2015 has proven quite stressful for Kenyan NIC Bank as its outstanding doubtful loans almost doubled to Sh14.3 billion ($141 million). This resulted in the bank making provisions amounting to about Sh1.6 billion ($15.7 million), thus five times what was planned to this effect in 2014, Sh329.1 million.

The provisions, to a large extent, contributed to operational costs increasing by 38.1%. In a difficult environment for the banking industry, the group increased its volume of loans to customers. Total outstanding loans surged by Sh13.9 billion to Sh116 billion. This led to interest revenues soaring 24% to Sh17 billion in an environment marked by growing rates.

Conversely, the boomerang effect was the 27.2% increase in customers’ deposits interests to Sh7.9 billion. Also, the firm’s expenditures rose as salaries increased by 20.3% to about Sh403 million.

Under these conditions, NIC Bank made a net result of Sh4.4 billion, 8.9% above 2014’s. Based on this, it plans to pay a dividend of Sh1 per share.

On March 4, 2016, the group’s share did not attract many on the Nairobi Securities Exchange but related transactions totaled Sh9.05 million. However, this share which was today at Sh41 keeps rising but remains far from the Sh70 recorded in September 2014.

Investors will surely look out for the impact of doubtful loans on the bank’s performances as rates might keep increasing until the end of 2016.

Idriss Linge