NIC Nets Huge Pre-Tax Profit

The NIC Bank has reported a 60 per cent increase in pre-tax profits for year 2006, driven largely by huge growth in income generated from trading in foreign currency.

The bank's pre-tax profits grew from Sh425 million in 2005 to Sh678 million in 2006. "Despite the high competition in the banking industry, we believe this was a fair escalation in profitability," said Mr James Macharia, managing director, NIC.

NIC Bank managing director James Macharia announcing the results at a Nairobi- hotel yesterday.

Income from foreign currency trading grew by Sh101 million or 229 per cent from Sh44 million in 2005 to Sh145 in 2006. The growth was also attributed to increase in interest and other non-interest income, which grew by 24 per cent to Sh1.5 billion and 17 per cent to Sh383 million respectively.

Lending increased

Deposits from customers went up by 33 per cent to Sh22 billion, while the lending increased by 18 per cent to Sh17 billion, resulting in an overall balance sheet growth of 26 per cent. "Overall, the positive growth in profitability was supported by improved prospects across most sectors of the economy and the bank's enhanced capacity for business development," Mr Macharia added.

To drive its non-interest income further, the bank is reviving its investment banking outfit - NIC Capital - to provide financial advice on investment at the stock exchange and alternative investing options. "This will enhance our non-funded revenue stream, and give us a high profile in the high end market which is our target market," Mr Macharia said.

Meanwhile, South Africa's biggest retail bank Absa will postpone a plan to issue up to 2 billion rand ($280.2 million) in preference shares, until it decides on how to deal with a tax change. Finance Minister Trevor Manuel last week said South Africa would scrap a secondary tax on companies but introduce a new tax next year on dividends at shareholder level.

Investment bank Investec has said preliminary legal advice suggested it could raise dividends on its perpetual preference shares to compensate shareholders for the new tax and it planned to propose the change to shareholders after seeking more clarity from lawyers.

Additional reporting by Reuters