NC Bank gets Shs10b fund to improve competitiveness
Mr John Okulo, the NC Bank managing director.
What you need to know:
On track. The bank has recorded growth, becoming profitable in its third year.
Kampala. NC Bank’s efforts to penetrate the competitive banking sector market has received a Shs10b ($3.3 million) capital boost from its parent company; Nairobi Stock Exchange listed lender- NIC Bank.
The Tier 1 capital infusion, according to NIC Bank group managing director John Gachora, will be used to strengthen the bank’s capital buffer, improve its competitiveness in the market and fund additional investments in strategic initiatives with an eye on long-term returns for the bank’s shareholders.
“This capital injection is in tandem with our long-term strategic plan to grow our corporate, retail and SME (Small and Medium Enterprises) customer base across the region,” said Mr Gachora.
The investment comes on the heels of NIC Bank’s successful capital-raising project last year, through which it mobilised more than KSh12b (Shs419.5b)
The move increases the bank’s paid up capital from Shs30billion to Shs40b – more than Shs15b above the regulatory minimum of Shs25b.
A bank’s Tier 1 capital or core equity capital is the measure of a bank’s financial strength. Stronger capital requirements enable banks to withstand risks, especially those associated with lending while empowering the banks to lend even more.
“This capital injection strengthens our position to be more competitive in this market, allowing us to make additional investments in strategic initiatives which will ultimately provide more products and convenience for our customers,” said NC Bank managing director John Okulo.
Fast growing
Since being licenced by Bank of Uganda in February 2012, the bank has recorded remarkable growth; becoming profitable in its third year of operation in a market where banks take up to five years before breaking even.
In 2014, bank assets grew by 16.8 per cent from Shs134.3b in 2013 to Shs156.8b while customer deposits grew by 4.2 per cent from Shs42.2b to Shs46.4b. Lending grew by 32.1 per cent from Shs72.4b to Shs104.6b. Net earnings grew from a loss of Shs19m to a profit of Shs670m.
By comparison, average sector growth for assets, deposits and loans in 2014 stood at 13 per cent, 14.9 per cent and 14 per cent, respectively.
Central bank role
Analysts say NC Bank’s good performance, despite its being new in the market, is largely reflective of the Central Bank’s earlier moves to raise regulatory limits on Tier 1 capital. Following the 2008 global financial crisis, the Central bank, in 2010 spearheaded moves to increase minimum reserve capital requirements from Shs4b to Shs11b by March 2011 and Shs24b by March 2013.
