Merger spurs chase for NIC bank stocks despite revenue decline

NIC bank (NIC: Sh31.60) gained 8.6 percent on the counter despite posting a 9.2 percent decline in net profits of Sh931 million by March from Sh972 million in the first quarter last year.

The impressive 8.8 percent increase in operating income was undone by the 15.2 percent year on year rise in operating expenses as well as the 21.4 percent hike in loan loss provisions.

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The asset financing Group’s bad loans rose from Sh15.9 billion to Sh17.4 billion with analysts at Apex Capital pointing out that measures to cut bad loans are proving insufficient.

“The lender’s loan loss provision shot up 21.4 percent partly eating into its margins. We don’t attribute the rise to the change in provisioning under IFRS 9 (allowance to effect the rising NPLs to the reserves in FY18) since the provisions actually came off on a quarterly basis,” Apex Capital said.

NIC Group will be the holding company when the bank is merged with Commercial Bank of Africa and will be headed by current NIC bank boss John Gachora.

His counterpart Isaac Awuondo who has led CBA as the Group Managing Director will take up the role of Chairman for the Kenyan banking business leaving the positions of the board chairs, Desterio Oyatsi, and James Ndegwa unknown.

The new bank will have a new name operating a complex structure with the Kenyan subsidiary and separate digital banking under the NIC Group holding company.

Awuondo will continue to provide the day to day leadership of the Digital Business with the intention of creating a distinct digital business with a separate board.

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