NIC Bank profit up 25 per cent

NIC Bank has recorded a 25 per cent growth in pre-tax profit during the first three months of 2009. The bank’s earnings increased to Sh371.9 million for the period ending March 31, 2009 from Sh297.2 million recorded last year.

The profit could, however, have been higher had the bank not factored in the challenges its subsidiaries especially the stockbrokerage firm, NIC Capital Securities, faced during the quarter.

“The first quarter was not good for the stock market and this negatively affected our brokerage business,” Mr James Macharia, the bank’s managing director, told the Daily Nation on Thursday.

There was a huge price meltdown at the Nairobi Stock Exchange with the NSE 20-Share Index, a measure of performance of the stock market, falling to near its seven year low.

This meant the Sh371.9 million profit the whole group - including NIC Capital Securities and NIC Bank Tanzania - made was lower than the Sh380.3 million pre-tax profit the bank made on its own over the same period.

Cost management

Mr Macharia attributed the bank’s improved profitability during the quarter to a cost management programme and increased earnings from foreign exchange trading as a result of high volatility in the money market.

This created a favourable environment for foreign currency trading as the Kenya shilling declined by 3 per cent in the quarter compared to one per cent over the same period in 2008. During the first three months, Mr Macharia said, they slowed down their lending especially to investments in the stock market, a trend that begun in the fourth quarter of 2008.

“Even large companies were reluctant to borrow from banks,” he said of a situation that has been precipitated by a slowdown in the local economy and the global financial crisis.

The bank’s loans and advances to customers grew by 17.8 per cent during the period to Sh27.9 billion from Sh23.6 billion in 2008. Customer deposits went up by 22.5 per cent to Sh35.4 billion from Sh28.9 billion last year.

Although he declined to give specifics, he projected that the economy will pick up as from the third quarter going into the fourth of this year. “We expect a very quiet and slow year,” said Mr Macharia.