Co-operative Bank’s profit after tax for 2017 declined 10.24 per cent against a backdrop of “one of the most challenging operating environments”, the group said yesterday.
The group’s net profit for the full year was Sh11.4 billion compared to Sh12.7 billion in 2016.
Last year, lenders realised the full cycle of the interest rate regime which most, including Co-op, said is an obstacle to business.
This, alongside the slow economic growth in 2017 - an election year - were the main factors that contributed to the profit slump.
“Interest income from government securities retreated three per cent from to Sh8.2 billion, while interest income from loans and advances dropped 4.7 per cent being the full-year effect of interest rates capping,” Co-op Bank managing director Gideon Muriuki said.
LOWER INTEREST EXPENSE
Despite the drop, Co-op said the performance was commendable, having reaped from its transformation project ‘Soaring Eagle’, which cut the bank’s operating costs and improved customer delivery platforms.
“The good performance in a tough operating environment is mitigated by the gains from the bold Soaring Eagle transformation project the bank has been implementing since 2014, with a clear focus on improvement in operating efficiencies, sales force effectiveness and innovative customer delivery platforms,” Muriuki said.
Lower cost of funding resulted in a four per cent decline in the bank’s total interest expense to Sh12.27 billion.
Whereas total interest income declined 4.47 per cent to Sh40.4 billion, total non-interest income (in form of fees and commissions, foreign exchange trading income and dividend income) rose 5.64 per cent to Sh13.49 billion.
Co-op’s net loans and advances grew 7.14 per cent to Sh253.86 billion while customer deposits increased by 10.46 per cent to Sh287.37 billion.
Total assets grew by Sh35 billion to Sh386.9 billion compared to Sh351.9 billion in the same period in 2016.
The bank recently secured a $150 million (Sh15.2 billion) seven-year loan from the International Finance Corporation for onward lending to small firms.