Friday, March 18, 2016

Co-op Bank costs fall further as 400 employees leave

Money Markets
Co-operative Bank chief executive Gideon Muriuki. PHOTO | JEFF ANGOTE
Co-operative Bank chief executive Gideon Muriuki. PHOTO | JEFF ANGOTE 
By GEORGE NGIGI
In Summary
  • Coop Bank said its staff numbers declined by 400 last year as its customers picked up the use of alternative service channels such as agency and mobile banking.

Co-operative Bank has become the second lender to announce a decline in staff numbers due to “natural attrition” pointing to a changing employment trend in the banking sector.
The lender Thursday reported its staff numbers declined by 400 last year as its customers picked up the use of alternative service channels such as agency and mobile banking.
“Our staff numbers year on year reduced by 400 as a result of natural attrition and our staff cost to total income ratio improved to 24.5 per cent from 26.3 per cent,” said chief executive Gideon Muriuki.
The bank puts its current staff numbers at 3,500 down from 3,918 in 2014 and 4,177 an year earlier. Co-op Bank follows the path of Equity Bank which reported an exit of 660 employees resulting in a four per cent drop in its staff costs.
Co-op Bank’s staff costs rose by 5.7 per cent to Sh8.9 billion.
Mr Muriuki said the bank hired 70 new staff due to their special skills needed for growth.
Transactions done in the bank’s branches dropped by a third to 19.8 million from 29.6 million while the deals executed by agents rose 45.6 per cent to 16.1 million from 11 million a year earlier.
Transactions on the bank’s mobile platform, dubbed M-Coop nearly doubled at 12.4 million up from 7.5 million with 183,000 loans worth Sh1.6 billion disbursed through the phone.
Management said the reduction of transactions done through branches had allowed it to use the staff to market the bank’s products.
“We had 55 per cent of staff in branches doing operational issues but that has dropped to 37 per cent with 75 per cent of transactions done through other channels up from 68 per cent,” said Mr Muriuki.
The lender had retrenched 160 staff in 2014 during a restructuring process which cost it Sh1.3 billion.
This is the first time banks have reported drop in staff cost not associated with lay-offs, indicating hopes of improved efficiency within the sector which is ideally expected to lead to lower charges and interest rates.
Banks have been accused of failing to pass on the benefits of automation to their customers, especially through lower interest rates.
The Central Bank of Kenya has introduced innovative banking models, such as the agency model, in an effort to cut operation costs for the lenders which had been cited as the key driver of high financial service fees.

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