Co-operative Bank recorded a 54 per cent growth in profit after tax (PAT) on the back of an increase in customer numbers.
The bank, which on Thursday doubled dividend to 40 cents a share, also announced it had embarked on establishing presence in Southern Sudan in partnership with locals.
With 600,000 more clients, customer deposits increased by 35 per cent while assets rose by 39 per cent to steer the company to Sh4.58 billion PAT.
Expansion of the bank including the Sudan venture and agency banking is expected to support profit growth going forward.
The bank took 70 per cent of the shareholding while Sudan’s cooperative movement took the other 30 per cent – a partnership that is expected to immediately yield business for the bank.
While releasing results at Intercontinental Hotel on Thursday, CEO Gideon Muriuki said: “In our determination to continue growing our revenues, do business and support our customers in the region, the establishment of the Cooperative Bank of Southern Sudan is at an advanced stage. Similar initiatives are also under way in the wide East African market.”
Of the top five banks by asset base, the Sh4.6 billion PAT puts the company in the fifth position in profitability after Barclays (Sh10.6 billion), KCB Group (Sh7.2 billion), Equity (Sh7.1 billion) and StanChart (Sh5.4 billion).
However, the bank dividends are lower compared to the other top four banks with a dividend yield of 2.1 per cent on the basis of Wednesday’s price.
Coop Bank’s EPS was Sh1.31, up from 85 cents in 2009. In terms of price-to-earnings (PE), the company was at 14.4 on the basis of Wednesday price of Sh18.85.
The PE ratio, whose level roughly indicates how expensive a share is, ranks Coop Bank close to StanChart PE ratio of 14.8 at an average price of Sh275 and Equity Bank’s PE ratio of 15 at about the time of the release of the 2010 results.
Barclays Bank had a PE ratio of nine while KCB Group had 8.5 at about the time of releasing their results, suggesting they are relatively cheaper.
“We see the results as generally good and what we expected following the basic trends in the industry so far,” said Mr Crispus Otieno, an equities dealer at Tsavo Securities.
He said the diversification of income streams had strengthened the bank by reducing income volatility but that there was still more potential in some of the subsidiaries.
“Lending was a bit conservative. They could have expanded the loan book further. Treasury department doesn’t seem to have contributed a lot compared to what we think is the potential,” said Mr Otieno.
Most of the subsidiaries of the company contributed to the profit.
Cooperative Insurance Company (CIC), in which the bank holds 20 per cent acquired in 2010, contributed Sh130 million to the profit before tax.
Kingdom Securities contributed Sh37 million while Coop Trust Investment, the fund management division, put in Sh57 million to the bank’s pre-tax profit.
Coop Consultancy is however yet to break even as it made a loss of Sh11 million.
In terms of asset growth at Coop Bank, the personal lending book saw the biggest growth at 35 per cent, followed by sacco banking loans that increased by 24 per cent.
Corporate lending rose 23 per cent growth.
The lowest growth on the asset book was in mortgages, assets finance, SMEs, among others.
In terms of the size of the portfolio, personal lending led with Sh32 billion, Sacco loans are at Sh22 billion and the corporate lending is at Sh21 billion.
Mr Muriuki said the bank gives mainly employer-based check-off loans which have served it well over the years, drastically reducing the chances of default.
The mortgage book which appears to be slow in growth has drawn a book worth over Sh1.3 billion.
“With the expected county level governments we have refocused our SME strategy to address potential needs,” Mr Muriuki said to indicate greater focus on SME this year.
A major achievement during the year was in reduction of the proportion of non-performing loans to 5.4 per cent in 2010 compared to 9.8 per cent in 2009.
In 2009, the bank, despite being among the top five in terms return on assets (ROA) has lagged those of peers.
The bank came seventh among the top banks, partly due to the history of bad loans incurred before 2003.
The bank increased by 27 per cent loan loss provisions of Sh799 million in 2010 in line with the growth in the loan book.