Pretax profit at NIC Bank rises 15 percent
22 August 2013, 14:19
Nairobi - Earnings at NIC Bank rose 15 percent in the first half as lower interest rates cut its costs of borrowing more than they hurt the bank's own interest income.
NIC Bank, which also operates in Tanzania and Uganda, said it made a first-half pretax profit of KES 2.6 billion ($29.8 million).
Eric Musau, an analyst at Standard Investment Bank, said the mid-tier bank benefited from having to pay less interest to its depositors, many of whom are corporate clients that command high rates on their deposits, and for its own market borrowings.
"Lending rates in the economy have come down and that is good for smaller banks which hold large expensive deposits," Musau said.
Official lending rates in Kenya have come down since inflation fell and the central bank began a cycle of monetary easing in mid-2012, which has more than halved key interest rates to the current 8.5 percent.
NIC said net interest income rose 36 percent to KES 3.4 billion due to a 30 percent fall in the amount it paid out as interest to depositors to KES 2.1 billion, despite a fall in the amount of loan advances.
The lender's total interest income dropped by just 4 percent to KES 5.6 billion.
Earnings per share rose to KES 3.44 from KES 2.93 previously, NIC Bank said in a statement.
The bank declared an interim dividend of KES 0.25 per share. Its share price had gained 0.9 percent to KES 57.50 each by 1022 GMT.
"As long as the cost of lending doesn't go up we expect the bank to perform well in the second half," Musau said.
($1 = 87.4000 Kenyan shillings)