Pretax profit at Kenya's NIC Bank rises 15 percent
NAIROBI Aug 21 (Reuters) - Earnings at Kenya's NIC Bank rose 15 percent in the first half as lower interest rates cut its costs of borrowing more than they hurt the bank's own interest income.
NIC Bank, which also operates in Tanzania and Uganda, said it made a first-half pretax profit of 2.6 billion shillings ($29.8 million).
Eric Musau, an analyst at Standard Investment Bank, said the mid-tier bank benefited from having to pay less interest to its depositors, many of whom are corporate clients that command high rates on their deposits, and for its own market borrowings.
"Lending rates in the economy have come down and that is good for smaller banks which hold large expensive deposits," Musau said.
Official lending rates in Kenya have come down since inflation fell and the central bank began a cycle of monetary easing in mid-2012, which has more than halved key interest rates to the current 8.5 percent.
NIC said net interest income rose 36 percent to 3.4 billion shillings due to a 30 percent fall in the amount it paid out as interest to depositors to 2.1 billion shillings, despite a fall in the amount of loan advances.
The lender's total interest income dropped by just 4 percent to 5.6 billion shillings.
Earnings per share rose to 3.44 shillings from 2.93 shillings previously, NIC Bank said in a statement.
The bank declared an interim dividend of 0.25 shillings per share. Its share price had gained 0.9 percent to 57.50 shillings each by 1022 GMT.
"As long as the cost of lending doesn't go up we expect the bank to perform well in the second half," Musau said.
($1 = 87.4000 Kenyan shillings) (Reporting by Kevin Mwanza; Editing by James Macharia and Anthony Barker)
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