Co-operative Bank of Kenya outshines banking peers with 32pc leap in half-year profits

Co-operative Bank of Kenya has signed a Sh12 billion long-term facility for onward lending from the International Finance Corporation after reporting the fastest half-year growth in Kenya’s banking sector.

Group Managing Director Gideon Muriuki yesterday said his bank’s after-tax profits rose by a third to Sh6.24 billion.

“We have managed to contain our costs to achieve this growth. Our focus in the last financial year has been on costs optimisation, improvement in operating efficiencies and innovative customer delivery platforms,” he said.

The bank’s 32 per cent jump in net profits for the six months to June, is the fastest in the top-tier band, where it is ranked third-largest by asset base.

Its total assets grew 22 per cent to Sh58.3 billion, supported by even faster growth in loans to customers worth Sh204.8 billion by June 30.

SME lending

Mr Muriuki said his bank would be drawing down on the IFC loan facility within the coming weeks, adding that it would be accessible to small and medium enterprises (SMEs), which “are the engine of growth for the economy”.

Co-op’s subsidiary in South Sudan also reported a Sh122 million in profits, despite the country’s civil strife, the MD said, terming this “very encouraging”.

The latest developments in South Sudan suggest a peace deal could be entered into before the end of the year, which would have huge benefits for the its economy, and specifically, the banking sector.

Co-op owns a 51 per cent stake in its joint venture with the government of South Sudan, and it wants to replicate this model in its Sh5 trillion expansion plan into four other countries — Rwanda, Uganda, Tanzania and Ethiopia — by 2019.

“Our approach would be acquiring a controlling stake in an established bank, rather than buying out one with a small customer base.”

Expense management

The bank’s cost to income ratio was down to 51 per cent, compared to 62 per cent reported last year, following expense management measures that included the use of efficient channels, such as mobile and electronic platforms.

Muriuki said the bank was also beginning to reap from the restructuring started last year and an increase in product uptake among its 5.4 million customers.

“We are now mining more business from the customers that we already have,” he said, translating to more revenue streams that are not necessarily driven by loans.

And with Muriuki expecting the recent rise in lending rates to depress borrowers’ appetite, Co-op is betting on its extensive agency network and co-operatives, previously its anchor customer base, to drive non-funded income streams, earned as fees and commissions.