Co-op Bank H1 profits up 55% on sound credit management

This is the highest industry growth reported this quarter in the country

In Summary
  • The bank's net earnings rose to Sh11.5 billion from Sh7.4 billion similar period last year
  • Shareholders’ funds grew to Sh96.7 billion, a 4.4 per cent increase from Sh92.6 billion in 2021.
Coop Bank Group managing director Gideon Muriuki at a past event/FILE
Coop Bank Group managing director Gideon Muriuki at a past event/FILE

Lower loan loss provision as businesses and households continue to recover from covid pandemic saw Co-operative Bank Group report the industry's highest growth in the first six months of the year. 

The lender's financial report for the first half of the year shows it recorded a 55.4 per cent growth in net earnings, higher than 41  per cent reported by Stanbic Bank, Equity Group at 36 per cent and KCB Group at 27 per cent. 

The lender, which rides on a strong cooperative movement in the country of over 15 million members reported a net profit of Sh11.5 billion in the review period compared to Sh7.4 billion same half last year. 

The Group prudentially provided Sh3.3 billion compared to Sh4.2 billion same period last year, indicating an improving quality of asset book as businesses and households continue to recover from the impact of the Covid-19 pandemic.

Profit Before Tax for the period was Sh15.3 billion, a 45.7 per cent growth when compared to Sh10.5 billion recorded in the second quarter of 2021.

"The performance delivers a competitive Return on Equity of 24.2 per cent to shareholders, with the percentage increase being the biggest so far reported by tier one banks,'' Coop Bank Group MD and CEO Gideon Muriuki said.

During the period, total operating income grew by 17.8 per cent from Sh29.2 billion to Sh34.4 billion.

Total non-interest income grew by 29 per cent from Sh10.3 billion to Sh13.3 billion.

This is primarily from fees including deposit and transaction fees as the bank recorded a jump in customer deposits, to Sh423 billion, from Sh407.7 billion.

Net interest income grew by 11.8 per cent from Sh18.8 billion to Sh21.1 billion.

The lender’s total operating expenses increased marginally by 2.5 per cent from Sh18.7billion to Sh19.2 billion.

Investment in Government securities rose marginally to Sh183.2 billion during the period compared to Sh182 billion last year. 

Besides, all the Group's subsidiaries reported positive growth including the Co-operative Bank of South Sudan which returned to profitability after a three-year hiatus. 

The joint venture (JV) between Coop Bank  Group and the Government of South Sudan reported a profit of Sh55.5 million in the quarter, compared to a loss of Sh290.1 million in a similar period a year ago.

Kingdom Bank Limited (a niche MSME Bank) acquired by the group from Jamii Bora in 2020 almost doubled its gross profit to Sh405.9 million from Sh275 million reported last year, representing a 48 per cent growth year-on-year.

The Group's bancassurance arm, Co-op Consultancy & Bancassurance Intermediary Limited posted a profit before tax of Sh593.3 million during the quarter, riding on strong penetration of the bancassurance business.

Co-op Trust Investment Services on other hand contributed Sh85.7 million in profit before tax, with Funds Under Management of Sh196.4 billion, compared to Sh179.4 billion in June 2021.

“The strong performance by the bank is in line with the Group’s strategic focus on sustainable growth, resilience, and agility,” Group managing director and CEO Gideon Muriuki said in a statement on Thursday.

Its loan book expanded by 9.6 per cent as loans and advances grew to Sh330 billion, from Sh301.2 billion.

Shareholders’ funds grew to Sh96.7 billion, a 4.4 per cent increase from Sh92.6 billion in 2021.

The Group's assets grew to Sh603.9 billion from Sh573 billion in the same period last year to solidify its position as the third largest lender in the country after Equity and KCB Group whose assets rose to Sh1.3 trillion and Sh1.2 trillion respectively. 

Through its digital channel strategy, the bank has successfully moved 94 per cent of all customer transactions to alternative delivery channels, an expanded 24-hour contact centre, mobile banking, 558 ATMs, internet banking and a countrywide network of Co-op Kwa Jirani agents.

“We have successfully migrated our customers to the Omni-channel, integrating accessibility and user experience,” management said.

A successful universal banking model and the implementation of sales force effectiveness have seen the Group serve nine million account-holders across all sectors.

Key focus on digital banking, with the all-telco Mco-op Cash Mobile Wallet continuing to play a pivotal role in the growth of non-funded income with five million customers registered.

Loans worth Sh40.8 billion have been disbursed year-to-date, averaging over Sh 6.8 billion per month.

Over 162,000 customers have taken up the MSME packages rolled out in 2018, and 26,943 have been trained on business management skills.

"Year to date, we have disbursed 12.6 billion to MSMEs through our Mobile E-Credit solution. MSMEs are a critical part of economic recovery post-covid and contribute up to 16 per cent of our total loan book,'' Muriuki said. 

WATCH: The latest videos from the Star