Co-operative Bank managing director Gideon Muriuki. Results for the
first quarter show that Co-op Bank posted a net profit of Sh2.6 billion,
beating Stanchart and Barclays. FILE
By VICTOR JUMA
In Summary
- Results for the first quarter show that Co-op Bank posted a net profit of Sh2.6 billion, beating Stanchart (Sh1.8 billion) and Barclays (Sh1.6 billion).
- This made Co-op Bank the third most profitable bank in the country behind its home-grown peers KCB and Equity.
- The bank is venturing into South Sudan in its first regional shop and has ambitions to open more foreign subsidiaries.
Co-operative Bank of Kenya has overtaken Barclays and Standard Chartered banks on the profit ranking deepening the dominance of indigenous banks against the multinationals.
Results for the first quarter show that Co-op Bank posted a net profit of Sh2.6 billion, beating Stanchart (Sh1.8 billion) and Barclays (Sh1.6 billion).
This made Co-op Bank the third most profitable bank in the country behind its home-grown peers KCB and Equity, whose net profits stood at Sh3 billion and Sh3.2 billion respectively.
The stronger performance by the indigenous banks was helped by major cutbacks in interest expenses compared to the multinationals that reduced their deposit costs marginally.
The local banks have also benefited from aggressive lending, especially on the retail and SME sectors, compared to the multinational rivals who have adopted a cautious approach.
“Margins in retail and SME lending are significantly higher compared to corporate banking and this is driving the performance of Co-op, Equity, and KCB,” said Vimal Parmar, an analyst at Burbidge Capital.
The three local lenders were the only top tier banks to grow their profits by double digits, with the earnings of Barclays and Stanchart shrinking by double digits in the first quarter.
Mr Parmar added that Barclays and Stanchart have traditionally focused on corporate banking, which has lower margins and is growing at a slower rate compared to retail and SME banking.
The larger retail presence among the home-grown banks has helped boost their loan books, interest earnings and transaction-based income from their millions of customers.
Equity has the largest customer base having seven million deposit accounts as of December, followed by Co-op (2.3 million) and KCB (1.2 million). Barclays had 1.1 million and Stanchart 171,377 accounts in the period. But deposit expenses were the game change in the first quarter.
Co-op Bank reduced its interest expenses by Sh1 billion in the three months to March, a move that compensated for its flat loan book of Sh119 billion.
KCB also cut also cut its interest expenses by Sh730 million and Equity by Sh511 million. Stanchart saved Sh72 million on the cost of deposits while Barclays reduced its interest expenses by Sh174 million.
Barclays dominated the local banking industry for decades but its reign ended in 2011 when its Sh8 billion net profit was overtaken by KCB’s Sh10.9 billion.
Investors have taken note of the shift in fortunes among the big banks, with the stocks of the indigenous lenders recording the highest demand and bigger gains, according to stock brokers.
Co-op Bank’s share price has risen 37 per cent to Sh16.7, Stanchart’s has gained 25.8 per cent to trade at Sh300 and that of Barclays has gained 23.1 per cent to trade at Sh17.9.
The homegrown banks — with the exception of Co-op Bank — have also benefitted from their expansion in the region in a move that has diversified their earnings away from the Kenyan market.
On this front, the local banks have a distinct advantage over the multinationals operating in Kenya who have limitations of broadening their reach beyond the country because their parent companies have operations in neighbouring countries like Uganda and Tanzania.
Results for the first quarter show that Co-op Bank posted a net profit of Sh2.6 billion, beating Stanchart (Sh1.8 billion) and Barclays (Sh1.6 billion).
This made Co-op Bank the third most profitable bank in the country behind its home-grown peers KCB and Equity, whose net profits stood at Sh3 billion and Sh3.2 billion respectively.
The stronger performance by the indigenous banks was helped by major cutbacks in interest expenses compared to the multinationals that reduced their deposit costs marginally.
The local banks have also benefited from aggressive lending, especially on the retail and SME sectors, compared to the multinational rivals who have adopted a cautious approach.
“Margins in retail and SME lending are significantly higher compared to corporate banking and this is driving the performance of Co-op, Equity, and KCB,” said Vimal Parmar, an analyst at Burbidge Capital.
The three local lenders were the only top tier banks to grow their profits by double digits, with the earnings of Barclays and Stanchart shrinking by double digits in the first quarter.
Mr Parmar added that Barclays and Stanchart have traditionally focused on corporate banking, which has lower margins and is growing at a slower rate compared to retail and SME banking.
The larger retail presence among the home-grown banks has helped boost their loan books, interest earnings and transaction-based income from their millions of customers.
Equity has the largest customer base having seven million deposit accounts as of December, followed by Co-op (2.3 million) and KCB (1.2 million). Barclays had 1.1 million and Stanchart 171,377 accounts in the period. But deposit expenses were the game change in the first quarter.
Co-op Bank reduced its interest expenses by Sh1 billion in the three months to March, a move that compensated for its flat loan book of Sh119 billion.
KCB also cut also cut its interest expenses by Sh730 million and Equity by Sh511 million. Stanchart saved Sh72 million on the cost of deposits while Barclays reduced its interest expenses by Sh174 million.
Barclays dominated the local banking industry for decades but its reign ended in 2011 when its Sh8 billion net profit was overtaken by KCB’s Sh10.9 billion.
Investors have taken note of the shift in fortunes among the big banks, with the stocks of the indigenous lenders recording the highest demand and bigger gains, according to stock brokers.
Equity’s share price has recorded the highest gain, rising 55.4
per cent over the past six months to trade at Sh36, followed by KCB’s
stock that is trading at Sh41 after gaining 49 per cent in the period.
Co-op Bank’s share price has risen 37 per cent to Sh16.7, Stanchart’s has gained 25.8 per cent to trade at Sh300 and that of Barclays has gained 23.1 per cent to trade at Sh17.9.
The homegrown banks — with the exception of Co-op Bank — have also benefitted from their expansion in the region in a move that has diversified their earnings away from the Kenyan market.
On this front, the local banks have a distinct advantage over the multinationals operating in Kenya who have limitations of broadening their reach beyond the country because their parent companies have operations in neighbouring countries like Uganda and Tanzania.
Co-op Bank is venturing into South Sudan in its
first regional shop and has ambitions to open more foreign subsidiaries,
which is expected to boost its earnings in the coming years.
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