Co-op Bank in major shift to ATMs, mobiles, Internet and agency banking

Co-operative Bank customers stand to benefit as it moves to improve efficiency and cut costs. PHOTO | FILE 

By JAMES ANYANZWA

In Summary

• This is part of a wider reorganisation aimed at improving efficiency, managing costs and opening a new phase of growth for the lender, which is set to expand to Uganda, Tanzania, Rwanda and Ethiopia in the next five years.

Kenya’s Co-operative Bank Group plans to offer more products to its account holders to boost margins, having reported a 30 per cent rise in its first-quarter profit.

The bank will shift its routine customer transactions such as deposits and withdrawals from bank branches to alternative channels such as automated teller machines, mobile phones, Internet and agency (“Co-op kwa jirani”) banking.

The move is expected to free most of the bank staff from over-the-counter transactions to handle individual customers.

“We want our staff to understand our customers better. We have been having these close relationship-based engagements with our corporate clients but now we want to elevate it to our individual customers,” managing director and chief executive Dr Gideon Muriuki told The EastAfrican.

The dedicated products and services are expected to help retain existing clients and attract new ones. This is part of a wider reorganisation aimed at improving efficiency, managing costs and opening a new phase of growth for the lender, which is set to expand to Uganda, Tanzania, Rwanda and Ethiopia in the next five years.

READ: Agency banking services face hurdles over low uptake

The bank reckons that about 73 per cent (four million customers) of the existing account holders operate only a single account, a state it wants to change.

“We need to offer three or four products to each of the existing customers,” said Mr Muriuki.

The initial phase of the transformation being executed by McKinsey&Company has seen off 160 employees from the management cadre — a decision expected to yield a one-off staff saving of $12.76 million and annual staff savings of $5.32 million.

The bank, Kenya’s sixth largest by market capitalisation ($1.11 billion), recorded a 30 per cent rise in profits to $47.87 million in the first three months of this year, from $37 million in the same period last year.

The growth was attributed to increased revenues from the bank’s diversified investment portfolio, which includes stock brokerage, consultancy, insurance, and mortgage and fund management.

Also contributing to profitability is the increased volume of transaction-based income.

The rise in profit before tax from $37 million to $47.87 million pushed Co-op’s stock at the Nairobi Securities Exchange upby 1.25 per cent to $0.22 per share from $0.21 per share last week.

During the period under review, the group’s net interest income grew 21 per cent to $62.23 million from $51.27 million while non-funded income rose eight per cent to $30.53 million from $28.29 million.

Total operating income increased 17 per cent to $92.76 million from $79.57 million while operating expenses grew three per cent to $45.74 million from $44.25 million.

Net loans and advances grew 19 per cent to $1.96 billion from $1.65 billion while deposits went up 24 per cent to $2.53 billion from $2.04 billion.

Meanwhile, Equity Bank’s stock remained at $0.52 even as information about the bank’s growth in profitability filtered through the market

Diversification strategy

The group’s first quarter (January-March) pre-tax profits increased by 13 per cent to $64.89 million, up from $57.44 million in the first quarter last year, largely attributed to the group’s diversification strategy.

“The group sustained investments in mobile and agency banking, payment systems and money transfer as well as diaspora remittances,” said James Mwangi, the group’s chief executive and managing director.

“We are highly optimistic that the growth momentum will be maintained throughout the year, with a number of new products and services set to be launched in the coming months.”

The group’s total operating income grew by 19 per cent to $140.42 million, up from $118.08 million, expenses grew by 24 per cent to $75.53 million on the back of investments made in an expanding the information technology infrastructure in 2014
Customer deposits went up by 35 per cent to $2.95 billion from $2.19 billion, while net loans recorded a 25 per cent growth to $2.39 billion from $1.9 billion.

Helios EB Investors LP has also completed the sale of a 12.22 per cent stake in Equity Group Holdings Ltd, representing half of its stake, to Norfund and Norfund AS (a joint venture investment company between Norfund and Norwegian private investors)
Equity Group, which cross-listed on the Rwanda Stock Exchange in February, aims to become a pan-African bank with a presence in over 15 countries across Africa leveraging on the use of technology to enhance non-interest income.