The solid performance was buoyed by the stellar performance by NMB Bank, which recorded significant increases in its net interest income which went up by 70,5% to US$11,7 million, with commission and fees amounting to US$11,9 million.
The bank managed to reverse the trend whereby most banks’ income streams are generated more from commission and services levied on their customers. NMB Bank now has a 50% split in its contribution to total income in net interest income and non-interest income, indicating its improved lending activities.
The bank remained the major contributor to group profits, with a 94% contribution to profit after tax. African Century Ltd (ACL), the leasing business, contributed US$113 573 to the group’s bottom line from a lease book totalling US$11,3 million as at 31 December 2011.
But the bank’s proportion to profitability is expected to decrease due to anticipated increases in profitability at the group’s other subsidiary, ACL, and other new units to be introduced in the future.
With a depositor base of US$103 million, the bank’s advances and loans amounted to US$98,1 million, indicating a loan to deposit ratio of 95% and the made a provision for bad debts of US$2,3 million.
Mushore said that the high loan to deposit ratio was mainly attributed to the effect of lines of credit lines which inflate the loans and advances made from deposits.
“The ratio could even go above 100% due to loans advanced on the back of lines of credit and banks in Europe usually have ratios above 100%. What matters is the quality of loans in your portfolio,” said Mushore.
As at 31 December 2011, the bank had lines of credit to the tune of US$18,9 million.
Mushore highlighted that the low provision for impairments on their loans was justified since about 90% of their advances were in the top grade with a lower portion of the loans being in the lesser grade exhibiting signs of stress being provided up to 50% to 100%.
The group’s chief executive, James Mushore, said that the bank’s liquidity management has remained commendable, with a liquidity ratio of 31,1% against the central bank’s requirement of 25%.
“We have managed to push all our payments when due even in the face of the market-wide liquidity constraints,” cemented Mushore.
However, the group’s operating expenses jumped by 11% to US$16,9 million, largely driven by administration and staff costs.
The group indicated that its strategic intent remains on the provision of premium financial services to existing and potential high net worth individuals and businesses with growth in capacity expected from lines of credit.
Mushore indicated that the bank had already concluded a US$10 million line of credit facility in the period in which US$5 million has been drawn down.