Bank upbeat about 2015 earnings

Cooperative Bank expects to reap big from strategic changes it made last year.

The bank, which reported a 32 per cent growth in net profit for 2015 half year says its move to cut cost, tap technology to increase efficiency and use of alternative channels to reach customers is paying off.

“The Group is looking at a growth in profit before tax of up to 30 per cent in 2015, a growth in loans and advances of between 25 to 30 per cent and a growth in customer deposits of between 20 to 25 per cent,” Co-operative Bank Group CEO Dr Gideon Muriuki told Smart Company.

In the 2015 half-year report, the bank’s profit after tax hit Sh6.2 billion from the Sh4.7 billion it earned a year earlier. This puts the bank at position three in profitability during the period after Kenya Commercial Bank with Sh9.2 billion and Equity Bank with Sh8.57 billion.

Last year in August, the bank engaged McKinsey & Co to carry out a “Growth and Efficiency Review” which is now being implemented.

The bank’s strategy to partner with the South Sudan government in entering that country is also paying off, making it one of the few foreign banks operating in the newest State that have broken even.

“Our partnership with the government of South Sudan (Co-op Bank 51 per cent and government 49 per cent) has seen us successfully run the branches,” Mr Muriuki says.

TURNAROUND IN SOUTH SUDAN

The bank reported the first profit of Sh122 million for the half year of 2015. During the same period the previous year, the bank recorded a loss.

The turnaround in South Sudan is in contrast to other players who are yet find their profit footing. Among the worst hit banks by South Sudan’s political unrest is CfC Stanbic Group which has reported a 42 per cent slump in 2015 half-year net earnings to Sh1.96 billion. This has been attributed to falling revenue from its branches in the volatile country.

CfC Stanbic has 32 branches and 645 staff in South Sudan. These subsidiaries were badly affected when most of the staff fled to Kenya at the height of the political standoff.

“CfC Stanbic has a sizeable business in South Sudan, which has been basically shut down by the escalating violence in the county,” said Allan Gray Africa, a fund manager with interests in CfC Stanbic.

Equity Bank and KCB Group while recording profit had to contend with growing portfolio of bad debt.

“Loan loss provision increased during the period because we are writing off the (bad) loans in South Sudan,” Equity Group CEO Dr James Mwangi said during investor briefing.

Co-op Bank Group is considering using similar joint venture models for inclusive growth in other countries the bank plans to enter in the next five years. These countries are Rwanda, Uganda, Tanzania and Ethiopia. “The future of the Group is promising on account of the growth strategies we have put in place, including the full execution of the ‘Soaring Eagle’ transformation agenda,” Mr Muriuki says.