By Beatrice Gachenge

NAIROBI (Reuters) - Profit rose sharply at Kenya's NIC Bank, sending shares 20 percent higher, driven by a rise in corporate lending at the lender which plans to raise cash for expansion in Uganda.

The mid-tier lender, known for its strength in asset financing, plans to raise 2 billion shillings through a rights issue to boost its capital ratio and build a warchest for future expansion.

With operations already in east Africa's second biggest economy, Tanzania, NIC plans to expand into the region's third largest market, Uganda, later this year, where it expects to invest 961 million shillings in a new unit.

James Macharia, the NIC Bank's managing director, said the bank had recently invested $8 million into a new banking system, eroding its capital ratio, which would also be supplemented by funds raised through the rights issue.

"The purpose of the rights issue is basically to support the future growth of the bank," Macharia told Reuters.

Rising income from corporate lending and foreign exchange trading drove the mid-tier bank's profits 38 percent higher to 3.6 billion shillings in 2011.

The bank's earnings per share rose 47 percent to 6.72 shillings, attracting investors to its stock. It paid a final dividend of 0.25 shillings, unchanged from the previous year.

NIC's shares raced 20 percent to 30 shillings, making it by far the biggest gainer among bank stocks on the day.

"An EPS of 6.72 shillings is fantastic," says Johnson Nderi, an analyst at Suntra Investment Bank said. "I don't see anyone who has reported such growth. Return on equity is also high."

Investors have been piling into banking stocks in anticipation of strong results after Barclays Bank of Kenya last Thursday posted an 11 percent jump in underlying pretax profit, buoying other banking shares.

Kenya Commercial Bank (KCB), which has the largest asset base in the country and operates in several neighbouring countries, is also scheduled to post its results on March 1.

"We had a very good run on corporate banking in terms of growing loans and advances so that contributed materially to the bottom line," Macharia said.

"There were very good profits as a result of forex trading because of the volatility which was there last year," he said referring to the shilling which lost a quarter of its value last year, after hit a record low of 107 to the dollar in October.

Macharia forecast a growth in credit as more borrowers emerge with interest rates set to start easing.

Aggressive monetary tightening to curb inflation and prop up the currency of east Africa's biggest economy has seen banks raise lending rates to about 25 percent from 15 percent since October, and lawmakers want a new law to cap the rates.

"Interest rates will start going down very soon ... there will be growth in credit, which has been very flat," Macharia said.

First Published: 2012-02-23 08:32:46
Updated 2012-02-23 15:13:55





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