NIC Group invested an additional Ksh350 million ($3.5 m) in its Tanzanian banking subsidiary last year when the regulator in that market introduced new prudential rules that put a strain on institutions’ capital.
The move left the Nairobi Securities Exchange-listed firm’s stake in NIC Bank Tanzania unchanged at 69.84 percent, indicating that minority shareholders in the subsidiary could have also provided their proportionate share of new capital.
NIC’s cumulative investment in the loss-making subsidiary in the review period stood at Ksh2 billion ($20 million), up from Ksh1.6 billion ($16 million) in 2017.
The Bank of Tanzania last year published rules requiring lenders to write off any loan that has not performed in four consecutive quarters (one year) instead of the previous 12 consecutive quarters (three years).
The rule ignored the value of securities held for bad debt written off under the more conservative international accounting standards, IFRS9, putting a strain on banks’ capital.
Besides the Tanzanian subsidiary, NIC also invested Ksh100 million ($1m) in its motor vehicle leasing arm NIC Leasing, bringing its total capital expenditure last year to Ksh450 million ($4.5m).
NIC Bank Tanzania’s loan book stood at Ksh3.4 billion ($34 m) last year and the lender made impairment allowances of Ksh311.3 million ($3m) or nine per cent of the total.
The institution met all the capital requirements in the review period when its net losses widened to Ksh113.6 million ($1.12m) from Ksh107.2 million ($1.12m) in 2017.
The Tanzanian subsidiary will be merged with CBA Group’s banking unit in that market.