NIC Bank Group Q1 2016 results show that the bank’s fundamentals are strong and the execution against its strategy is on track. Despite profit before tax for the quarter being flat at KES 1.4 billion, the bank was able to grow its Retail customer accounts by 20%, in line with its strategy to grow the Retail and SME (Small and Medium Enterprises) segments.
Total operating income grew by 29% to KES 4.1 billion compared to KES 3.2 billion the same period last year, largely driven by an increase in interest income and non-funded income.
Growth in the loan book and investments in government securities saw interest income grow by 33% to KES 5.0 billion, compared to KES 3.8 billion the previous year. The loan book grew by 6%, from KES 106 billion in March 2015 to KES 112 billion in March 2016. To fund this growth in advances, the deposit base increased to KES 110 billion during the period under review, reflecting a 15% growth from KES 96 billion in March 2015.
Non funded income also grew by 15% to KES 1.137 billion from KES 0.986 billion in 2015, in line with the Group’s strategy to diversify its revenue sources.
The Group’s cost to income ratio declined to 34% from 42% the prior year and continues to be one of the lowest in the market. Total operating expenses at KES 1.4 billion, grew marginally with branch expansion and related staff costs planned for later in the year.
According to the Group Managing Director, Mr. John Gachora, the focus on growing the Retail and SME segments of the business is paying off. “Our culture of innovation is a key factor in driving the growth of our Retail and SME business. Furthermore, the bank’s results show that we continue to dominate the Asset Finance space,” he said.
Mr. Gachora added that the Bank’s profitability was impacted by additional provisions relating to non-performing loans taken in Q4 2015. “We continue to make progress on the recovery, “ he said.
In the period under review, the bank grew its branch network in Kenya to 29 branches, with the opening of its Kisii and Kitengela branches.
“Our branch expansion will continue to ensure we offer our customers with more points of access to the bank. By 2018, our target is to have 50 branches across Kenya,” said Mr Gachora.
Going ahead, the bank is planning to roll out a new branch concept across the country. These new branches will require significantly less capital investment compared to a fully-fledged branch without compromising on the Bank’s product offering and service.
In a bid to grow its customer base, NIC Bank is constantly looking to launch new and innovative products. In March, the Bank partnered with Kenya Red Cross Society to launch a new co-branded credit card which will enable customers to donate towards the humanitarian work carried out by the organization. NIC Bank will donate a percentage of the earnings from the card to the Kenya Red Cross.
NIC Bank has also invested in ensuring customers’ Visa enabled credit and debit cards can be used for e-commerce transactions securely following the launch of Verified by Visa. The extra security measures that have been implemented on NIC Bank Debit and Credit Visa cards, ensures customer’s online transactions remain secure.
The growth and development of the subsidiary companies remains a key strategic objective and one that is aimed at broadening both the range of financial services offered to customers and enhancing diversity within NIC Bank Group.
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. NC Bank Uganda is eyeing to expand its reach having received capital injection worth $3.3 million from the Group last year.
NIC Tanzania received a long term loan of $7 million from Proparco, a private sector financing arm of Agence Francise de Development (AFD), towards strengthening the Bank’s position in Corporate and SME segments in Tanzania last year. The financing will mainly support the subsidiaries expansion efforts.
In March 2016, the leasing unit, NIC Leasing LLP which was launched in 2015, partnered with lifestyle retailer Deacons Kenya Limited’s LifeFitness brand to provide leasing facilities for gym equipment to local corporates. The partnership will see NIC Leasing LLP offer financing to corporate customers looking to invest in gym equipment from LifeFitness.
NIC Bank is optimistic about the future and positioning itself to continue growing its Retail and SME Banking alongside its strong Corporate Banking business and Asset Financing.