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Saturday, July 22, 2017

Co-op Bank blames Q1 profit drop on rate cap

Co-operative bank managing director Gideon Muriuki during the bank AGM held at Boma Hotel on May 27 last year./ENOS TECHE
Co-operative bank managing director Gideon Muriuki during the bank AGM held at Boma Hotel on May 27 last year./ENOS TECHE

Co-operative Bank Group, the country’s second largest lender by market share, yesterday reported a 5.83 per cent decline in net profit for three months ended March 31.

The lender said post-tax income stood at Sh3.23 billion in the January-March period from Sh3.43 billion during the same period in 2016.

Co-op blamed the drop on the impact of interest rates cap in a tough economic environment coupled with hyper-inflation in the lender’s South Sudan operations.

“The Co-operative Bank Group is delighted to report a commendable performance against the backdrop of a tighter operating environment especially with the capping of interest rates and currency devaluation and hyperinflation on our operations in South Sudan,” group chief executive Gideon Muriuki said in a statement.

Muriuki said Co-operative Bank of South Sudan made a loss of Sh34.7 million in the period under review owing to hyperinflation occasioned by devaluation of the South Sudanese currency.

Co-op Bank of South Sudan is a unique joint venture with the government of South Sudan, where the bank holds 51 per cent shares and while the government controls the remainder 49 per cent .

Customer deposits grew by 6.9 per cent to record Sh279.8 billion in the first quarter of 2017 compared to Sh261.7 billion during the same period last year.

During the period loans and advances to customers rose by Sh32.2 billion, a 15 per cent increase to Sh245.9 billion up from Sh213.7 billion in the same period last year.

Net interest income however dropped by 10.8 per cent to record Sh9.5 billion in the first quarter of 2017 compared to Sh10.7 billion in 2016.

Muriuki said that the group has been working on improving operational efficiency through its Soaring Eagle Transformational Agenda which has allowed the group to reduce the overall operating costs.

“The Group has reduced the overall operating costs with a Cost Income Ratio of only 47.9 per cent this quarter, compared to a ratio of 52.1 per cent in a similar period last year and a high of 60 per cent in 2014,” Muriuki said.


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