Co-operative Bank shrugged off a near-double loan loss provision of Sh1.31 billion to post a 19 per cent rise in profit for the first half of the year.
The top-tier lender's profit after tax rose from Sh6.24 billion to Sh7.41 billion, helped by a 29 per cent increase in interest income and benefits accrued from a transformation project, which the bank started in 2014.
"The commendable performance is attributable to the significant benefits arising from the bold Soaring Eagle transformation project that the bank has been implementing with a critical focus on cost optimisation, improvement in operating efficiencies and innovative customer delivery platforms," said the bank in a statement yesterday.
Co-op had booked a loan loss provision of Sh667 million in a corresponding period in 2015, 96 per cent lower than this year's. Industry regulator Central Bank of Kenya has stepped up surveillance on banks, directing them this year to adequately provision for bad loans.
Banks had previously been accused of under-reporting bad loans so as to allocate lower provisions for non performing loans to boost their profits.
During the half-year period, Co-op's gross non performing loans increased by 23 per cent to Sh10.25 billion from Sh8.32 billion last year.This is the lowest rise in bad loans in terms of percentage among all the top and mid-tier lenders that have released their results.
So far, National Bank has the biggest jump in bad loans at 297.6 per cent, followed by Family Bank's 92 per cent, CfC Stannic's 45 per cent, KCB with 36 per cent and Housing Finance, which has the second lowest after Co-op, with a 29 per cent rise in gross non performing loans.
Co-op Bank also waded through a difficult operating environment in South Sudan characterised by politically instigated conflicts to earn a profit of Sh29.22 from that market.
(+) Co-op's interest income increased by 29 per cent to Sh21.5 billion,
while income from fees and commissions was up by 15 per cent to Sh6.85 billion.
Customer deposits as at end June stood at Sh279.6 billion, 11 per cent higher than last year's Sh252.8 billion.
Net loans and advances grew to Sh221.3 billion.
Assets increased by 12 per cent to Sh363 billion.