Co-op Bank's Q3 profits dip 10% on high loan provision

Gross profit shrunk to Sh13.8 billion compared to Sh15.5 billion recorded in the corresponding period last year.

In Summary
  • Equity and KCB Group also suffered a similar fate, with net earnings shrinking 14 and 43 per cent respectively 
  • Fitch Rating has projected NPLs for Kenyan banks to grow to an average 15 per cent 
Co-op Bank MD Gideon Muriuki

Co-op Bank Group has reported a slight drop in net profit for the third quarter ended September on high loan provision arising from Covid-19 economic pressure.

The lender’s financial results for the period released Thursday show profit after tax dropped 10 per cent to Sh9.8 billion compared to Sh10.9 billion over a similar period last year.

Gross profit shrunk to Sh13.8 billion compared to Sh15.5 billion recorded in the corresponding period last year.


Managing Director Gideon Muriuki said the lender has taken a 90 per cent increase in loan loss provision from Sh2.1 billion in 2019 to Sh4 billion.

This he said is in appreciation of the challenges that businesses and households are grappling with from the disruption occasioned by the ongoing pandemic.

By September, a total of Sh46 billion in loans had been restructured to support customers impacted by the 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 unfolds,’’ Muriuki said.

Despite the challenges, the lender’s operating income grew by six per cent from Sh35.2 billion to Sh37.2 billion while net interest income grew by 12 per cent from Sh21.2 billion to Sh23.6 billion.

Total assets grew by Sh70.1 billion (16 per cent) to Sh510.9 billion compared to Sh440.8 billion in the same period last year. Net loans and advances book grew by six per cent Sh15.4 billion from Sh268.9 billion to Sh284.2 billion.

Shareholders’ funds grew to Sh82 billion (11 per cent) from Sh73.9 billion in 2019 enabling the bank to continue pitching for big-ticket deals.

However, total-operating expenses grew by 18 per cent from Sh19.8 billion to Sh23.5 billion on account of higher loan loss provisions.


The bank which finalised the acquisition and rebranding of Jamii Bora to Kingdom Bank is however optimistic about better results in the future, driven by the digital wave.

''We shall ride on the unique synergies in the over 15 million-member co-operative movement that is the largest in Africa, continue to pursue strategic initiatives that focus on resilience and growth in the ‘New Normal’,'' Muriuki said. 

Co-op Bank's results is a continuation of a trend already displayed by other tier-one lenders like KCB and Equity Bank Group whose profits for the quarter have dipped on high loan loss provisions. 

Coronavirus pandemic saw Equity Group's profits dipped to Sh15 billion compared to Sh17.5 billion reported in the corresponding quarter last year, representing a 14 per cent drop.

Loan loss risk provisions grew 11-fold from Sh1.3 billion to Sh14.3 billion increasing non-performing loan coverage to 86 per cent in anticipation of defaults due to reduced earning among borrowers.

 The bank's total non-performing loans for the quarter under review grew to Sh45.9 billion from Sh26.5 billion over a similar period last year, representing a 73.2 per cent increase.

KCB Group on other hand registered a 43 per cent drop in net earnings, with non-performing loans rising to 15.3 per cent compared to 8.3 per cent last year.

Net profit dropped to Sh10.9 billion, compared to Sh19.2 billion-recorded same period last year.

Loan loss provisions rose to Sh20 billion from Sh5.8 billion in the previous period, driven by changes in customer risk profiles and the impact of the pandemic on macroeconomic drivers.

Last month, Fitch Rating projected Kenyan banks' credit profiles to face significant risk from the economic impact of the coronavirus pandemic, forecasting non-performing loans to hit 15 per cent. 

''We forecast that the sector's non-performing loans (NPL) ratio will rise to about 15 per cent by end-2020, and even higher in 2021 when debt relief measures are phased out,’’ said the global credit rating firm.

The firm gave a Negative Outlook on Kenyan bank Issuer Default Ratings, all of which is 'B+', saying profitability will remain under pressure from rising loan impairment charges (LICs) and moderate credit growth.