Corporate News

Co-op Bank posts biggest full-year profit jump among top lenders

Co-op Bank managing director Gideon Muriuki. FILE PHOTO | NMG
Co-op Bank managing director Gideon Muriuki. FILE PHOTO | NMG 

Co-op Bank reported an 8.2 per cent net profit growth in the year ended December, helped by increased lending.

The bank’s net profit stood at Sh12.6 billion in the period compared to Sh11.7 billion the year before, recording the fastest rise among the big banks.

KCB Group reported a near flat net profit of Sh19.7 billion in the period while Barclays’ dropped 12 per cent to Sh7.3 billion and Equity’s declined 4.1 per cent to Sh16.6 billion.

Stanbic Holdings reported a 10 per cent drop in net profit to Sh4.4 billion in the same period.

Co-op Bank’s performance came as the loan book expanded 11 per cent to Sh236.9 billion, helping to raise total interest income 14.8 per cent to Sh42.2 billion.

The lender also benefitted from a six per cent drop in interest expenses to Sh12.7 billion, boosting its lending margins.

Savings on cost of funds came as customer deposits dropped by a marginal 1.9 per cent to Sh260.1 billion.

The bank declared a dividend of Sh0.8 per share, same as the payout for the previous year. The dividend will be paid on June 30 to shareholders on record as of May 26.

The lender also proposed the issuance of a bonus share at the rate of one for every five ordinary shares held, with the new shares expected to be credited on June 30 subject to approval from the Capital Markets Authority.

This is the second time Co-op Bank has moved to issue a bonus share after 2014’s allotment at the rate of one for every six ordinary shares held.

The lender has maintained a conservative dividend policy coupled with issuance of bonus shares to retain more capital for expansion.

“Shareholders’ funds grew from Sh50.2 billion to Sh61.3 billion, an impressive growth of 22 per cent, supported by the board of directors sustained policy to aggressively recapitalise the bank for regional expansion leveraging on retained earnings,” the company said in a statement.

“The level of capital enables the group to double its balance sheet and also finance major corporate deals in the market.”

The bank’s gross non-performing loans jumped 37.6 per cent to Sh11.2 billion, leading to 28.7 per cent increase in loss loan provisions to Sh2.5 billion.

Provisions for the bad debts contributed to a 15.2 per cent jump in operating costs to Sh24.6 billion, with the bank also taking a hit from a Sh498.3 million loss in South Sudan due to hyperinflation and currency devaluation  in that market.

Co-op Bank’s non-interest income dropped 3.1 per cent to Sh12.7 billion, largely due to reduced earnings from foreign exchange trades.

The lender said it will focus on boosting efficiencies as part of a wider strategy to grow its earnings in the wake of interest rate controls.

“The group notes that the environment for doing banking business has become progressively challenging, most lately with the enactment of interest rate caps that have clearly slowed down economic growth,” the company said.

“The group will continue to leverage on the strong 6.2 million account-holder base, digital banking focus and multichannel access, the basket of innovative financial solutions, and efficient delivery of services to retain market position and deliver business growth and profitability.”

Co-op Bank added that its restructuring efforts, including retrenchment of staff, has reduced its cost to income ratio to 52.1 per cent from a high of 59 per cent in 2014.