In February 2020, Evanson Mwangi started investing at the Nairobi Securities Exchange (NSE). He had pooled together Sh. 800,000 savings and was wondering the best way he could invest it. “I consulted an investment advisor who recommended securities as one of the ways I could invest my money,” says Evanson, 38. He began to contemplate about buying shares at the NSE. “I knew that there was an ongoing pandemic and stock prices were depressed. But my advisor was quick to point out that the best strategy in making money from shares was to take position when prices are depressed,” he says. Before taking a position, though, Evanson needed to spot the right stock.
“I identified the banking sector as one area that I wanted to invest in. I poured myself into research checked the profitability of the listed lenders and their management, and growth over the last five years,” he says. Finally, he settled on Co-op Bank shares. “I was impressed with the bank’s financial stability, the strength of its loan book, how quickly it had adopted digital banking, and its growth strategies under the McKinsey’s Soaring Eagle transformation program,” he says. At the time, Co-op Bank shares were trading at Sh. 10.20 per share. He acquired 75,000 shares at Sh. 10.20 apiece.
Co-op Bank braces Covid year to post Sh. 10.8 billion full year net profit
Less than three weeks after acquiring the shares, Kenya reported her first case of Covid-19. The first case of the viral scourge was confirmed by the National Influenza Centre laboratory at the National Public Health Laboratories of the Ministry of Health on March 12. It involved a patient who had traveled to Kenya from the US through the United Kingdom on March 5.
As more cases were reported, health measures to curb the spread of this disease were announced. The country went into a semi lock down. The economy tanked. Businesses shut down and banks started restructuring loans. What had looked like a promising year for Evanson now looked like a doomed year to invest in. One year down the line though, Evanson says that instead of depreciating, his investment has paid off. “With banks expected to take in a heavy dose of bad loans, it was anticipated that the general stock performance would be negative. This has not been the case for me,” he says. Currently, the Co-op Bank shares are trading at Sh. 13.90, having hit a high of Sh. 14.05 over the last twelve months. “My investment is now a gross of Sh. 1,042,500. It has gained Sh. 277.500 gross profit,” he says.
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At the end of this month, Evanson will pocket Sh. 75,000, this being dividends for his investment in the bank. This follows the final full year results in which Co-op announced that it would be paying Sh. 5.86 billion dividend equal to Sh. 1 per share to its shareholders. “I am glad and satisfied at how I invested my money,” says Evanson. “I had not anticipated to earn any NSE dividends. Now the dividend will be a major boost for my investment since I am planning to reinvest it in my stock portfolio.”
A look at financial performance by Co-operative Bank Group reveals that the bank performed well despite the hardships that came with the pandemic. In its full year results, the bank posted Sh. 10.81 billion net profit. The profit, coming in following an economically subdued financial year, came in as the bank continued to extend financial support to its customers who have been affected by the ongoing coronavirus pandemic. For instance, according to the bank’s chief executive officer Gideon Muriuki, Co-op has so far restructured loans worth Sh. 49 billion. “We continue to actively engage our customers to support them through this period, by re-aligning the servicing of facilities, funding and transactional needs as the situation unfolds,” he said.
In addition, a spot check on listed firm’s NSE dividends shows that the bank is one of the few that will pay NSE dividends for the the financial year ended December 2020.
