Co-op profit falls 10pc on high cover for loan defaults

Co-operative Bank head office along Haile Selasi Avenue, Nairobi. FILE PHOTO | NMG

By PATRICK ALUSHULA
More by this Author

Summary

• Co-op Bank managing director Gideon Muriuki said the rise in provisions was in appreciation of the challenges that businesses and households are grappling with due to Covid-19 disruptions.
• However, improved performance from Co-op Bank Group subsidiaries helped to minimise the fall in the bottom-line. 
• Co-op says 90 per cent of transactions have now moved from branches to digital channels such as M-Co-op cash.

Co-operative Bank Group net profit for the first nine months to September has dropped by 10 per cent to Sh9.77 billion, weighed down by near doubling of coronavirus-related loan loss provisioning.

The retreat in net earnings is from preceding similar period’s Sh10.88 billion and came on the back of rising loan loss provisioning by 89.4 per cent to Sh4.02 billion.

Co-op Bank managing director Gideon Muriuki said the rise in provisions was in appreciation of the challenges that businesses and households are grappling with due to Covid-19 disruptions.

Net interest income, however, rose by 11.8 per cent to Sh23.64 billion during the period as the bank expanded lending by six per cent to Sh284.23 billion.

The lender has so far restructured loans valued at Sh46 billion or 16.2 per cent of the loan book to accommodate customers seeking flexible options such as longer repayment periods. 

“We continue to actively engage our customers to support them through this period, by re-aligning the servicing of facilities, funding and transactional needs as the situation unfolds,” said Mr Muriuki.

“The group continues to implement proactive enterprise risk management initiatives to ensure uninterrupted business operations.”

Non-interest income, which is mainly made up of fees and commissions on transactions, dropped by 3.5 per cent to Sh213.6 billion following the waiving of charges on transfers between banks and mobile wallets such as M-Pesa.

However, improved performance from Co-op Bank Group subsidiaries helped to minimise the fall in the bottom-line. 

Co-op Consultancy & Insurance Agency posted a pre-tax profit of Sh625 million, a growth from Sh511.1 million earned in a similar period last year.

Co-operative Bank of South Sudan, where Co-op owns a 51 per cent stake, booked a pretax profit of Sh217.8 million, a growth from Sh174.7 million.

Co-op Trust Investment Services posted Sh68.7 million pre-tax profit as funds under management grew by nearly a third to Sh123.7 billion. 

The lender, which in August acquired controlling stake in Jamii Bora bank at Sh1 billion and renamed it Kingdom Bank, says the subsidiary is expected to breakeven next year. 

Other tier I lenders have also seen drops in net profits with that of Absa Kenya 

 tanking by 65.4 per cent as that of Equity Bank and KCB Group

reduced by 43.1 per cent and 14.5 per cent respectively majorly on higher provision for defaults. 

Co-op says 90 per cent of transactions have now moved from branches to digital channels such as M-Co-op cash.

The mobile wallet disbursed Sh42 billion during this period, in contrast with Sh27.6 billion in a similar period last year, showing the increased switch to digital channels.