NIC Group posts drop in full-year profit

NIC Group recently announced a drop in its full-year profit for the year 2017. The bank reported a gross profit of Ksh5.6 billion, marking a nearly 10 per cent decrease compared to the previous year. The Group Managing Director, John Gachora, attributed the decline in profit to various factors affecting the bank's operations in different markets. During an interview with CNBC Africa, Gachora discussed the drivers behind the numbers, highlighting the performance of the bank in Kenya, Uganda, and Tanzania. He mentioned that while Kenya experienced a 4% decrease in profit before tax, Tanzania faced significant challenges, reporting a loss of 156 million. The adverse effect on the bottom line was primarily attributed to the tough operating environment in Tanzania, characterized by high interest rates that later dropped to sub-10%, as well as issues with provisions. In Kenya, the main reason for the profit drop was the impact of an interest rate cut, the first in four years. However, the bank mitigated this by increasing investments in government securities, doubling their holdings. Despite seeing growth in loans and advances, NIC Group also witnessed an increase in non-performing loans, totaling 13.3 billion Kenyan shillings. The bank's provisions for these loans have been critical in managing their NPL ratios, which currently stand at around 11%, down from 13% in 2015. Gachora acknowledged the challenges posed by the strained economy, as some customers have struggled to repay their loans, presenting an ongoing challenge for the bank. Additionally, the total assets of the group grew by 40 billion, a 22% increase in 2017. The bank heavily invested in government securities during this period, doubling their investments from 22 billion to 52 billion, aligning with their strategic decision to prioritize size and maintain momentum in deposit growth. NIC Group saw a 25% increase in deposits, outperforming the market averages and positioning themselves as a leader in deposit growth in Kenya.