[Kenya] NIC Bank announces growth plan as it records 4 per cent dip in net profit
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.
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%.
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.
The Bank continued with its various Citizenship initiatives which focus on four key pillars: Education, Innovation, Health and Humanitarian Assistance. On Education, the Bank sponsored 75 financially disadvantaged children who attended various academic programs across the country in partnership with Edumed Trust, Palmhouse Foundation, Dr. Choksey Albinism Foundation and Mpesa Foundation Academy.
NIC Bank also celebrated its 10th annual Job Shadow Program in partnership with Junior Achievement where students from different high schools were hosted by the bank across Kenya, Uganda and Tanzania.
Lastly, as part of the Bank’s mentorship program, the bank staff were able to mentor 585 Upper Hill Boys High School Form 3 and Form 4 students through a 36 week mentorship program.
The regional banking subsidiaries in Tanzania and Uganda, as well as the non-banking subsidiaries in Kenya, NIC Leasing LLP, NIC Insurance Agents (Bancassurance) and NIC Securities all contributed positively to the Group’s financial performance in the period under review.
During the year under review the bank also established a new subsidiary, NIC Ventures, to drive the Group’s digital strategy. Through NIC Ventures, the Group will aim to partner, invest in or acquire Fintechs.
In September 2017, NIC Bank Limited completed it’s restructuring into a Non-Operating Holding Company. This followed approval from shareholders, bondholders and regulators. The reorganization saw NIC Bank Limited change its name to NIC Group PLC.
The Board of the Group has resolved to recommend to the shareholders at the forthcoming Annual General Meeting, scheduled for 25 May 2018, the payment of a first and final dividend for the year of Shs 1 per share (2016: final dividend of Shs 1 per share).
The Board has also recommended the issuance of Bonus shares at the rate of one new fully paid up bonus share of par value KES 5 for every ten shares of par value KES 5 to be issued to the shareholders registered on the company’s register at the close of business on 30 April 2018.
The Bonus issue is subject to approval by the Capital Markets Authority and the shareholders at the Annual General Meeting to be held on 25 May 2018.
Following the receipt of regulatory approvals from the Central Bank of Kenya and the Capital Markets Authority, NIC Group announced the appointment of Mr. Jonathan Somen and Mr. Philip Lopokoiyit as Non-Executive Directors of the Group.
Mr. Somen is an IT expert and well-known Entrepreneur in Kenya. He is the Founder and former Group Managing Director of AccessKenya Group Limited, one of the pioneer Internet Service Providers in Kenya. He is also the Founder and Director of various companies in the Technology Industry, including Eldama Technologies Limited and Virtual IT Limited.
Mr. Somen holds a Bachelor of Science Degree in Economics and Accounting from the University of Bristol, UK. He is also a keen sportsman and avid promoter of environmental conservation.
Mr. Lopokoiyit has a wealth of experience in Financial Management, Risk Management, Internal Controls and Corporate Governance, having worked for over 20 years in various senior management capacities in multinational companies both locally and abroad. Most recently, Mr. Lopokoiyit was the Head of Finance for BAT Kenya.
Mr. Lopokoiyit holds a Bachelor of Commerce Degree (Hons.), Accounting Option, from the University of Nairobi and a Master’s degree in Business Administration from Warwick Business School, UK.
He is a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Institute of Certified Public Accountants of Kenya (ICPAK) and the Institute of Chartered Management Accountants (ACMA). He has also attended several courses in Leadership, Governance, Management and Finance both locally and internationally.