Co-op Bank net profit falls 9pc on tax rise

Co-operative Bank of Kenya Wednesday reported a nine per cent decline in net profit in the nine-month period ended September 30 weighed by higher taxation and rise in expenses.

The lender’s third-quarter net earnings announced Wednesday stood at Sh6.3 billion compared to Sh6.9 billion the year before.

Co-op moved to the 30 per cent tax bracket this year after the expiry of its five-year tax holiday last year.

The bank previously paid tax at the rate of 20 per cent following its listing through an initial public offering in 2008.

The higher taxation saw it pay Sh2.8 billion to Kenya Revenue Authority in the period, up from Sh1.9 billion the year before.

Co-op’s interest expenses also 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 Bank’s performance 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.