Lending lifts NIC Bank’s nine-month profit 7.7pc

NIC Bank posted a 7.7 per cent net profit growth in the nine months ended September, helped by increased lending and a jump in non-interest income.

The lender’s net profit in the period stood at S.5 billion compared to S.3 billion the year before.

Its interest income rose 19.7 per cent to Sh12 billion, reflecting the 14.8 per cent expansion of the loan book to Sh111.1 billion.

NIC’s non-interest income, including fees and commissions, also increased 15.6 per cent to S billion.

The bank’s interest expenses rose by Sh812.8 million to Sh5 billion as deposits grew by Sh7.7 billion to Sh105.7 billion.

The rise in interest rates from September to above 20 per cent also affected most Kenyan banks that had to raise their deposit rates to attract and retain cash from individuals and institutions.

NIC also raised its loan loss provision to Sh689.1 million from Sh205.5 million as gross non-performing loans increased to Sh6.8 billion from Sh5.9 billion.

Despite the company’s diversification in the region, more than 95 per cent of its earnings still come from Kenya.

NIC has over the past several years ventured into Uganda and Tanzania seeking geographical expansion and diversification in the new markets where uptake of financial services is lower than Kenya.

READ: NIC Bank half-year profit up 9.8pc to Sh2.24 billion

The recent jump in rates saw the overall banking sector record lower earnings in the quarter ended September as higher cost of funds ate into interest margins.

The high lending rates — which peaked at 27 per cent among some banks — has also raised the spectre of higher defaults and a reduced appetite for new loans.

Kenya’s commercial banks pre-tax profits in the third quarter fell by 5.8 per cent to S7.3 billion compared to the second quarter’s S9.6 billion, underlining the industry’s difficult operating conditions in the past few months.