Co-op Bank pulls ahead of Barclays in profit rankings
Co-operative Bank group MD Gideon Muriuki speaks during the release of financial results for the 2013 financial year in Nairobi March 19, 2014. Photo/William Oeri
What you need to know:
Co-op Bank Wednesday announced an 18.2 per cent jump in the 2013 after-tax profit to Sh9.1 billion, overtaking Barclays Bank that reported net earnings of Sh7.6 billion.
Co-op’s profit growth will be a boon for shareholders after the lender announced a bonus issue in the ratio of one new share for every six held, and kept the dividend pay-out at Sh0.50 a share.
Co-operative Bank has for the first time pulled ahead of Barclays in the ranking of Kenya’s most profitable lenders.
Co-op Bank Wednesday announced an 18.2 per cent jump in the 2013 after-tax profit to Sh9.1 billion, overtaking Barclays Bank that reported net earnings of Sh7.6 billion.
Co-op Bank is majority owned by the co-operative movement, which also provides a lucrative captive client base.
“The good performance was supported by progressive growth in the balance sheet and transaction-based incomes,” said Co-op Bank group managing director Gideon Muriuki at an investor briefing Wednesday. “We see Co-op Bank growing bigger in the future,” he added.
The lender is in contention with Standard Chartered for the position of Kenya’s third most profitable bank.
StanChart, which is yet to announce last year’s results, will have to record an after-tax profit growth of at least 12.3 per cent from 2012’s net earnings of Sh8.1 billion to rank ahead of Co-op Bank.
Co-op Bank’s turnaround is one of Kenya’s banking sector success stories, from a loss of Sh1.7 billion in 2000 when it only had 29 branches to become Kenya’s third largest lender with 134 outlets.
Mr Muriuki was appointed Co-op’s chief executive in 2001 and his tenure has seen the bank’s turnaround and guided the bank to list at the Nairobi bourse in 2008 through an initial public offering.
The lender posted a net profit of Sh2.3 billion in 2008, the year it listed at the NSE, and last year’s Sh9.1 billion shows its profitability has nearly quadrupled over the six years.
Co-op’s dividend pay-out has grown fivefold during the period to Sh0.50 from Sh0.10 in 2008.
KCB and Equity, whose net profit stood at Sh14.3 billion and Sh13.2 billion respectively, are Kenya’s biggest earners.
Co-op Bank’s growth in the last year was helped by a drop in interest expenses due to lower deposit costs and growth in income from fees and commissions.
The 17.9 per cent profit jump indicates that Co-op grew faster than some peers, including KCB’s 17.5 per cent profit growth rate, Equity’s 9.5 per cent and NIC Bank’s 6.6 per cent.
Barclays, which dominated the local banking industry for years but whose reign ended in 2011, saw after-tax full-year profit drop 12.7 per cent to Sh7.6 billion last year, weakened by high costs and a one-off staff restructuring cost of Sh788 million.
It cut its dividend pay by a third to Sh0.70 down from Sh1 per share paid in 2012.
Co-op’s profit growth will be a boon for shareholders after the lender announced a bonus issue in the ratio of one new share for every six held, and kept the dividend pay-out at Sh0.50 a share.
Co-op’s share Wednesday closed at Sh20.25 apiece.
The bank’s deposit costs dropped by a third to Sh5.9 billion from Sh8.6 billion in 2012, translating to savings of Sh2.7 billion.
Its loan book grew by 15 per cent or Sh18 billion to Sh137.1 billion last year compared to Barclays Kenya’s total loans which stood at Sh118 billion in December last year.
Mr Muriuki said the bank leveraged on its ties to saccos to expand retail base for loans, bancassurance and grow income from the customised Sacco Link ATM cards issued to the institutions.
The lender said Sacco Link customers now stand at 631,487 and accounts for 15 per cent of Co-op Bank’s 4.1 million account holders.
