Rate cap slows Co-operative Bank profit to Sh9.5b

Co-operative Bank Managing Director and Chief Executive Gideon Muriuki. (Photo: Courtesy)

Co-operative Bank has posted a 9.5 per cent drop in net profit to Sh9.5 billion in the first nine months of the year on account of reduced interest income.

The drop from the Sh10.5 billion recorded in a similar period last year makes the lender, which is the third largest by asset base in the country, the second tier I bank to record a dip in net profit after Equity Bank.

Equity Group Holding posted a three per cent decline in net profit to Sh14 billion in the third quarter of this year compared to Sh15.1 billion recorded in the same period last year.

Co-operative Bank Group Managing Director and Chief Executive Gideon Muriuki however described the lender’s performance as “commendable”.

Citing a tight operating environment, especially with the capping of interest rates and the general economic slowdown in an election year, Mr Muriuki said in a statement the group remained focused on long-term profitability.

“The group has a sustained focus on long-term profitability, with current challenges in the operating environment being mitigated by the benefits arising from the successful execution of the ‘Soaring Eagle’ Transformation project,” he said.

In South Sudan where it has a joint venture partnership with the government, Co-operative Bank made a profit of Sh30 million.

Through a multi-channel strategy, the bank said it had moved 86 per cent of customer transactions to alternative delivery channels such as mobile banking, ATMs, Internet and agency outlets to improve efficiency.

As a result, the bank’s cost-to-income ratio, a measure of efficiency, improved from 52.1 per cent achieved last year to 47.6 per cent in the quarter under review.

Total interest income reduced by 7.7 per cent from Sh32.3 billion in the third quarter of last year to Sh29.9 billion in the quarter under review. However, non-interest income grew to Sh10.14 billion from Sh9.8 billion.

At the same time, net loans and advances to customers grew by Sh32.4 billion, or 14.2 per cent, to Sh259.4 billion compared to Sh227 billion in the same period last year.