Co-op Bank first quarter net profit hits Sh3.4bn

The Co-operative Bank of Kenya net profits for the three months of the year grew by eight per cent helped by an upsurge in lending and gains from cost-cutting measures, the lender said Wednesday.

The Nairobi Securities Exchange-listed bank announced an after-tax profit of Sh3.44 billion for the three months to March 2016 compared to Sh3.17 billion posted in the similar period a year earlier.

The bank’s chief executive Gideon Muriuki attributed the performance to a cost-cutting and efficiency drive initiated two years ago.

“Operational efficiencies resulting from this project have seen our cost to income ratio improve from a high of 58.8 per cent in December 2015 to 51 per cent in March 2016,” said Mr Muriuki.

“(The drive) had a critical focus on cost optimisation, improvement in operating efficiencies and innovative customer delivery platforms,” added Mr Muriuki.

Equity Bank announced an after-tax profit of Sh5.1 billion in the three months to March 2016 compared to Sh4.2 billion posted in a similar period last year.

Co-op Bank’s other close rivals KCB, StanChart, and Barclays Bank of Kenya are set to announce their quarter one results.

The bank which is Kenya’s third-largest lender by assets, laid off 160 employees in 2014 in the cost-cutting drive aimed at reducing its then Sh8 billion wage bill.

The retrenchment, was done according to the recommendations of consulting firm McKinsey. Co-op Bank hired McKinsey in 2014 to advise on cost cutting and improve its operations.

READ: Co-op Bank defies South Sudan forex hit to post 46pc increase in net profit

It incurred a one-off cost of Sh1.3 billion in laying off the staff in 2014 whose absence last year boosted the lender’s financial performance while also boosting its cost to income ratio to 53 per cent from 61 per cent at the time.

On Wednesday, Mr Muriuki said the performance was also backed by an upsurge in its lending which saw its loan-book grow by 16 per cent to Sh213.7 billion in the three months compared to Sh184.1 billion in similar period last year.

This, the lender said, resulted in a 25 per cent rise in interest income of Sh8.3 billion in the first quarter of this year compared to Sh6.7 billion recorded in quarter one of 2015.

Customer deposits with the bank grew by Sh29.4 billion to Sh267.4 billion during the period from Sh238 billion last year, a 12 per cent increase.
Its total operating income grew by 18 per cent to Sh10.3 billion from Sh8.7 billion in the period.

Total non-interest income grew by 21 per cent from Sh2.87 billion to Sh3.46 billion compared to last year.

Co-op Bank said last year it upgraded its core banking system, gaining increased efficiency through mobile and Internet banking platforms.

On Wednesday, Mr Muriuki said the bank had successfully moved 85 per cent of its customer transactions to alternative delivery channels particularly mobile banking, ATMs, internet and Co-op Kwa Jirani banking agency outlets away from its banking halls, fostering efficiency.

The bank’s total assets stand at over Sh350.7 billion backed by a customer base of over six million account-holders.