NIC Bank profit dips to Sh952 million

NIC Bank, the first lender to release its financial results for three full months under the interest rate cap, has seen a 3.8 per cent decline in its net profit.

The bank’s first quarter total income fell by Sh400 million to post a net profit of Sh952 million in the three month to March this year, down from Sh990 million during a similar period last year.

Income charged from interests fell by Sh700 million, demonstrating the impact of the rate cap on the bank’s books.

The rate cap law set the limit banks can charge on loans to a maximum of 14.5 per cent in August last year.

Despite the impact of the new interest rates regime on NIC Bank’s results, its performance was boosted by a reduction in provisioning for bad loans, which only increased marginally.

“Earnings decline was cushioned by 33.4 per cent year on year drop in loan loss provision,” said Standard Investment Bank (SIB) in a note to investors.

SIB also noted the bank’s expenses fell due to the rate cap as they paid less on deposits, with interest expenses on customer deposits during the period under review standing at Sh1.2 billion, down from Sh1.7 billion in a similar period last year.

Under the rate cap law, Parliament prescribed that minimum deposit rates be set at 70 per cent of the Central Bank Rate (CBR).