NIC Group, a financial services organisation in East Africa, invested an additional 350 million shillings in its Tanzanian banking subsidiary last year when the regulator in Tanzania introduced new prudential rules that put a strain on the institution’s capital.
The new investment left NIC Group’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.
The Nairobi Securities Exchange-listed firm’s cumulative investment in the loss-making subsidiary in the review period stood at 2 billion shillings, up from 1.6 billion shillings in 2017.
Last year, the Bank of Tanzania 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.
NIC Group also invested 100 million shillings in its motor vehicle leasing arm NIC Leasing, bringing its total capital expenditure last year to 450 million shillings.
NIC Bank Tanzania met all the capital requirements in the review period when its net losses widened to 113.6 million shillings from 107.2 million shillings in 2017. The subsidiary will be merged with CBA Group’s banking unit.