An NIC Bank branch on Kenyatta Avenue in Nairobi. The lender invested
$3.5 million in its Tanzanian banking subsidiary last year. FILE PHOTO |
NMG
NIC Group invested an additional Ksh350 million ($3.5 m) in its
Tanzanian banking subsidiary last year when the regulator in that market
introduced new prudential rules that put a strain on institutions’
capital.
The move left the Nairobi Securities
Exchange-listed firm’s stake in NIC Bank Tanzania unchanged at 69.84
percent, indicating that minority shareholders in the subsidiary could
have also provided their proportionate share of new capital.
NIC’s
cumulative investment in the loss-making subsidiary in the review
period stood at Ksh2 billion ($20 million), up from Ksh1.6 billion ($16
million) in 2017.
The Bank of Tanzania last year
published rules requiring lenders to write off any loan that has not
performed in four consecutive quarters (one year) instead of the
previous 12 consecutive quarters (three years).
The
rule ignored the value of securities held for bad debt written off under
the more conservative international accounting standards, IFRS9,
putting a strain on banks’ capital.
Besides the
Tanzanian subsidiary, NIC also invested Ksh100 million ($1m) in its
motor vehicle leasing arm NIC Leasing, bringing its total capital
expenditure last year to Ksh450 million ($4.5m).
NIC Bank Tanzania’s loan book stood at Ksh3.4 billion ($34 m)
last year and the lender made impairment allowances of Ksh311.3 million
($3m) or nine per cent of the total.
The institution
met all the capital requirements in the review period when its net
losses widened to Ksh113.6 million ($1.12m) from Ksh107.2 million
($1.12m) in 2017.
The Tanzanian subsidiary will be merged with CBA Group’s banking unit in that market.
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