Co-op Bank eyes profit from all its branches

What you need to know:

  • The outlets that the bank opened in 2014 had posted a combined loss of about Sh300 million. This was compounded by the bank’s South Sudan operation, which booked a Sh500 million loss in its first year since launching operations.
  • “Out of the 23 branches that did not make profit last year, 13 of them broke even in the first quarter of this year and we expect the remaining to break even in the course of the year,” said Mr Muriuki.

Co-operative Bank of Kenya expects the 23 branches that made losses in 2014 to become profitable as cost-cutting measures initiated late last year start to bear fruit.

Addressing shareholders during the bank’s annual general meeting (AGM) held yesterday, chief executive Gideon Muriuki, said 13 of the 23 branches had already broken even in the first quarter, with the remaining expected to turn around this year, boosting profitability.

“Out of the 23 branches that did not make profit last year, 13 of them broke even in the first quarter of this year and we expect the remaining to break even in the course of the year,” said Mr Muriuki.

The outlets that the bank opened in 2014 had posted a combined loss of about Sh300 million. This was compounded by the bank’s South Sudan operation, which booked a Sh500 million loss in its first year since launching operations.

The bank has a controlling stake of 51 per cent in its South Sudan operation, with the remaining 49 per cent being held by the South Sudanese Government.

Last year, Co-op bank engaged the services of global consultancy firm McKinsey for a second time to advise it on cost-cutting measures and how to increase its efficiency to drive profitability. As a result, the bank reported a 29 per cent growth in profit after tax to Sh3.2 billion in the first quarter of this year up from Sh2.5 billion reported in a similar period in 2014.

FULLY EXECUTED

“We are confident that this transformation project will be fully executed and deliver on objectives, as is already being reflected in our great results of quarter one this year,” said Mr Muriuki.

Following McKinsey’s recommendations, the bank spent Sh1.3 billion in a restructuring process that saw 160 senior staff — who were declared redundant following recommendations by McKinsey — retired.