Co-op Bank 9 months net profit down 9.5pc
Co-operative Bank of Kenya’s net profit for the nine months to September shrunk by nearly a tenth, saddled by a 70 per cent ballooning of the lender’s gross non-
performing loans portfolio to Sh16.9 billion. The tier one lender yesterday reported that its after-tax profit dipped by 9.5 per cent to Sh9.54 billion in the wake of a 7.7 per cent drop in total interest income to Sh29.85 billion compared to Sh32.34 billion during a similar period last year.
Co-op’s large stock of nonperforming loans, a big signal of assets erosion, may have arisen from a large customer(s) books going bad, the Central Bank of Kenya’s increased vigilance on provisioning, or both.
Gideon Muriuki, the bank’s managing director, attributed the profit drop to the interest rate capping regime that came into force a year ago and the slowdown in economic activity in an election year.
“The current challenges in the operating environment are mitigated by the benefits of the transformation project that has focused on improved operational efficiencies, customer service and lower operating costs,” he said in a statement.
“Co-op Bank is alive to both the challenges presented by the operating environment, and the wide opportunities in Kenya’s growing economy.” The electioneering period, which has lasted for the better part of this year, slowed down economic activity, hitting hard banks that were already navigating the negative effects of the interest rate cap.
Co-op’s interest income dropped Sh1.7 billion to close the third quarter at Sh23.6 billion despite the Sh32.3 billion increase in net advances to Sh259.4 billion. The lender’s total non-interest income grew 3.4 per cent to close the period at Sh10.14 billion, mostly driven by fees and commissions levied on loans and advances that grew Sh542 million to close the period at Sh1.85 billion.
Co-op’s interest expense dropped 8.6 per cent to Sh9.08 billion as the bank paid less for deposits. Customer deposits stood at Sh288.96 billion, representing a Sh31.2 billion growth compared to a similar period last year, but the interest paid on for it dropped 11.4 per cent to Sh8.1 billion.
Total operating expenses increased marginally from Sh17.15 billion to Sh17.25 billion. Co-op also closed the period under review with total assets of Sh388.3 billion, representing a growth of 9.7 per cent from Sh354 billion in 2016.