Co-op Bank sees 9pc drop in nine-month net profit

Co-operative Bank of Kenya posted a nine per cent decline in net profit in the nine-month period ended September, an outcome linked to higher interest, operating and tax expenses.

Profit before tax was up a marginal 2.5 per cent to Sh9.13 billion for the period.

The lender’s net earnings in the period stood at Sh6.3 billion compared to Sh6.9 billion the year before.

This came as interest expenses increased 27 per cent to Sh5.8 billion while operating expenses, including staff costs, rose 13.9 per cent to Sh14.4 billion.

The higher costs ate into the bank’s interest and non-interest income, which rose 8.8 per cent and 23.7 per cent respectively to Sh20.8 billion and Sh8.4 billion.

Co-op Bank’s loan book expanded to Sh175.9 billion in September compared to Sh137 billion in December last year and Sh134.3 billion in the previous September.

Falling interest rates over the past one year has seen a reduction in lending margins, with banks augmenting their performance from commissions, fees, and other charges.

Co-op’s after-tax performance reflects the expiry of a five-year tax holiday following its listing through an initial public offering in 2008. It has been paying corporate tax at the reduced rate of 20 per cent until last year.

"The single largest contributor to reduced post-tax earnings is tax", Co-op Bank officials told BDAfrica.com, "which increased from Shs1.97 billion in September 2013 to Shs2.82 billion in 2014, a 43 per cent jump."

The standard 30 per cent tax rate took effect this financial year.

Co-op Bank’s performance also bucks the trend seen among its top two rivals KCB and Equity whose net profits increased 15.4 per cent and 26 per cent respectively in the same period.