Co-op Bank lends Sh499m to its brokerage subsidiary

Co-operative Bank along Moi Avenue in Nairobi on January 25, 2023.  

Photo credit: File | Nation Media Group

Co-operative Bank of Kenya lent its stock brokerage services arm Sh499 million in the financial year ended December 2023 for liquidity and capital boost, adding to the support that the lender is giving the subsidiary it acquired in 2009.

The lender’s top shareholder —Co-op Holdings Co-operative Society Limited— has disclosed that the loan to Kingdom Securities Limited added to the Sh45 million that had been advanced to the brokerage firm in the previous financial year. This took the outstanding loan to Sh544 million as at the end of last year.

The latest loan was advanced at 13 percent, being the same as that in the previous year but comes with relaxed repayment conditions.

“The terms of the facility are such that the facility is to be repaid in cash once the company’s liquidity/capital has improved to above regulatory levels and the company is profitable. The loan is non-secured,” said Co-op Holdings in its latest annual report.

Kingdom Securities is among the subsidiaries and associates owned by Co-op Bank as part of its strategy to offer comprehensive financial services including lending, wealth management, insurance and leasing.

Kingdom Securities, previously Bob Mathews Stockbrokers Limited, was acquired by Co-op Bank through the purchase of 60 percent shareholding in 2009. The company offers brokerage services and is a registered broker with the Nairobi Securities Exchange.

The brokerage arm made a profit after tax of Sh2.99 million in the financial year ended December 2023 compared with Sh5.8 million net profit a year earlier on increased finance costs.

Kingdom Securities closed December last year with Sh50 million as the paid-up capital, being the required minimum. Total shareholders’ funds stood at Sh111.18 million, being more than twice the required minimum of Sh50 million.

The subsidiary’s liquidity capital closed last year at Sh561.78 million, up from Sh556.5 million, being above the required minimum of Sh57 million it was required to hold.

There has been a longstanding claim of Sh31.86 million against Co-op Bank relating to the sale and purchase of shares in Bob Mathews Stockbrokers. Co-op says it successfully applied for and obtained a stay of proceedings and referral of the matter to arbitration as per the terms of the share purchase agreement.

The arbitrator in December 2022 ordered the parties to each appoint auditors to prepare a report on the claim. The two parties were expected to file their respective audit reports with the arbitrator by April 5, 2024 and then the matter to be mentioned next week Wednesday (April 24) for further directions.

Co-op Bank owns several other subsidiaries including Kingdom Bank, in which it has a 90 percent stake. It fully owns Co-op Consultancy & Bancassurance Intermediary Limited and also has a 51 percent stake in Co-operative Bank of South Sudan.

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