, NAIROBI, Kenya, Feb 20 – NIC Bank Group Ltd has reported a Sh4.5 billion profit before tax for the year ended December 31, 2012 representing an increase of 25 percent from the Sh3.6 billion registered in the previous year.
Announcing the results on Wednesday, the group Managing Director James Macharia said: “NIC Bank achieved strong results in 2012, notwithstanding the increasingly challenging operating environment.”
“NIC Bank Group succeeded in 2012 by focusing on the key business fundamentals. Net interest margins remained favourable despite the upheavals in the financial markets and we registered impressive growth in our balance sheet. In addition, our risk management culture helped to maintain the strength and quality of our balance sheet despite the deterioration in the macroeconomic environment,” Macharia continued.
Net interest income grew by 28 percent to Sh5.5 billion, an increase of Sh1.2 billion, attributable to the growth in the loan book by Sh14.9 billion from Sh56.6 billion to Sh71.5 billion by December 2012. To fund this growth in advances, the deposit base increased to Sh83.3 billion as at December 2012, reflecting a 26 percent growth from Sh66.3 billion reported in December 2011.
The group’s efforts to diversify its revenue sources continued to bear fruit, with total non-funded income growing by Sh0.5 billion to Sh2.9 billion for the year ended December 31, 2012, up from Sh2.4 billion reported in the previous year. Non-funded income contributed 35 percent of the total operating income.
Total operating income grew by 26 percent to Sh8.4 billion, an increase of Sh1.7 billion, underpinned by the expansion of the balance sheet by Sh29.4 billion and the growth in non funded income.
The provision for loan losses amounted to Sh297 million, an increase of 15 percent from Sh258 million reported in 2011. This compares well with the growth in the group’s loan book of 26 percent year-on-year.
“Credit quality remains good, although we have made prudent increases in our level of provisions to reflect the growth in our business combined with the deterioration in the short-term economic outlook,” commented Macharia.
“The group’s capital base now stands at Sh15.5 billion, a growth of Sh5.0 billion from 2011, which includes proceeds from the recently concluded and successful Rights Issue of Sh2.0 billion and the growth in our revenue reserves of Sh2.8 billion due to retained profits for the year. All key banking regulatory performance indicators also reported favourable trends,” Macharia remarked.
During the year, the group also secured a Sh1.7 billion line of credit from the Dutch Development Agency (FMO).
Macharia commented that one of the highlights of the year was the Rights Issue that was carried out in the third quarter of the year.
“The group received an overall subscription of Sh7 billion compared to the target of Sh2billion, which translates to a 338 percent subscription rate, one of the highest subscription rates ever recorded for a Rights Issue. This performance is a clear testament of our trusted strong heritage and the confidence that the shareholders and the investor community have in NIC Bank Group and its plans for the future.”
Another highlight for our shareholders was the bonus issue, of one additional Ordinary Share for every 10 Ordinary Shares held by all the shareholders in the Shareholders Register in November 2012. This bonus issue was approved by shareholders at the Annual General Meeting held in May 2012.
The growth and development of the subsidiary companies has remained a key strategic thrust aimed at broadening both the range of financial services offered to customers and enhancing the diversity within NIC Bank Group.
“As a testament to the confidence that the Group has in the growth opportunities in the region, we invested more than Sh1.1 billion in a new subsidiary in Uganda (NC Uganda Ltd.) through which we serve Kenyan customers with operations in Uganda, and other local,” commented Macharia.
The Group’s Board of Directors has also approved an additional investment of Sh608 million in NIC Tanzania to be carried out in 2013.
The subsidiaries, NIC Tanzania, NC Uganda (which opened its offices to the public in June 2012), NIC Capital (Investment Banking), NIC Insurance Agents (Bancassurance) and NIC Securities (Brokerage) contributed 5 percent of the year on year increase in the Group’s profit before tax.
Macharia explained that the bank will continue in its quest to establish its presence in new strategic and commercially viable locations. Plans are also underway to open additional branches regionally.
Macharia added that the Bank recently implemented a new core banking system, T24, provided by Temenos, on September 1, 2012. T24 will facilitate the development and roll-out of technology-based products and services that will exploit the full potential of alternative channels such as mobile and internet banking. The new core banking system will also make possible the centralization of operations away from branches and regional subsidiaries thus enhancing the efficiency of operations leading to cost savings and enabling our regional customers to be efficiently served under one platform.
The group MD reported that the Board of Directors had recommended for approval at the Annual General Meeting the payment of a first and final dividend of one shilling per share, which translates to a total payout of Sh543 million. This compares to a dividend of Sh0.5 per share (total payout of Sh197 million) which was paid out for the financial year 2011.
“2013 is likely to be a challenging year given the uncertainty associated with the general elections, continued volatility in international oil prices, spillover effects of the global economic slowdown and the balance of payments pressure associated with the high current account deficit. However, NIC Bank Group will seek to exploit emerging opportunities that will maintain and enhance the value of the franchise. This will be done within the framework of the Group’s strong risk management structures and processes, ” noted Macharia.