NIC Bank Limited Full Year 2014 Earnings Update

NIC Bank limited announced results for the full year 2014 results with the following highlights:

• Net interest income grew by 17.8 percent from KES 11.64bn in 2013 to KES 13.71bn in 2014 while net interest expense grew by 30.6 percent from KES 4.37bn to KES 5.71bn.
• Non-interest income grew by 11.0 percent from KES 3.22bn to KES 3.57bn in 2014.
• Total operating income increased by 10.3 percent from KES 10.49bn in 2013 to KES 11.57bn in 2014 while operating expenses declined by 2.5 percent to KES 5.34bn.
• Loan loss provisions declined by 69.9 percent from KES 1.09bn in 2013 to KES 329.13mn in 2014. Non-performing loans (NPL) ratio decreased from 5.4 percent in 2013 to 4.0 percent in 2014.
• Operating expenses edged down by 2.5 percent to close the year at KES 5.34 billion as the bank benefitted for its improved service channels.
• Pretax income increased by 24.4 percent from KES 5.01bn in 2013 to KES 6.23bn in 2014 while net income grew by 27.2 percent to KES 4.12bn translating to an earnings per share of KES 6.43 in 2014.
• Loans and advances to customers grew by 22.2 percent from KES 83.49bn to KES 102.04bn in 2014.
• Customer’s deposits grew by 9.7 percent from KES 91.57bn in 2013 to KES 100.43bn in 2014 while amount due to other banks edged down by 8.2 percent from KES 5.90bn in 2013 to KES 5.41bn in 2014.
• Shareholders’ funds increased by 29.3 percent from KES 17.19bn in 2013 to KES 22.23bn in 2014.
• The directors recommended a final dividend of KES 1.00 with books closure on 9th April, 2015.

Our view
Operating expenses will remain stable in the long run as Cost to income ratio is expected to continue declining. The bank has continued to be watchful over costs, keeping the cost to income ratio low. With the increasing appetite for credit, we expect NIC bank to grow its loan book more aggressively, with asset financing driving the growth.

We expect a recovery in the net interest margin, driven by both volumes and spreads. Prudent credit management by NIC bank will continue to drive down the non-performing loans, thereby widening the bottom line.