Co-op Bank's net profit grows to Sh6.1b in first quarter


A Co-op Bank branch in Nairobi. FILE PHOTO | NMG

Co-operative Bank of Kenya reported a 4.7 percent net profit growth in the first quarter ended March, benefitting from higher interest income from loans.

Its net earnings rose to Sh6.1 billion in the review period, up from Sh5.8 billion the year before.

The Nairobi Securities Exchange-listed firm said the performance, which saw its return on shareholder funds stand at 22.2 percent, fits with its sustainable growth plan.

“The strong performance by the bank is in line with the group’s strategic focus on sustainable growth, resilience, and agility,” Co-op Bank’s chief executive Gideon Muriuki said in a statement on Thursday.

The firm’s total interest income rose 11.2 percent to Sh15.5 billion, reflecting the impact of the loan book expanding by Sh35.6 billion to Sh360.1 billion.

Co-op Bank reduced its investment in government debt securities by Sh4.1 billion to Sh179.2 billion.

Other lenders which have announced their first quarter results such as Equity Group and Standard Chartered Bank have also cut their holdings of treasuries in a shift to lending more to households and the private sector.

Co-op Bank also gained from a 10.7 percent jump in non-interest income comprising fees and commissions, among other items.

The lender’s revenue in this business category increased to Sh7 billion from Sh6.4 billion.

It is among big banks that have benefitted from fees on loans as well as growth in foreign exchange trading and other transactions by customers.

Co-op Bank’s interest expenses surged 32.2 percent to Sh4.8 billion, coming at a time when interest rates have been rising including the returns on fixed deposit accounts.

The average interest paid on fixed deposits across the banking sector rose to 7.54 percent in February from 7.17 percent in December 2022, according to Central Bank of Kenya data.

Co-op Bank reported an 8.7 percent rise in operating expenses to Sh9.8 billion, with staff costs among the items that saw significant increases.

The bank continues to invest in expanding its presence in Kenya where it believes growth opportunities are yet to be exhausted.

“The bank has strategically grown its branch network to 187 Branches (four in South Sudan),” the company said in the statement.

“Three new branches (Kenol Makuyu, Hindi and Bamburi) were opened in 2023, whereas five branches (Kabarnet, Iten, Kasarani, Kamakis and Chwele) were opened last year.”

Co-op Bank’s provision for bad debt fell to Sh1.53 billion despite the stock of the non-performing loans increasing by Sh6.2 billion to Sh55.6 billion.

The bank announced it took Sh12.6 billion worth of long-term loans from institutional investors led by German fund DEG to bolster its capital as well as support increased lending of small to medium-sized enterprises.

It is among the major Kenyan banks that have drawn medium to long-term funding from global institutions to raise their supplementary capital besides expansion of lending to specific client groups.

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