Treasury’s borrowing lifts Co-op Bank profit

Co-op Bank Managing Director Gideon Muriuki.

Cooperative Bank registered a net profit of Sh3.6 billion in the first three months of 2019, as income from Government securities continued to shore up the bank’s profitability.

This was a six per cent increase from a profit after tax of Sh3.4 billion that the lender made in the same period in 2018.

Interest income from Government securities in the first quarter of 2019 increased by 39.6 per cent to Sh2.8 billion from Sh2 billion in the same quarter last year, as banks stock-piled Government papers to circumvent a law that capped interest rate charged on loans.

During the period under review, the lender’s total operating income grew by 1.7 per cent from Sh10.9 billion to Sh11.1 billion

Slash expenses

The tier-one bank managed to slash its expenses by 1.2 per cent from Sh6.1 billion to Sh6 billion in what the lender attributed to “prudent cost management strategy and enhanced efficiency.”

Like many other lenders, the bank continued to leverage on technology to contain its spending bills.

“Through our multi-channel strategy, the bank has successfully moved 88 per cent of all customer transactions to alternative delivery channels,” said Group Managing Director Gideon Muriuki in a statement yesterday.

Despite stabilisation in its loan book, aggressive investment in Government securities saw total assets grow by Sh27.9 billion - seven per cent - to Sh425.7 billion compared to Sh397.8 billion in the same period last year.

Co-operative is one of the five banks that has committed to lend to give unsecured loans to SMEs through a Central Bank-backed initiative known as Stawi that was launched on Monday.

Small businesses will be able to borrow up to Sh250,000 without collateral.

The bank also says there has been more uptake on its credit facilities targeted at SMEs.

“Over 26,800 customers have taken up the rolled out MSME packages that we launched in 2018 and 1600 have been trained on business management and planning,” said Dr Muriuki.

“We have earmarked Sh15.2 billion for MSME lending and to date we have disbursed Sh3.2 billion under the programme. These include 24,167 mobile unsecured business e-loans and 450 supply-chain loans disbursed in the first quarter of 2019 alone.”

Net loans and advances stabilised at Sh251.6 billion.

Co-operative Bank pumped Sh29 billion into Treasury bills and bonds, an increase of 38.6 per cent to Sh103.9 billion compared to Sh75 billion in the first quarter of 2018.