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Co-op Bank profit drops 3 percent on bad loans provisions

Co-op Bank has restructured terms of Sh39.2 billion loans since Covid-19 started and says it is still actively considering customer applications on a case by case basis.
Co-op Bank has restructured terms of Sh39.2 billion loans since Covid-19 started and says it is still actively considering customer applications on a case by case basis. FILE PHOTO | NMG 

Co-operative Bank’s #ticker:COOP half-year net profits have dropped by 3.6 per cent to Sh7.2 billion on account of higher loan loss provisioning in a Covid-19 environment.

This happened despite an increase in revenue from mainstay lending business. Net earnings dropped from Sh7.5 billion posted in a similar period last year, making Co-op the latest top lender to post a drop in profit on increased provisioning for bad debts linked to the infectious virus that struck Kenya mid-March.

Net interest income grew by 12 percent to Sh15.9 billion from Sh14.3 billion posted in the preceding similar period to keep the bottom-line steady despite a five percent retreat in non-interest income to Sh8.3 billion.

Co-op Bank Group CEO Gideon Muriuki termed the performance strong, even as the lender raised the loan loss provision by 57.9 percent to Sh1.87 billion, from Sh1.18 billion.

The rise was in appreciation of the tough economic environment facing borrowers.

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“This strong performance is an affirmation of the resilience of the business in view of the most challenging operating environment occasioned by the Covid-19 pandemic that has brought about unprecedented economic and social disruption,” said Mr Muriuki yesterday.

Another large bank, KCB #ticker:KCB, on Wednesday posted a 40 percent decline in net earnings to Sh7.5 billion as it raised its provision for potential loan losses 3.6 times to Sh11 billion.

Co-op Bank has restructured terms of Sh39.2 billion loans since Covid-19 started and says it is still actively considering customer applications on a case by case basis.

Its South Sudan joint venture in which it owns 51 percent stake made a before tax profit of Sh102.6 million, a growth from Sh93 million posted in similar half last year.

Other subsidiaries—Co-op Consultancy & Insurance Agency and Co-op Trust Investment Services—contributed Sh387.8 million and Sh47.1 million pre-tax profits respectively.

The lender is on course to formally acquire a 90 percent stake in Jamii Bora Bank on Friday next week after the deal received all the regulatory approvals.

The lender has hinted at using the deal to deepen micro small and medium sized entities banking, microfinance, youth and women banking, asset finance and leasing.

“The acquisition offers Co-op Bank the opportunity to cross-sell and deepen product offering to the enhanced customer base and create a niche bank to offer specialised credit offerings,” said Mr Muriuki.

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