Co-op Bank records Ksh13.8 billion pre-tax profit in Third Quarter 2020


By Boy Matumbai, Nairobi – November 19, 2020
Co-operative Bank has reported Ksh13.8 billion pre-tax profit for third quarter of 2020, an 11 per cent dip from Ksh15.5 billion recorded in the similar period under review in 2019, with the decline clearly being attributed to the ravages of the Covid-19 pandemic, majorly the attendant
loan loss provisions on the one hand, and reduced banking transactions on the other.

On a similar trend, the Co-op Bank Group’s net earnings declined by 10 per cent to stand at Ksh9.8 billion down from Ksh10.9 billion in the same period last year, the unaudited financial results released Thursday show.
The enhanced provisioning, a massive 90 per cent – from Ksh2.1 billion to Ksh4 billion – was inevitably designed to cushion against the Covid-19 economic disruptions that have negatively impacted businesses and households. This would effectively see the total operating expenses rise
by 18 percent to 23.6 billion, up from Sh19.8 the previous year.

To support customers impacted by the pandemic, the Group had, as at the close of the third quarter, documented a total of Ksh46 billion in restructured loans, as well as the continued implementation of proactive enterprise risk management initiatives towards uninterrupted business operations.

Such measures include – but not limited to – the fortification of digital channels, enhanced digitization of internal processes, adoption of the work-from-home model and robust engagement with regulators to ensure full compliance and support.

The bank’s total assets grew by an impressive 16 per cent to reach Ksh510.9 billion, Ksh70.1 billion more than the previous period’s portfolio that reflected Ksh440.8 billion then, with shareholders’ funds peaking at Ksh82 billion, an 11 per cent increase from last year’s Ksh73.9 billion mark.

Even as the upsurge in loan loss provisioning affected Co-op Bank’s profitability, the Nairobi Securities Exchange-listed lender increased its investment in government securities by 50 per cent to Ksh142.3 billion, up from Ksh 94.6 billion in the same period in 2019.

Customer deposits shot by 16 per cent in the period under review to hit the Ksh375.5 billion mark, up from Ksh322.5 billion in the previous year, with borrowed funds from development partners shrinking to Ksh26.2 billion down from 29.7 billion in 2019, a decrease of Ksh3.6 billion.

Still at it, the lender’s total operating income grew by six per cent from Ksh35.2 billion to Ksh37.2 billion, even as total non-interest income stood at Ksh13.6 billion, a six per cent decline from Ksh14.1 billion the same period last season.

The swell in interest recorded income and loan book over the period under review, is, perhaps, an indicator of Co-op Bank’s strategy to stay afloat, what with the disbursement of more loans and its increased investment in government securities.

Net interest income grew by 12 per cent to Ksh23, with the lender’s net loans and advances rose to S284.2 billion, a six per cent increase from Ksh268.9 billion in the same period last year.

To move in tandem with the changing environment of doing business, the bank has put in place multiple innovative customer delivery platforms that have, for instance, successfully moved over 90 per cent of all customer transactions to alternative delivery channels including an expanded
24-hour contact centre, mobile banking, 584 ATMs, internet banking and over 17,700 Co-op Kwa Jirani banking agents.

Other innovative attributes to Co-op Bank’s credit include a successful Universal Banking model and the implementation of Sales Force Effectiveness that has seen the Group diligently serve over 8.8 million account holders across the spectrum.

The bank also places key focus on digital banking, with the all-telco MCo-op Cash Mobile Wallet continuing to play a pivotal role in the growth of non-funded income with five million customers registered and loans worth Sh42 billion disbursed in the first nine months of 2020.

Co-op Bank’s unique retail banking model through Sacco FOSAs enabled it provide wholesale financial services to over 479 FOSA outlets, and issue over 1.4 million Sacco-Link cards. More recently, the bank engaged a global consultant to conduct a credit risk adaptation project.

The Group’s subsidiaries continued to play a pivotal role, with Co-op Consultancy & Insurance Agency posting a pre-tax profit of Ksh625 Million as at 30 Sep 2020, riding on strong penetration of the Bancassurance business.

On its part, the Co-operative Bank of South Sudan, a unique joint venture partnership with the Government of South Sudan, where Co-op Bank holds a majority stake of 51 per cent, recorded a profit before tax of Ksh 217.8 million in the period under review.

Elsewhere, Co-op Trust Investment Services contributed Sh 68.7 million in pre-tax profit in the third quarter, with Funds Under Management standing at Sh123.7 billion, a salient improvement of Sh96.7 billion that was realized as at 30 September 2019.

The Covid-19 crisis saw the bank proactively engage its customers and reviewed various aspects including interest moratorium, longer repayment period and additional funding to mitigate the debilitating consequences of the pandemic. A portfolio of over Sh46 Billion has been re-aligned to offer its customers this much-needed support.

Other notable achievenments include the acquisition of and rebranding of Jamii Bora Bank to Kingdom Bank, a fully-fledged commercial bank, licensed and regulated by the Central Bank of Kenya, with over 444,000 customers in 17 branches.

The acquisition offers Co-op Bank the opportunity to cross-sell and deepen product offering to the enhanced customer base and create a niche bank to offer specialized credit offerings that include MSME Banking, Microfinance, Youth & Women Banking, Asset Finance and Leasing.

The subsidiary is expected to break even in 2021 and has clear strategic focus on Deposit Book and quality loan book growth, customer base growth, enterprise risk management and compliance.