Co-op Bank, Absa profits drop on account of Covid-19

Co-operative Bank of Kenya’s net profits in the first nine months of 2020 dropped by 10 per cent to Sh9.8 billion due to the adverse effects of Covid-19 pandemic.

By September 2019 the lender made a profit after tax of Sh10.9 billion, a blissful period for the banking sector as the economy had not been riveted by the pandemic.

However, a 90 per cent increase in loan loss provisioning in the third quarter of this year has eaten into the lender’s bottom-line despite a slight expansion in its loan book.

Gideon Muriuki, Co-operative Bank’s Managing Director, said the increase in loan loss provisioning is in appreciation of the challenges that businesses and households are grappling with from the disruption occasioned by the ongoing pandemic.

“We continue to actively engage our customers to support them through this period, by re-aligning the servicing of facilities, funding, and transactional needs as the situation unfold,” said Muriuki.

As at the close of the third quarter, the lender had restructured loans valued at Sh46 billion in what was aimed at giving relief to customers negatively impacted by the pandemic.

Muriuki insisted a net profit of Sh9.77 billion at a time when the economy is buffeted by the pandemic was not bad.
Among the three tier 1 banks that have so far released their financial results, Co-op Bank has had the least drop in profitability while ABSA Bank had the worst.

During the period under review, ABSA made a net profit of Sh1.9 billion, which was a drop of 65 per cent compared to Sh5.5 billion that it made in the same period last year.

KCB profits dropped by 43 per cent while Equity Bank’s declined by 14 per cent as the banking sector continued to grapple with a tough business environment that has seen a spike in bad loans.

KCB Group's branch in Nairobi

The total operating income for Co-operative Bank, majority-owned by co-operative societies, grew by six per cent from Sh35.2 billion to Sh37.2 billion, on the back of increased earnings from loans.

Total interest income, which is earned from loans, increased by 12 per cent to Sh23.6 billion from Sh21.2 billion.

Non-funded income that comes from fees and commissions declined to Sh13.6 billion from Sh14.1 billion due to waiver of all fees on mobile banking and restructuring fees.

The lender’s total operating expenses grew by 18 per cent from Sh19.8 Billion to Sh 23.5 billion on account of higher loan loss provisions.

During this period, the publicly listed bank saw its balance sheet expanded with total assets growing by Sh70.1 billion, 16 per cent, from s. 510.9 billion compared to Sh440.8 Billion in the same period last year.

The growth was mostly due to increased investment in Government securities which grew by half to Sh142.3 Billion compared to Sh94.6 Billion in 2019.

Loans and advances increased by six per cent to Sh284.2 billion.