Saccos receive Sh3.8b dividend windfall from Co-op Bank stake

Co-operative Bank Chairman John Murugu (left) and Managing Director Gideon Muriuki (centre) present a dividend cheque of Sh3.8 billion to the Chairman of Co-op Holdings Co-operative Society Macloud Malonza at the bank’s head office in Nairobi. (Wilberforce Okwiri, Standard)
Savings and credit societies (saccos) which together have a controlling stake at Co-operative Bank, have received a Sh3.8 billion dividend windfall.

This is after Co-operative Bank shareholders approved a dividend payment of Sh1 per share at an annual general meeting last week.

This year’s dividend payment is the highest ever and matches the entire initial investment by the co-operative movement in the bank, thereby enabling them to recoup their investment in full.

Co-operative Bank Chairman John Murugu and Chief Executive Gideon Muriuki handed over a Sh3.78 billion cheque to the saccos’ umbrella body, Co-op Holdings Co-operative Society after the AGM on Thursday.

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Saccos have a 64.5 per cent stake in the lender through the society, which was formed in 2008 to facilitate the bank’s listing on the Nairobi Securities Exchange.

During the cheque handover at the bank’s head office, Co-op Holdings Co-operative Society Chairman Macloud Malonza lauded the uniqueness of the co-operative financial system that touches over 22,000 societies.

Co-operative Bank reported a profit before tax of Sh18.2 billion in 2018.

This was the highest payout to shareholders since the listing of the bank.

“This year’s Sh1 dividend matches the entire initial investment by the co-operative movement in the bank, thereby enabling them to recoup their investment in full, and can be regarded as ‘shilling-for-shilling’ dividend payout,” said Co-operative Bank Group Managing Director during the AGM.

The lender’s shareholders approved a dividend payout of Sh5.9 billion after the lender’s net profit for the year ending December 31, 2018 grew by 11.4 per cent to Sh12.7 billion, up from Sh11.4 billion recorded in the previous year.

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The Sh1 payment per share is a 25 per cent increase compared to the 80 cents paid out last year.

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

Last year, against punishing macro-economic conditions in which financial institutions have been prevented from charging any interest rate, income from Treasury bills and bonds made up for a slight dip in the loan book.

Interest income

Lending to Government earned the Tier One bank Sh9.79 billion in interest income, an increase of 19 per cent from the Sh8.21 billion it received in 2017.

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Mr Muriuki termed the performance “remarkable” coming against a backdrop of a challenging operating environment marked by rate caps, adverse economic effects of drought and the slow economic recovery from the extended electioneering period.

“The good performance was made possible by the gains from the Transformation Project that the bank has been implementing since 2014 focused on improving operational efficiency, superior customer service and lower operating costs,” explained Muriuki, who is also a shareholder at the bank.

Co-operative is one of the five banks that will pilot a new mobile lending product named Stawi for micro, small and medium enterprises (MSMEs).

The mobile phone-based credit scheme backed by Central Bank of Kenya aims at improving access to credit for MSMEs which still encounter significant challenges in accessing the formal credit market because of the informal nature of their operations and lack of collateral for secured loans.

Other lenders under the Stawi programme include Commercial Bank of Africa, Diamond Trust Bank, NIC and KCB.

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,” Muriuki said in a statement early this year.

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saccosCo-operative BankJohn MuruguNairobi Securities ExchangeNSE