NIC BANK HALF YEAR 2011 ANALYSIS

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Today morning NIC BANK announced its financial results for the Half Year ending June 30^th 2011

In comparison to the half year period ending 30^th June 2010, Profit Before Tax rose by 33% to Kshs. 1.6 Billion. Profit After Tax was up 34% to Kshs. 1.1 Billion

Earnings Per Share is at Kshs. 2.65/=

Subsidiaries which include NIC Bank Tanzania, NIC Capital, NIC Securities and NIC Insurance Agents contributed Kshs. 67.8 Million to the Profit After Tax, equivalent to 6.2% of PAT. This is an improvement from the Kshs. 49.2 Million they contributed in the previous half year

Cost management improved from the already impressive figures the previous year

Cost:Income ratio was down 3.9% to stand at 46.22%, easily beating Diamond Trust Bank’s 51.4 which was until now the lowest of the NSE listed banks which have released their Half Year results.

H1 2010 vs. H1 2011 Analysis

	H1 2010  Kshs.	H1 2011  Kshs.	% CHANGE
TOTAL ASSETS	54.7 BILLION	67.8 BILLION	+24%
NET LOANS AND ADVANCES	35.8 BILLION	47.3 BILLION	+32.2%
CUSTOMER DEPOSITS	44 BILLION	55.5 BILLION	+26.1%
LOAN:DEPOSIT RATIO	81.24%	85.1%	+3.9%
TOTAL INTEREST INCOME	2.36 BILLION	2.72 BILLION	+15.1%
TOTAL INTEREST EXPENSE	910.4 MILLION	783 MILLION	-14%
NET INTEREST INCOME	1.45 BILLION	1.9 BILLION	+33.3%
TOTAL OPERATING INCOME	2.4 BILLION	3 BILLION	+23.3%
TOTAL OPERATING EXPENSE	1.2 BILLION	1.4 BILLION	+13.6%
COST:INCOME RATIO	50.14%	46.22%	-3.9%
PROFIT BEFORE TAX	1.2 BILLION	1.6 BILLION	+33%
PROFIT AFTER TAX	818 MILLION	1.1 BILLION	+34%

The rise in Net Loans and Advances, which was  up 32.2%, enabled NIC to increase its Interest Income from Loans and Advances by 17.9% to Kshs. 2.45 Billion, which represents 90% of Total Interest Income

Interest Income from Government Securities dropped 6.6% to Kshs. 215 Million from Kshs. 231 Million

Net Non Performing Loans was up 115% to Kshs. 433 Million from Kshs. 202 Million

Foreign Exchange Income was up 19.5% to Kshs. 362.6 Million

Total Fees and Commissions surged by 45.8%, from Kshs. 307 Million to Kshs. 448 Million

Staff Costs registered an increase of 17.3% to stand at Kshs. 715 Million

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011          Kshs.	Q2 2011          Kshs.	% CHANGE
TOTAL INTEREST INCOME	1.3 BILLION	1.4 BILLION	+6.4%
TOTAL INTEREST EXPENSE	362.3 MILLION	420.9 MILLION	+16.2%
NET INTEREST INCOME	954 MILLION	980 MILLION	+2.7%
TOTAL OPERATING INCOME	1.43 BILLION	1.55 BILLION	+8.1%
TOTAL OPERATING EXPENSE	627.3 MILLION	748.8 MILLION	+19.4%
COST:INCOME RATIO	43.85%	48.42%	+4.6%
PROFIT BEFORE TAX	803.3 MILLION	797.7 MILLION	-0.7%
PROFIT AFTER TAX	550 MILLION	545.7 MILLION	-0.8%

But it seems NIC will face a tough 2^nd Half of the year if their Q2 performance is anything to go by.

Interest Expenses and Operating Expenses were up by 16.2% and 19.4% respectively, higher than the rate of growth of Interest Income and Operating Income which was at 6.4% and 8.1% respectively

This resulted in Cost:Income ratio for Q2 2011 rising to 48.42% from 43.85% in Q1 2011. This however, is still low by industry standards.

The Bank made slightly less profit in Q2 2011 than Q1 2011 as a result of the rise in Expenses.

At the closing price of 33.50, the bank is trading at a forward P.E of 6.32