Co-op Bank half-year profit up by 64 per cent

Co-operative Bank of Kenya announced a 64 per cent increase in first half profit, outperforming its top-tier peers on increased lending.

The bank, Kenya’s fourth-largest by assets, says net profits grew to Sh2.4 billion in the six months to June, compared to Sh1.4 billion in a similar period last year.

Its loan book increased to Sh70 billion from Sh62.2 billion in December, making it the second biggest jump after KCB that added 9.6 billion in the six months.

This saw Co-op Bank’s net interest income — the measure of a bank’s earnings from lending — rise by about a third to Sh4 billion.

At 64 per cent, it has emerged top among Kenya’s top five on the growth front as Equity returned a 43.5 per cent growth, Standard Chartered (21.4 per cent), Barclays Bank (19 per cent) and KCB (18.7 per cent).

Analysts attribute the performance to low branch cost and benefits from the buoyant agriculture — which forms the chunk of its customer base.

“The agricultural sector is performing well and this has helped the bank in driving up its loan volumes due to increased trading activities,” said David Mataen, the head of research at Faida Investment Bank.

Good weather and high commodity prices in the international market have reversed the fortunes of agricultural sector, which suffered last year and in 2008.

The sector constitutes the largest segment of the Kenyan economy and employs three in every five workers.

The bank’s cost to income ratio stood at 57 per cent compared to KCB’s 69 per cent.

“Half of their new branches have started turning in profits and the rest should break even by year-end. This affords them a sustainable growth pace going forward,” Mr Mataen said.

On Monday, the bank said the second half of 2010 would be stronger as the country reaps from increased activity in the economy driven by agriculture.

The news seems to have excited investors at the Nairobi Stock Exchange (NSE) as its shares closed trading Sh16.80 compared to Sh15.95 on Friday.

“The high performance surprised the market,” said Eric Musau, financial analyst at Africa Alliance investment Bank.

While most banks have grown their lending books, Standard Chartered and Barclays have seen theirs drop by Sh6.4 billion and Sh2 billion respectively.