Co-operative Bank of Kenya has emerged as one of the fastest growing lenders in value on the Nairobi bourse in the wake massive exit of foreign investors.
The lender has now become the second most valuable bank amongst the 10 lenders whose shares are publicly traded on the Nairobi Securities Exchange (NSE).
Investors on the NSE valued Co-op, controlled more than 60 per cent by the co-operative movement, at Sh69.23 billion at the close of trade last week after shares traded at Sh11.80 per unit.
This has placed it only behind Equity Bank in an emerging realignment in the industry, spurred by the exit of return-chasing, risk-averse foreign investors in the past two years.
It has come on the back of Co-op clinching lucrative deals with the government to process cash in the government-government fuel import deals with Saudi Arabia and the United Arab Emirates as well as the relaunched Nairobi Coffee Exchange.
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“We reiterate that we view the bank’s E-credit lending as an earnings driver going forward with Sh6.4 billion being disbursed monthly, though the NPLs [non-performing loans] are also quite elevated at 12 to 15 per cent,” analysts at Standard Investment Bank wrote in a recent note to investors. “Partnership with government in the G2G oil importation plan and the coffee exchange settlement platform should boost non-funded income.”
Analysis of market data shows Co-op is amongst half of the banks that have gone against an industry-wide fall in value in the last one month.
The 11 publicly-traded banks - including Rwanda’s BK Group - lost cumulative Sh19.35 billion of value in the review month.
Co-op, Kenya’s third largest by assets, gained slightly more than Sh1.17 billion value in September after posting a 5.8 per cent growth in after-tax profit to Sh12.1 billion in the half-year period through June.
The data shows that only Absa Kenya (Sh2.4 billion) and Standard Chartered Bank (Sh1.89 billion) gained more value in shares trading on the NSE last month.
Co-op’s Bank's performance has in part been helped by double-digit growth in loan book and interest earnings.
“The group continues to pursue strategic initiatives that focus on resilience and growth in the various economic sectors,” Co-op Bank’s Chief Executive Gideon Muriuki wrote in half-year financial performance report in August.
Co-op leapfrogged KCB Group to occupy the second position for the first time by market value, while Equity maintained the first spot with a value of Sh134.61 billion.
The value of KCB, whose value has been impacted by 20 per cent drop in net profit drop to Sh15.5 billion in half-year period ended June on the back of a sell-off by foreign investors in recent years, was estimated at Sh67 billion.
Some analysts also argue that the considerable fall in KCB’s market capitalisation since the beginning of this year may be driven by perceptions amongst investors of a return of government interference in the running of the bank.
This followed perception of government’s hand in board changes that saw former Head of Public Service Joseph Kinyua appointed board chair.
Co-op Bank says it has set aside a Sh12.6 billion war chest for affordable loans to small businesses as it posted a 5.17 per cent jump in net earnings to Sh6.1 billion for the first three months of the year.
The growing focus on small traders, who control the bulk of Kenya’s economy, has earned the bank world-wide recognition after it was named the ‘SME Financier of The Year in Africa in 2023’ at a global fete in Mumbai, India, earlier in the year.
The SME Finance Forum is a network of over 250 leading banks, NBFIs, fintechs and development banks, created by the group of 20 world’s leading economies (G20) in 2012 and managed by the International Finance Corporation. The jump in earnings was driven by growth in both interest and non-interest income, with total operating income rising 6.5 per cent to Sh17.9 billion.
"The strong performance by the bank is in line with the group’s strategic focus on sustainable growth, resilience and agility," Mr Muriuki in a statement.
He said the bank has signed a Sh12.6 billion long-term credit agreement with global institutional investors led by the German fund, Deutsche Investitions–und Entwicklungsgesellschaft (DEG) to strengthen the bank’s capital base and support lending to small enterprises.