Operating profit during the period rose by 23.2% to KES 9.9 billion, representing strong growth in the Bank’s core business and a demonstration that execution against its three-year strategy remained on track.
Total operating income for the year grew by 17.4% to KES 16.1 billion compared to KES 13.7 billion the same period the previous year. The growth was largely attributed to a number of initiatives the Bank undertook during the year to bolster funded and non-funded income lines.
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. The overall NPL ratio however declined year on year from 11.2% to 10.8%.
“2016 was a challenging year with various factors impacting our operating environment but our strategic shift to reach more retail and SME businesses, as well as branch expansion, continued to drive our performance. NIC Bank continued to roll out strategic partnerships over the course of the year to drive business growth especially around Asset Finance where we continue to be the clear leaders,” said NIC Bank’s Group Managing Director, John Gachora.
The Group reported an increase in total assets of KES 3.7 billion, while customer deposits remained flat.
The Group’s capital base for the period closed at KES 30.3 billion, a growth of KES 4.0 billion over 2015, with key banking regulatory ratios in excess of the minimum thresholds set by the Central Bank of Kenya.
Total Operating expenses, excluding loan loss provision, grew 9.3% to KES 6.2 billion reflecting the Bank’s continued investment in technology and new branches.
During the period under review, the Bank continued to aggressively migrate customers onto its digital platforms and there are plans to launch a number of innovative digital banking solutions in 2017.
In May, the Bank rolled out a fully automated online platform enabling employees of corporate organisations in the Bank’s Scheme to apply for loans conveniently.
During the year, the Bank grew its branch network from 27 to 33 in Kenya with the opening of Kitengela, Kisii, KMA Centre in Upper Hill, CPA Centre in Ruaraka, Maasai Mall in Rongai and The Point in Buruburu. The expansion in Kenya saw its branch network in the region reach 40. The Branch expansion plan is part of the Banks proposition to target more retail and SME customers.
In the year under review, the Bank continued to enter into strategic partnerships that offer customer’s innovative and tailor-made financing solutions for vehicle and non-motor vehicle assets underscoring its position as a market leader in Asset Finance. The Bank partnered with Delights Kenya Ltd, Simba Colt Motors, General Motors (GM), Nissan and DT Dobie as part of maintaining its position as a market leader in Asset Finance.
In June 2016, the Kenya Deposit Insurance Corporation (KDIC) appointed NIC Bank to act as the Assets and Liabilities Consultant for Imperial Bank Limited (in Receivership). The mandate included, amongst others, an assessment of the quality of IBLIR’s assets and liabilities, disbursement of funds to IBLIR depositors and other advisory services to KDIC. In our role we have been able to disburse more than KES 10 billion to IBLIR depositors.
Subsidiaries:
The Bank continues to focus on growth and development of its subsidiary companies in order to offer a wide range of financial services to customers across the region.
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.
Group Reorganisation:
In quarter four of 2016, the Group held an Extraordinary General Meeting (EGM) where it received a nod from shareholders to proceed with the proposed reorganisation, to create a non-operating holding company structure. The Group is awaiting approval from the regulators.
The reorganisation is a strategic move 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 reorganization is expected to have minimal impact on shareholders, customers, employees and regulators.
Outlook:
The Bank’s management is cognisant of the changing operating environment following the new interest rate capping law. This has meant a review of business to maintain growth driven by operational efficiency across the business. Key will be enhancing the Bank’s digital banking platform to offer greater automation and digitisation of processes for an enhanced customer experience.
“The Bank is consolidating its business and relooking at our strategy on the back of the interest rate capping law. The Bank remains a strong institution and has fully complied with the new law,” said Mr Gachora. “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.”
Mr. Gachora noted the full effects of the new law would start being felt in the first quarter of 2017 results.
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