NIC Bank has recorded a 3.4 per cent decline in net profit for the year ended December on the back of higher provisioning for bad debt.
The lender’s net profit stood at Sh4.3 billion in the year compared to Sh4.4 billion the year before, with the provisions rising more than 2.2 times to Sh3.7 billion.
The higher provisioning and an increase in staff costs widened the bank’s total operating expenses by 35.8 per cent to Sh10 billion.
“In the period under review, the group’s net profit was weighed down by significant additional provisions taken to support the non-performing facilities of a few large corporate customers that were impaired in 2015,” NIC said in a statement. The stock of non-performing loans declined 5.3 per cent to Sh13.5 billion.
NIC declared a final dividend of Sh1 per share, having paid an interim dividend of Sh0.25 per share.
This brings the total payout per share to Sh1.25, same as for the previous year.
NIC cut its lending 1.3 per cent to Sh114.4 billion, indicating a more conservative stance in the wake of the defaults and the controlling of lending rates that started in September.
Despite the shrunken loan book, the company recorded an 11.7 per cent increase in interest income to Sh19 billion.
Customer deposits also dropped by a marginal 0.4 per cent to Sh111.8 billion, helping to drive interest expenses down 5.7 per cent to Sh6.8 billion.
NIC said the effects of controlled lending margins will be felt from the first quarter ending this month.
The bank’s staff costs rose by Sh405.6 million to Sh3.2 billion on the back of expansion in the country.
The lender opened six new branches –in Kitengela, Kisii, Upper Hill, Ruaraka, Rongai and Buru Buru. This raised its branch network in Kenya to 33 from the previous 27.
The company said its subsidiaries NIC Bank Tanzania, NIC Bank Uganda, NIC Insurance Agents and NIC Securities all contributed positively to the bottom-line in the review period.
The company plans to enhance automation of its services, with new products expected to be launched on digital platforms as part of its response to the capping of interest rates.
“We are re-evaluating our business in this new operating environment and we will be rolling out new products and services to ensure we continue being competitive by investing more in our digital platforms,” the bank’s CEO John Gachora said in a statement.