Co-op Bank 9 months net profit down 9.5pc

Business Daily (Kenya) - - FRONT PAGE - Mugambi Mutegi­tion­

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.

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