The Co-operative Bankt of Kenya reported a profit before Tax of Kshs.9.3 billion for half year 2017 compared to Kshs.10.4 Billion recorded in the same period 2016.
This commendable performance was against the backdrop of a tight operating environment especially with the capping of interest rates, general economic slowdown in an election year, currency devaluation and hyperinflation in South Sudan.
Profit after tax for the period was Kshs. 6.6 billion compared to Kshs. 7.4 billion the previous year.
The Co-op Bank Group has put in place strategies intended to sustain long-term profitability, with current challenges in the operating environment being checked by the benefits arising from the successful execution of the ‘Soaring Eagle’ Transformation project.
As a result, the bank’s Cost to Income ratio improved from 52.1% in FY2016 to 47.9% in half year 2017.
Key financial highlights include;-
1. Balance sheet
Total assets grew by Kshs 20 billion (+5.6%) to Kshs. 383.3 billion compared to Kshs 363 Billion in the same period last year.
Net loans and advances book grew by Kshs 31.3 Billion (+14.2%) to Kshs. 252.6 billion compared to Kshs. 221.3 Billion in the same period last year.
Customer deposits grew by Kshs. 7.6 billion (+3%) to Kshs. 287.2 billion compared to Kshs. 279.6 billion in the same period last year.
Shareholders’ funds grew from Kshs. 57.9 billion to Kshs. 64.5 billion, an impressive growth of 11.3%, supported by a steady growth in earnings and a dividend policy geared towards a progressive growth.
2. Profit & Loss
Total interest income reduced by 10.3% from Kshs 21.47 billion in 2Q2016 to Kshs 19.26 billion in 2Q2017 with interest on loans and advances declining by 9% despite the 14.2% increase in net loans and advances
Total interest expense reduced by 17% from Kshs 7 billion in 2Q2016 to Kshs 5.84 billion in 2Q2017 on account of reduced cost of funding.
Foreign exchange income increased by 28.2% from Kshs969.35 million to Kshs1.24 billion.
Other fees and commissions increased by 3.5% from Kshs3.76 billion to Kshs3.89 billion.
Fees and commissions from loans and advances increased by 14.3% from Kshs1.20 billion to Kshs1.37 billion
3. Innovative Customer Delivery Platforms
A successful Universal Banking model and the implementation of Sales Force Effectiveness has seen the Group serve 6.53 million account-holders across all sectors supported by our multichannel strategy that includes 149 Branches, over 8,000 Co-op Kwa Jirani Banking Agents and over 580 ATMs.
The all-telco Mco-op Cash Mobile Wallet has continued to play a pivotal role in the growth of non-funded income with over 3.33 million customers.
Through our multi-channel strategy the Bank has successfully pushed over 90% of customer transactions to alternative delivery channels particularly mobile banking, ATMs, internet and Co-op Kwa Jirani bank agency outlets.
Our unique model of retail banking services through Sacco FOSAs enabled us provide wholesale financial services to over 560 FOSA outlets. The bank has currently issued over 1 million Saccolink cards.
We continue with our focus on Digital Bank which will ensure timely, business-led solutions delivery to our customers.
4. Regional Expansion
Co-operative Bank of South Sudan that is a unique Joint Venture (JV) partnership with Government of South Sudan (Co-op Bank 51% and GOSS 49%) made a marginal loss of Kshs. 0.06 Million in the period under review owing to hyperinflation occasioned by devaluation of the South Sudanese currency.
Corporate Social Responsibility Programs
Co-op Bank Foundation has provided Scholarships for gifted but needy students from all counties in Kenya. The sponsorship includes; fully paid secondary education, full fees for University education, Internships and career openings for beneficiaries. The foundation is fully funded by the bank and has so far supported 5,119 students since the inception of the program in 2007.
Co-op Bank’s Moody’s Rating
The Co-operative Bank Group got its first ever international rating by the global credit ratings firm Moody’s where it was assigned a B1 Global Rating and a strong Aa2 National Scale Rating, affirming the strong performance of the bank on all fronts. The strong rating is a credible signal to the bank’s counterparties especially investors and development partners.
Co-op Bank/Super Group Leasing Strategic Joint Venture
Co-operative Bank also received a regulatory approval from the Central Bank of Kenya to enter into a Leasing business joint venture with Super Group Limited, an established global leader in leasing business based in South Africa and listed on the Johannesburg Securities Exchange, with a market capitalization of over USD.967 Million and operating in 5 countries globally.
The Joint Venture is to take advantage of key strengths by the two partners and focus on the emerging opportunities in leasing business with the bank providing the customer base and Super Group providing proven products, technology and expertise on the running of a scalable leasing business.
The Strategic Joint Venture will leverage on the following market opportunities in the growing Kenyan economy and the region.
i) Major infrastructure projects.
ii) Government setting the pace acquisition of key equipment through with leasing, especially vehicles.
iii) Exploration and mining activities including oil and gas.
iv) Other sector demands including manufacturing, construction, transport, ICT among others.
The joint venture will also leverage on the support of the Co-operative movement with over 14 Million customers and over 22,000 co-operative societies. The venture is also expected to substantially boast the bank’s strategy of diversifying revenues and is being operationalized immediately.
Conclusion;
The Co-operative Bank Group is alive to both the challenges presented by the operating environment, and also the wide opportunities offered by Kenya’s growing economy. The Group has put in place strategies to sustain the business on a growth trajectory in the long term leveraging on our strong balance sheet, solid customer base, and a wide range of service channels, robust ICT framework and a skilled team riding on the ongoing ‘Soaring Eagle’ Transformation project.
DR. GIDEON MURIUKI – MBS
GROUP MANAGING DIRECTOR & CEO
17th August 2017.