Co-operative Bank first quarter pre-tax profit jumps 30 per cent

The Bank has posted a Shs 6.8 billion profit for half-year 2014, and launched a mobile wallet dubbed M-Co-opcash to up its game in the mobile payments area and better serve its 4.6 million customers and the over 10 million members of the co-operative movement.

Kenya: The Co-operative Bank of Kenya has reported a 30 per cent increase in first-quarter pre-tax profit to Sh4.5 billion from Sh3.47 billion in the similar period last year, buoyed by a jump in interest income.

The bank said net interest income, the money banks earn from interest charges on loans, climbed 21 per cent to Sh5.8 billion in the three months to end-March. The NSE-listed bank said non-funded income grew by 8 per cent to Sh2.87 billion from Sh2.66 billion. The lender saw its net profit increase by 28 per cent to Sh3.17 billion in the three months through March, compared with Sh2.47 billion a year earlier.

Managing Director Gideon Muriuki attributed the growth to its transformation agenda that enabled the bank to cut on operational costs. "We are realising gains out of the restructuring we have been going through since last year focusing on cost reduction and efficiency," he said in an investor briefing yesterday.

Co-op Bank, Kenya's third largest by assets and customer base, cut 160 jobs last year as part of the reforms recommended by global management firm McKinsey. This is expected to save it Sh600 million this year.

Mr Muriuki (pictured) said total operating expenses increased by 3 per cent from Sh4.16 billion in the first quarter of 2014 to Sh4.3 billion. "This reflects the realisation of the cost management agenda, a key objective of our restructuring project," he said.

He is upbeat about 2015 performance and retained loan and deposit growth target for this financial year at 30-35 per cent and 25-30 per cent, respectively. Co-operative Bank's total assets grew by 25 per cent to Sh309.6 billion with the lender's loans and advances to customers during the period standing at Sh184.1 billion or 68 per cent of total assets. Also, deposits increased by Sh46.43 billion to Sh238.04 billion.

The bank's mobile banking customers grew to 1.87 million and transactions stood at 2.5 million in the first quarter of this year. "Overall, management is optimistic about 2015 performance and we expect the momentum to be maintained going forward," Standard Investment Bank Research said in a note to investors.

new countries

The bank plans to expand into countries such as Rwanda, Uganda, Tanzania and Ethiopia. For operations in South Sudan, where growth was slowed due to a civil war in December 2013, Muriuki said they almost broke even in the first quarter. The business is expected to contribute Sh200 million to the group's annual profit. Muriuki said the bank plans to open three new outlets in South Sudan this year, adding to the existing two.

He projected the bank's full-year profitability to grow by at least a third, from the Sh8 billion announced for the period ending December 2014 that was reported a month ago. The growth will be supported by emerging lending opportunities and income from fees and commissions. The bank plans to cut its cost to income ratio to no more than 53 per cent this year, down from 70 per cent last year.