Bad loans dampen NIC Bank’s 2016 profit

The continued growth of non-performing loans has weighed down NIC Bank’s profit for the year ended December 2016.

During the period, the listed bank’s net profit dropped 3.4 percent to Sh4.3 billion from Sh4.4 billion a year earlier.

This as the lender made high provisions for bad loans in line with a directive from the Central Bank of Kenya.

NIC Bank set aside Sh3.7 billion to cover non-performing loans which saw the total operating expenses rise to Sh10 billion.

NIC Bank Group Chief Executive Officer John Gachora said the performance dropped as the bank made additional provisions taken to support the non-performing facilities of a few large corporate customers that were impaired in 2015.

“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,” Mr Gachora said.

By the end of December, NIC had Sh15.5 billion in gross non performing loans and advances.

With a more measured lending approach, NIC’s loan book shrunk to Sh114 billion but saw its net interest income rise 11.7 percent to Sh19 billion.

Customer deposits remained flat at Sh111.8 billion.

Mr Gachora said with changes in the banking landscape occasioned by the capping of interest rates, the bank would turn to efficiency to drive growth in 2017.

“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,” he said.

The CBK has in the past said it was still too early to tell whether the interest cap law had had the desired effect.

Mr Gachora added that the full effect of the law that came into force in September 2016 would be felt in the first quarter.

The board has recommended the payment of a final dividend of Sh1.