New strategy ups Co-op Bank's investor confidence as stocks rise

NAIROBI: Co-operative Bank Group’s business restructuring plan could have received nod from investors.

This is after the bank’s share price at the Nairobi Securities Exchange (NSE) surged to Sh20.5 per share on average this week, from an average of 19.25 last week. The bank also became the top mover on the NSE on Tuesday, trading 4.99 million shares valued at Sh102.30 million - accounting for 18.8 per cent of market activity.

Co-operative Bank was also most heavily traded stock on Wednesday with 9.62 million shares worth Sh193.8 million traded - making the stock much sought after by foreign investors. They accounted for 36.7 per cent of all buys on Wednesday, but only 3.1 per cent of yesterday’s sale of the stock. On Thursday, Co-op Bank, Safaricom and Britam were the top movers jointly accounting for 50.2 per cent of activity.

This followed a presentation to investment analysts, fund managers, investment banks and stockbrokers by Chief Executive Gideon Muriuki (pictured) about the bank’s transformation plan dubbed ‘Soaring Eagle’ developed following McKinsey & Company advise from last year.

In formulating its 2015-2019 strategic plan, the bank engaged the services of the advisory firm to carry out a review, which identified key areas that the bank needed to address. The audit was meant to reorganise the bank’s business processes and enhance efficiency, control costs and ensure the bank gets to higher growth path and bolster shareholders’ value.

Muriuki said the reorganisation will ensure the bank increases staff productivity. “Amongst other areas of focus include strategies to enhance the growth of the dominant co-operative sector reducing silos and the need for flatter management structures, thus freeing more time for management to focus on core responsibilities,” he said. He said there is also need to manage the growing cost income ratio out of the expansion by the bank in branch network, agency banking, and key systems among other key investments in the last five years. Co-op Bank is in the process of implementing a transformation strategy aimed at improving its business model and delivery as well as cost cutting. The bank is targeting to cut its cost to income ration to 53 per cent this year down from 58 per cent in third quarter of last year which will improve its profitability.

So far, the bank has successfully implemented the new realigned organisational structure that will drive the institution to scale up new frontiers. The bank has now embarked on the second phase of the recommendations expected to contribute the bank’s five-year (2015-2019) strategic plan.