NIC Bank Q3 profit dips to Sh3.4bn on high NPL provisions

NIC Bank has registered flat profit growth in the nine month period to September, posting a net profit of Sh3.4 billion.

The bank attributes its stagnation to increased provisions for non performing loans during the period.

NIC Bank set aside Sh3.2 billion to cover non performing loans, compared to the Sh689 million it set aside in 2015.

Banks have increasingly been increasing their provisions for non performing loans following a directive by the Central Bank to ensure bad loans are sufficiently catered for.

This follows concerns that the growth of NPls could affect operations in the banking sector.

The regulator has said banks found to be understating non performing loans would be penalized while the Kenya Revenue Authority has also cautioned against the action which could be used to depress profit margins and lower the tax obligation.

Barclays Bank of Kenya also saw its third quarter profit dip six percent to Sh6 billion.

NIC Bank’s total operating expenses excluding provisions for bad debts, increased by seven percent to Sh4.5 billion, driven by branch expansion and continued investment in IT systems undertaken during the period.

NIC Bank Group Chief Executive John Gachora gross non-performing loans remained steady during the third quarter.

“Our fundamentals are sound and an interrogation of our business performance independent of the non-performing loans shows that our growth strategy is working and we remain confident in the future stability of the Bank,” Mr Gachora said.

He said the bank would consolidate its operations in the fourth quarter on the back of the interest rate capping law.

“As a Bank we have gone back to the drawing board to re evaluate our business in the new operating environment. We expect an impact on our performance, especially margins but as a bank that has remained innovative, we will be rolling out new products and services to ensure we continue to be competitive,” Mr Gachora said.