Co-operative Bank of Kenya has had a commendable growth since the beginning of the year reclaiming its position as the third-largest bank in Kenya in assets ranking.
This was after the lender declared the biggest dividend payout in the industry of Sh5.8 billion.
Co-op Bank’s asset was aided by its acquisition of a 90 per cent stake in Jamii Bora Bank in August last year for Sh1 billion, with the new subsidiary subsequently renamed to Kingdom Bank.
Co-op Bank gained an additional Sh30.6 billion worth of assets from the deal, managing to reclaim its spot despite being the only large bank to maintain dividend payouts over the past two years.
In the first quarter, the lenders’ net profit retreated to Sh3.46 billion despite growth in interest income as the lender increased provisioning for loan defaults in a pandemic environment.
The net earnings for the three months to March 2021 were 3.6 per cent lower than the Sh3.59 billion posted in a similar period last year.
Net interest income which is income from the mainstay business of lending grew by 31 per cent to Sh9.8 billion as the bank expanded its loan book.
However, the lender raised provisioning for loan defaults 2.5 times to Sh2.3 billion to reflect the difficulties facing businesses and individuals in servicing loans in the Covid-19 environment.
The increased provisioning for loan defaults saw total operating expenses rise by 27 per cent to Sh9.3 billion, weighing down the bottom-line.
“The Group prudentially increased loan loss provisions to Sh2.3 billion in the first quarter of the year in appreciation of the challenges that businesses and households continue to face due to the economic effects of the ongoing pandemic,” said Gideon Muriuki, the chief executive.
In the half year financial results, Kingdom Bank’s growth in interest and non-interest income lifted Cooperative Bank Group’s earnings for the six months to June by 2.3 per cent.
The lender’s net profit rose to Sh7.4 billion from Sh7.2 billion same period last year.
Kingdom Bank contributed a profit before Tax of Sh275 million during the period under review compared to the 2020 full-year loss of Sh124 million.
The Group’s gross earnings grew by 10 per cent compared to the Sh9.6 billion recorded in the second quarter of 2020.
The increase came on the back of total operating income made up of interest income and non-interest income growing by 20 per cent to Sh29.2 billion.
Net interest income grew by 18 per cent to Sh18.8 billion as the loan book expanded by 11 per cent to Sh302.1 billion.
Non-interest income was up 24 per cent to Sh10.3 billion. This was supported by its Mco-op Cash mobile wallet which was disbursing loans valued at about Sh5.6 billion monthly.
In the third quarter of 2021, the lender posted an 18 per cent growth in net profit for the nine months to September, surpassing the 2020 full-year earnings on increased income.
The lender made a profit after tax of Sh11.6 billion in the third quarter compared to Sh9.8 billion in a similar period in 2020.
“The strong performance by the bank exceeds the pre-pandemic performance and is in line with the group’s strategic focus that supports growth, resilience and agility,” said Muriuki.
The Group grew its revenues by 19.2 per cent to Sh44.4 billion from Sh37.2 billion in the same period last year.
Net interest income grew by more than a fifth to Sh28.7 billion from Sh23.6 billion, as borrowers resumed servicing their loans.
Non-funded income, comprising of fees and commissions, grew by 15.6 per cent to Sh15.7 billion from Sh13.6 billion.
Faster growth in income compensated for increased loan provisions, which pushed up the lender’s expenses by 19.2 per cent to Sh28 billion.
Loan-loss provisions, or money set aside as insurance against possible loan defaults, increased by 50 per cent to Sh6 billion.
The bank said credit management will be a key focus area as the lender seeks a return to its non-performing loans levels before the pandemic.
The third-largest bank in asset size, Co-op saw its total assets grow by Sh82 billion to Sh592.9 billion compared to Sh510.9 billion in the same period last year.
Muriuki was also named the best Chief Executive Officer in the banking industry in Africa for paying dividends and retaining workers despite the adverse effects of the Covid-19 pandemic.
In March this year, the bank announced that its shareholders will be paid Sh5.86 billion dividend after it retained the payout despite full-year net profit declining by 24.4 per cent on increased provisions for loan defaults.
“The group has taken loan loss provisions of Sh8.5 billion in appreciation of the challenges that businesses and households are grappling with from the disruptions occasioned by the ongoing pandemic,” said Muriuki.
The bank restructured loans worth Sh49 billion or 17 per cent of total loan book during the review period to support customers.
Unlike other large banks, Co-op Bank stood out for maintaining dividend payouts, hiring more employees, paying them more and expanding in the midst of the pandemic through its acquisition of Kingdom Bank.