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Co-op Bank returns flat earnings in quarter one

Friday May 22 2020

A customer at Cooperative Bank branch.  PHOTO |

A customer at Cooperative Bank branch. PHOTO | FILE | NATION MEDIA GROUP 

OTIATO GUGUYU
By OTIATO GUGUYU
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Co-operative Bank of Kenya has announced flat profits for the three months to March as rising workers’ pay and costs linked to loan defaults ate into the lender’s earnings.

The bank says net profit for quarter one stood at Sh3.58 billion against Sh3.59 billion in a similar period last year.

Rising employee costs and provision for bad debts ate into the bank’s income from loans and fees such as ATM transactions.

Co-op Group Managing Director Gideon Muriuki said operating expenses grew by 20.6 per cent on the back of loan loss provision and staff expenses.

REDUCED DEMAND
Its staff costs rose to Sh3.4 billion from Sh2.7 billion while the loan loss provisions nearly doubled from Sh510 million to Sh900 million.

Banks expect reduced demand for loans in the wake of the coronavirus crisis, which has reduced business activity in what will ultimately slow down lenders’ profits.

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“With the Covid-19 crisis, the bank has proactively engaged all the customers and reviewed terms for customers requiring an interest moratorium period, those requiring a better structure/longer repayment period and customers requiring additional funding to manage the crisis,” Mr Muriuki said.

The bank has restructured loans worth Sh15 billion for struggling borrowers.

Co-op says it has also managed to move 90 per cent of all customer transactions to alternative delivery channels, including mobile and internet banking as well as agents.

“Key focus on digital banking, with the all-telco MCo-opCash Mobile Wallet continuing to play a pivotal role in the growth of non-funded income with 5.6 million customers registered and loans worth over Sh16 billion disbursed in Quarter 1 2020,” Mr Muriuki said.

ACQUIRING JAMII

Its income from fees jumped to Sh3.76 billion from Sh2.87 billion. The Co-operative Bank had offered to fully acquire Jamii Bora Bank in the latest instance of consolidation in the banking industry.

The 55-year-old Co-op Kenya, which is mainly owned by members of the Kenya cooperative movement, is the fourth-largest lender, controlling 9.63 per cent of the market.

Jamii Bora is the second smallest of Kenya’s 39 lenders, with just 0.12 per cent market share and 17 branches.