NIC Bank Group posted a Net Profit of KES 3.4 billion for the period ending September 30, 2016 compared to KES 3.6 billion in 2015.
The Group posted a strong operating profit, which rose by 36% during the period under review, demonstrating that the Bank’s fundamentals remained strong and that execution against the three-year strategy remains on track.
Total income for the period was KES 12.5 billion compared to KES 10.1 billion in 2015. This growth was driven by interest income arising from loans and advances to customers as well as income from Government securities.
Total operating expenses excluding provisions for bad debts, increased by 7% to KES 4.5 billion, driven by branch expansion and continued investment in IT systems undertaken during the period. The Group improved its cost to income ratio to 36%, compared to 42% in 2015, and continues to be one of the lowest in the market.
In the period under review, the Group’s net profit was weighed down by a significant increase in provisions to support the non-performing facilities of a few large corporate customers that have been previously reported. The overall NPL ratio remains at the level reported in December 2015.
The Group reported an increase in total assets of KES 10 billion as a result of growth in customer deposits.
The Group’s capital base for the period closed at KES 29.5 billion, a growth of KES 5.2 billion over 2015, with key banking regulatory ratios in excess of the minimum thresholds set by the Central Bank of Kenya.
NIC Bank’s Group Managing Director John Gachora said the Bank’s strategy to grow its Retail and SME (Small and Medium Enterprise) segments in the past three years has borne fruit. “By diversifying our product offering and channels we have been able to reach more customers and thereby boosting customer acquisition. Our subsidiaries across the region continue to do well and contribute positively to the business,” said Mr Gachora.
Expanding the branch network remained integral in reaching more SME and retail customers in Kenya. The Bank saw its branch network grow from 27 at the end of 2015 to 33 at the end of quarter 3, and a total of 40 across the region.
The Bank’s management is cognizant of the changing operating environment following the new banking law. This has meant a review of business, to maintain growth driven by operational efficiency across the business.
Mr Gachora noted the Bank continued to review its internal processes, structures and business model to ensure it remains well-positioned to take advantage of emerging business opportunities.
Key will be enhancing the Bank’s digital banking platform to offer greater automation and digitisation of processes for an enhanced customer experience.
During the period under review, the bank continued to aggressively migrate customers onto its digital platforms and plans to launch a number of innovative digital banking solutions in early 2017.
The Bank’s Gross non-performing loans remained steady during the third quarter and it continues to work closely with these customers to turn around their businesses.
“Our fundamentals are sound and an interrogation of our business performance independent of the non-performing loans shows that our growth strategy is working and we remain confident in the future stability of the Bank,” said Mr Gachora.
NIC Bank remains the market leader in Asset Finance and continues to enter into partnerships with several leading dealers including Simba Colt Motors, Nissan Kenya, CMC Motors and General Motors (GM) to offer customers competitive financing to acquire assets. The Bank has also recently partnered with Delights Kenya Limited, a leading second-hand vehicle importer and dealer, to offer customers financing for the importation of vehicles directly from the Japan car auctions, a first in the market.
NIC Bank Tanzania, NC Bank Uganda, NIC Insurance Agents (Bancassurance) and NIC Securities (Brokerage) all contributed positively to the Group’s financial performance in the period under review.
On October 11, the Group held an Extraordinary General Meeting (EGM) where it received the nod from shareholders to proceed with the proposed reorganisation, to create a non-operating holding company structure. The Group now awaits approval from the regulators.
This reorganisation is strategic to support the Group’s medium and long term strategy by providing a structure that facilitates optimal use of capital, more effective use of strategic and risk management, and improved governance of its subsidiaries. As part of its strategy moving forward, the Group intends to expand the scale and scope of operations of its subsidiary companies alongside growing its banking business.
The reorganisation of NIC Bank is expected to have minimal impact on shareholders, customers, employees and regulators.
“The move presents us with an opportunity to secure our future growth by allowing sufficient investment of the Group’s capital as is needed to establish and grow subsidiaries engaged in providing complementary services to the Group’s core banking business,” said Mr. Gachora.
He noted the process was timely given the changes in the industry following the new banking law.
In the fourth quarter and going ahead the Bank is consolidating its business and relooking at its strategy on the back of the interest rate capping law. NIC Bank remains a strong institution and has fully complied with the new law.
“As a Bank, we have gone back to the drawing board to evaluate our business in the new operating environment. We expect an impact on our performance, especially margins but as a bank that has remained innovative, we will be rolling out new products and services to ensure we continue to be competitive,” said Mr Gachora.
He noted the Bank has had to relook at its branch expansion plan, with only two branches out of four to be opened by the end of quarter 4. Going ahead the Bank will invest more on its digital platforms and move towards offering customers, especially corporate and SME, sector specific solutions.
The Bank continues to fulfil its mandate as Asset and Liability Consultant for the Imperial Bank Limited (IBL) in Receivership following the appointment by the KDIC. So far, the Bank has retained close to 60% of IBLIR customers who were paid following the disbursement in July and opening of five branches.