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Co-op Bank invests Sh305m more in South Sudan unit
Co-operative Bank of Kenya has invested an additional Sh305.5 million in its South Sudan subsidiary even as the lender reported an 18.8 per cent rise in net profit to Sh7.4 billion in the half year ended June.
The extra capital provided to Co-op Bank South Sudan, its only subsidiary in the region, brings the cumulative investment in the unit to Sh2.2 billion.
The Nairobi Securities Exchange-listed lender invested Sh1.5 billion to set up the subsidiary in 2013, acquiring a 51 per cent stake in the joint venture that saw the government of South Sudan take up the remaining 49 per cent equity.
Co-op has so far invested an additional Sh700 million in the unit, indicating increased need for capital at the subsidiary which became profitable last year. The reasons for the increased funding were not immediately clear. The bank did not respond to our queries by the time of going to press.
Banks operating in South Sudan are, however, facing several challenges including a massive devaluation of the country’s currency and a conflict that has pitted government forces against rebels.
Political turmoil
The depreciation of the South Sudanese pound by more than 80 per cent has seen the asset base of Kenyan banks in that market shrink by billions of shillings. The political turmoil has also hurt the country’s economy as evidenced by, among others, industrial unrest, fuel and foreign currency shortages.
Co-op Bank South Sudan recorded a pre-tax profit of Sh849.7 million last year. The lender said the unit made a profit of Sh29.2 million in the half year, indicating reduced earnings.
The group’s net profit of Sh7.4 billion in the review period was boosted by total interest income which increased by Sh4.8 billion to Sh21.5 billion.
“The performance is attributable to the significant benefits arising from the ‘Soaring Eagle’ transformation project the bank has been implementing since 2014,” managing director Gideon Muriuki said in a statement.
“(The project focuses on) cost optimisation, improvement in operating efficiencies and innovative customer delivery platforms. The group’s sustained good performance is an affirmation of the bold transformation agenda.”
The lender, which has been implementing a transformation agenda over the past two years, saw income from loans and advances grow by Sh3.2 billion to Sh16.8 billion even as its loan book improved eight per cent to Sh221.3 billion.
Non-interest income, which includes items such as fees and commissions, dividend income and foreign exchange trading income, increased by Sh879 million to close the period at Sh6.8 billion.
The interest and non-interest income helped the bank to absorb higher operating expenses which increased 21 per cent to Sh10.96 billion on higher loan loss provisions, staff costs, and director emoluments, among other costs.
