NIC Bank Geared for Growth

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Group reports KES 5.6 Billion PBT for the year 2017

NIC Group PLC is ready for its next phase of pace-setting growth and market leadership positioning after successfully concluding its three-year strategic plan.

Over the last few years, NIC Bank Kenya Plc, the Group’s flagship, has strongly positioned itself as a leading retail and SME Bank coming on the back of its already entrenched leadership in the area of Corporate Banking and Asset Finance.

Announcing the commencement of the Group’s new strategy, NIC Group Managing Director, John Gachora, said the Group had now firmly established itself as one of the leading home grown financial institutions in the country and was now well positioned to continue to assert itself as an innovative and responsive institution in addressing the needs of its customers across all sectors.

“We are entering a new ambitious five-year strategic journey. The new five-year, 2018 to 2022, journey is critical as it is intended to refocus our efforts to become the most customer-centric financial services institution and ‘go-to’ thought leader in the arena of financial and business advisory services.”

Mr. Gachora revealed the new market positioning strategy during the Group’s Investor Briefing for the financial year ending December 31, 2017.

Results

In the 2017 financial year, NIC Group continued to make good progress in its strategic growth despite the challenging operating environment due to the interest rate cap and a protracted electioneering period.

During the period under review NIC Group reported a pre-tax profit of KES 5.6 billion, compared to KES 6.2 billion the prior year. This marked a 9.2% year on year decline, mainly driven by a reduction in interest income on loans and advances.

Total Assets grew by 22% year-on-year from KES 169.5 in 2016, to KES 206.2 billion as at end of 2017.  In the last three year strategic cycle, the Group invested heavily in growing their customer focused franchises namely Retail and SME banking and this saw its total assets increase by 42% from KES 145.8 billion in 2014.

Total liabilities closed at KES 171.5 billion driven by strong growth in customer deposits which increased by 24% during the period. This was driven largely by the Group’s strong customer relationships as well as flight to quality from depositors.

The loan to deposit ratio reduced to 91% down from 107% a year earlier, while liquidity levels as at the end of December 2017 stood at 48.2%.

Bank

The NIC Bank Kenya PLC customer account numbers have increased by 67% in the past three years and 11% during the year under review. In line with its digitization agenda, the Bank now processes more than 58% of all transactions though its digital channels up 16% year on year.

Introduction of the rate cap in 2016 has seen a reduction in lending to businesses leading to a sharp decline in credit growth in the private sector. Despite this, NIC Bank has continued to see a growth in lending. The Bank’s balance sheet primarily led by lending to SME’s and Asset Finance customers, saw an increase in net loans and advances by 5% year on year to KES 112.3 billion.

“We have spent the last three years investing in building our SME offering by ensuring our products and services meet our SME customer needs, as well as getting the right talent that understands their market needs. This investment has paid off with our SME book growing significantly,” said Mr. Gachora.

The Bank’s non-performing loans remained relatively stable growing from KES 12.6 billion to KES 13.3 billion as at December 2017, reflecting a challenging operating environment which saw NPLs for the industry rise from KES 215 billion in 2016 to KES 259 billion in 2017.

The Bank’s cost to income ratio increased to 37% from 34% reported a year ago. This has been impacted mainly due to investments in people and technology to serve the bank’s growing footprint.

Total operating income declined by 8% year on year to KES 13.5 billion from KES 14.7 billion while total operating expenses (excluding loan loss provisions) increased year on year by less than 1% in line with the Bank’s strategic move to invest in technology to support branch expansion.

In the period under review, the Bank rolled out a revamped version of its mobile platform, NIC NOW, which offers customers a better user experience with additional functionalities.  As a first in the market, NIC customers can now purchase/sell foreign currency on the mobile App through a service dubbed FX NOW.

“We plan to further invest in digital platforms over the course of the year in line with our strategy to migrate more of our customers onto digital channels.  We have recorded an impressive 27% year on year growth in active mobile banking users,” said Mr. Gachora.

He noted the Bank would continue with its physical branch expansion despite heavy investments in mobile and online banking. “Opening physical branches is part of our growth strategy to increase our footprint across the country. We are not shying away from rolling out branches strategically and we expect to open a number of new branches in 2018.  We want to be a walking distance from your wallet,” he said.

The Bank closed the year with a branch network of 37, and has already opened an additional 4 branches in 2018, bringing the total number of branches to 41.

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