Co-op Bank grew its net income 68.8 percent in the first quarter ended March on a surge in non-interest income. The lender made a net profit of Sh5.8 billion in the review period, up from Sh3.4 billion the year before.
Non-interest income, including fees and commissions, rose 41.6 percent to Sh6.4 billion. Total interest income increased 4.1 percent to Sh14 billion, mainly due to higher income from investment in government fixed-income securities.
Co-op Bank increased its purchases of treasuries by 10.3 percent to Sh183.3 billion. Its loan book meanwhile expanded 8.8 percent to Sh324.4 billion.
Besides the sharp rise in non-interest income, Co-op Bank also benefitted from reduced provisions for bad loans.
The amount set aside to absorb the non-performing loans fell 32.3 percent to Sh1.5 billion, contributing to total operating expenses declining 2.4 percent to Sh9 billion.
The stock of gross defaults also dropped 4.8 percent to Sh49.4 billion, signalling an improved quality of the loan book.
The ongoing economic recovery and the easing of the Covid-19 pandemic have strengthened the financial position of borrowers besides lifting the value of assets used as collateral such as properties.
Co-op Bank’s new subsidiary –Kingdom Bank— contributed to the group’s consolidated earnings after its net profit increased 57.2 percent to Sh199.2 million in the first quarter.
Co-op Bank acquired a 90 percent stake in the subsidiary in August 2020 for Sh1 billion in a rescue deal after the original shareholders balked at providing additional capital to the institution which was in losses.
The acquisition was part of Co-op Bank’s strategy of growing in the Kenyan market where it believes opportunities are yet to be exhausted. The bank’s only foreign operation is in South Sudan.
The lender is opening seven new branches in the country this year, a move that will raise its total distribution network to 200.
Co-op Bank is among the lenders that posted double-digit earnings growth in the quarter under review, a signal that Kenyan banks could set new profit records this year after bumper profits last year attributed to the recovery of the economy from the Covid-19 pandemic.
Infections and deaths from the respiratory disease have slowed down, leading to the easing of travel and other restrictions. This has revived economic activities and brightened the outlook, with banks benefitting from improved loan repayments.
Borrowers, for instance, have resumed normal payments on 90 percent of the Sh1.6 trillion loans that were restructured in the wake of the pandemic in early 2020.
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