase their capabilities and flexibility. This is in line with our core promise to be a ‘One Stop Shop’ for our customers – we want to ensure that customers get the variety of financial services from current accounts, insurance, stock brokerage services etc with ease and convenience – facilitated by our modern technological channels,” said Mr. James Wainaina, Director, Personal Banking.

Regional Expansion
As part of our strategic initiative to grow regionally, the shareholders at the last AGM held on 29th April, 2009, approved the acquisition of 51% equity stake in Savings & Finance Commercial Bank [S&F] in Tanzania. The acquisition was effective from 1st May, 2009 and it is expected that S&F will, going forward, significantly contribute to NIC Bank’s bottom line.

“The Tanzanian market offers good growth potential for the group and will facilitate improved service delivery to our customers who are already operating regionally,” noted Mr. Macharia.

NIC Positioning in the Capital Markets
Mr. Macharia added that NIC Capital Securities, the brokerage subsidiary of the Group, has been repositioned and operations streamlined to ensure that services exceed customer expectations. The brokerage has continued to increase its market share at the NSE and has progressively grown its clients’ investment portfolio.

NIC Capital, the Group’s investment banking arm, has also been revamped with a focus to establishing a regionally focused investment bank to support both local and regional aspirations of our clients. NIC Capital recently partnered with the Johannesburg-based, Pan-African financial services group, Imara Group, to enhance capacity for corporate finance advisory services, securities trading and research. “Imara is positioned internationally and across Africa as a financial services group that is close to developments in all key Sub-Saharan markets” added Mr. Macharia.

In recognition of the Bank’s improved performance, the Board has declared an interim dividend of Shs 0.25 for every ordinary share of Shs.5 held. Dividend warrants will be posted on or about 2nd October, 2009 to all members on the register at the close of business on 16th September, 2009. The register of members will therefore be closed on 17th September, 2009 for purposes of preparing dividend warrants.

Following the imminent completion of the transaction, S&F will become a 51% owned subsidiary of NIC Bank. NIC Bank’s Chairman, Mr. James Ndegwa said that the acquisition will complement the Bank’s organic growth as evidenced by the current rollout of a branch expansion strategy across Kenya. “This has been supported by the funding from the successful rights issue in November 2007 that raised KES 1.2billion,” said Mr. Ndegwa. NIC Bank’s Managing Director, Mr. James Macharia indicated that this transaction will enhance the Bank’s competitive position in the region, diversify its business and enhance services to its cross-border customers. “S&F is a natural partner for our growth and diversification efforts as it has reported steady growth and profitability. In addition, its shareholders and directors have significant experience in the Tanzanian financial sector and this will definitely strengthen our competitive position,” said Mr. Macharia. Savings & Finance Commercial Bank was founded as a non-bank financial institution in 1994, converted to a fully fledged Commercial Bank in 2005 and has branches in Dar es Salaam, Mwanza and Arusha. As at December 31 2007, S&F had total assets of TZS 42.6 billion and shareholders’ funds of TZS 5.9 billion.

For the year ended December 31 2007, S&F generated profit before tax of TZS 1.4 billion on an operating income base of TZS 3.7 billion. In addition to the share purchase, NIC Bank will subscribe for additional equity in S&F to be payable partially by way of a cash payment of TZS 2,606,100,000 (equivalent to KES 155 million) and a further subscription on the basis of S&F’s audited net profit for 2008. The existing shareholders of S&F will also be injecting approximately TZS 2,503,900,000 (equivalent to KES 149 million) into S&F by acquiring new shares.

This additional capital will be used to fund the business plan of S&F in the medium term with a view to enhancing the Bank’s market share, capacity and geographical outreach. Mr. Macharia indicated that the acquisition was subject to NIC Bank obtaining regulatory approvals from the Minister of Finance of Kenya (acting through the Central Bank of Kenya) and also obtaining approvals from the Bank of Tanzania and the Fair Competition Commission of Tanzania. “We are confident that the regulatory authorities involved will expeditiously grant the requisite approvals and thus facilitate completion of the transaction by 30th April 2009,” he said. The transaction is also subject to approval by the East African Development Bank (current holder of preference shares) and from NIC Bank’s shareholders at an extraordinary general meeting (EGM) to be convened shortly. NIC Bank’s Board of Directors will shortly issue a circular to the shareholders providing information on the proposed transaction and on S&F, which will include a notice of the EGM. NIC Bank’s Chairman, Mr. James Ndegwa, also emphasised that S&F’s existing shareholders, who will retain 49% of the issued ordinary shares, will continue to play an important role in S&F’s future growth.

“The most important aspect of this deal is that it is a partnership between NIC Bank and the existing shareholders of S&F. We both have a common goal and shall work together to achieve it,” said Mr. Ndegwa. NIC Bank recently launched a rebranding process aimed at repositioning the Bank for future business development. The Bank’s Chairman, Mr. James Ndegwa, said that the Bank’s expansion, both in Kenya and the Eastern African region will be prudently planned and implemented. The Bank opened a total of 4 new branches in both Nairobi and Mombasa in 2008 and plans on opening new ones in Thika and Kisumu in early 2009, as part of its plan to open up to an additional 20 branches over the next three years.

Key Accountabilities will include:-

• Staff Provident Fund Administration, being the liaison between the Bank and provident Fund providers
• Administration staff insurance schemes, such the Group personal accident, medical insurance scheme.
• Management of the staff leave in line with the Bank HR policies.
• Recruitment & selection, through designing job adverts, constitute the interview panel; develop suitable interview materials for various levels.

Qualifications & Experience

• Hold a Bachelors degree in Social studies or Human resources Management.
• Professional qualification in Human Resources.
• Minimum 5 years work experience in busy HR environment, 3 of which should be in Generalist HR.
• Good working Knowledge of HR processes and systems, with a focus in Banking.

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Why does financial independence remain a dream for most of us? Is it due to procrastination? Do we feel investing is risky, complicated, time consuming and only for the rich?
The fact is there is nothing complicated about financial planning.   It is important to plan and invest for your future because the future is bound to be expensive. Inflation is on the rise and because people are living longer, retirement costs are often higher than many expect.

Here are eight basic steps to get you started on the path of financial security.

• Organize your finances
  Ensure you have an adequate emergency fund, sufficient health, car, life insurance coverage, and a realistic budget. An adequate emergency fund consists of three to six months worth of your living expenses.
• Get in the habit of saving
  Try saving at least 10 per cent of your salary every month. Savings are kept in banks accounts and with savings, your principal typically remains constant and earns interest or dividends.
• Get professional help

Working with a professional is the single most important investment that they can make. Do not underestimate the value a professional (e.g. financial planner, stockbroker, commercial lawyer or real estate advisor) can offer in helping you define your goals, determine the type of risk that is right for you, and create a comprehensive investment plan.

• Invest where your money can grow at a meaningful rate
  Ensure you understand and can live with the risk. Your tolerance for risk is affected by several factors, including your objectives and goals, timeline(s) for using this money, life stage, personality, knowledge, other financial resources, and investment experience. Choose a mix of investments that has the potential to provide the highest possible return at the level of risk you feel comfortable with.
• Do not put all your eggs in one basket
  Divide your investment funds among asset classes that respond to different market forces in different ways at different times. This will help you minimize the effects of market volatility and maximize your chances of return in the long term. In a nutshell, multiple types of investments will reduce the impact of a loss on any single investment.
• Understand the impact of time
  There is no denying that financial markets can be volatile. Endure short-term price fluctuations and focus on long-term potential. Though past performance does not guarantee future results, money left in an investment offers the potential of significant return over time.
• Take the liquidity of your investment into account
  As a rule, the sooner you will need your money, the wiser it is to keep it in an accessible savings account or in investments with comparatively less volatile price movements such as short-term bonds or a money market fund. Conversely, think long-term for goals that are many years away. With time on your side, you do not have to go for investment “home runs” in order to be successful.
• Invest consistently and often
  Accumulate shares of stock or purchasing units in a unit trust fund at regular intervals over an extended time. Keep in mind that when the price is high, your investment buys less, when prices are low, you will often buy more shares/units.
  The long-term success of your portfolio will depend on periodically reviewing it. Even if nothing bad happens, your various investments will likely appreciate at different rates and your circumstances change over time – your asset allocation will need to reflect those changes. For example, as you get closer to retirement, you may increase your allocation to less volatile investments, or those that can provide a steady stream of income.