Co-op Bank bullish amid profits drop

Co-operative Bank of Kenya City Hall Branch, Nairobi. [Wilberforce Okwiri, Standard]

Co-operative Bank of Kenya projects its profit to drop significantly this year due to the coronavirus pandemic but expects the reduction to be lower than the rest of the industry. 

In a statement yesterday, the listed bank said it had made positive strides in a dark period that was characterised by a drop in incomes for households and businesses owing to the adverse effects of the pandemic.  

Profits for last year are expected to decline compared to 2019 due to increased provisioning of loans for borrowers adversely affected by the Covid-19 pandemic.

“The board of directors wishes to announce that the bank’s full-year earnings for the 2020 financial year are projected to be materially lower than the earnings reported for the same period in 2019,” said Co-op Bank Company Secretary Samuel Kibugi in a notice to shareholders.

The bank restructured loans valued at Sh46 billion by the end of the third quarter to help customers negatively impacted by the pandemic.

As a result, Co-op Bank made a net profit of Sh9.8 billion for the period compared to Sh10.9 billion in 2019, a largely blissful period for the banking sector before the pandemic depressed the economy.

Compared to the other Tier-One banks, Co-op had the least increase in loan impairments and hence the lowest drop in profitability - mainly due to the composition of its loan book, with most of the borrowers continuing to service their loans.

The bank says it is confident that the Covid-19 mitigation strategies that have been put in place, including a “proactive” credit risk management project in partnership with global consulting firm McKinsey will give the business impetus for sustained growth.

Citing the bank’s transformation agenda, dubbed “Soaring Eagle,” Mr Kibugi said the business continued to operate on a sound footing.

Balance sheet growth

This, he said, includes sustained balance sheet growth with assets of over Sh510 billion supported by loan book of Sh284 billion, and total deposits of over Sh380 billion.

He added that the bank also boasted of a thriving universal banking model serving over 8.8 million account holders across all sectors.

“A growing leverage on digital platforms has seen the bank successfully move over 90 per cent of all customer transactions to alternative channels, with over five million customers registered and loans worth Sh42 billion disbursed on the unique Mcoopcash Mobile Wallet,” Kibugi said.