Co-op Bank investors to receive Sh8.8b payout after profit surge

Co-op Bank Group CEO Gideon Muriuki attributes the earnings growth to a sharp drop in loan loss provisions. [File, Standard]

Co-operative Bank of Kenya (Co-op Bank) will pay out Sh8.8 billion in interim dividend to its shareholders after net earnings for the nine months to September 2026 rose by 27.2 per cent to hit Sh27.4 billion.

This comes as the tier one lender ramps up interim payouts and builds a reputation as one of the most consistent dividend stocks on the Nairobi bourse.

The interim dividend, set at Sh1.50 per share, a 50 per cent increase from Sh1.00 last year, will be payable to shareholders on the register as at the close of business on November 25, 2026, with payment due on December 4, 2026.

The payout will deliver a substantial cash injection to Co-op Holdings Co-operative Society, the bank's strategic and majority shareholder representing Kenya's co-operative movement, which stands to receive about Sh5.7 billion for its 64.5 per cent stake.

Saccos including Harambee, H&M, Kenya Police Sacco, Afya and Masaku Teachers, are among the significant beneficiaries of the dividend distribution. Individual retail investors, who hold the balance of the shares, will share the remainder.

Co-op Bank Group Chief Executive Gideon Muriuki, while releasing the lender's financial performance for the nine months that ended on September 2026, attributed the earnings growth to a sharp drop in loan loss provisions, strong growth in loans and deposits, and disciplined cost control.

Profit before tax rose by 19.6 per cent to Sh35.9 billion from Sh30 billion in the same period in 2025, while profit after tax climbed to Sh27.4 billion from Sh21.6 billion.

"The strong performance underscores the significant gains made under the 2025-2029 Good to Great Strategy and the Soaring Eagle Transformation Agenda,"  Muriuki said.

Total operating income grew by 11.6 per cent to Sh75.2 billion, driven by a 12.7 per cent rise in net interest income to Sh51 billion and resilient non-funded income. Operating expenses rose just 5.3 per cent, keeping the cost-to-income ratio before provisions at 46.4 per cent.

The biggest driver of the bottom line was a dramatic improvement in asset quality. The Group's non-performing loan ratio fell to 12.9 per cent from 17.1 per cent in Q3 2025, IFRS coverage improved to 82.2 per cent from 70.4 per cent, and the cost of risk nearly halved to 1.4 per cent from 2.5 per cent, meaning far less money set aside to cover bad loans.

The balance sheet expanded by 11.3 per cent to Sh907.4 billion. Total deposits grew 14.8 per cent to Sh642.5 billion, while net loans and advances jumped 22.2 per cent to Sh496.9 billion. Government securities rose 6.1 per cent to Sh271.1 billion, and borrowed funds were cut 13.2 per cent to Sh57.7 billion, reflecting what the bank called continued optimisation of its funding mix.

Shareholders' funds increased 9.2 per cent to Sh179.3 billion, lifting return on average equity to 21.3 per cent from 19.4 per cent, while return on average assets improved to 4.3 per cent from 3.7 per cent.

The Group's subsidiaries continued to make a strong contribution. Kingdom Bank posted Sh1.33 billion profit before tax, a 61.8 per cent rise, while Co-op Bancassurance Intermediary recorded Sh1.39 billion. Co-optrust Investment Services grew profit before tax 54.8 per cent to Sh966.8 million on funds under management of Sh508.8 billion. Co-op Bank of South Sudan posted Sh528.0 million, up from Sh93.5 million, and Kingdom Securities delivered Sh104.5 million, a 16.2 per cent increase.

Digital channels now process approximately 94 per cent of all customer transactions, supported by 16,215 Co-op Kwa Jirani agents, 600 ATMs and cash deposit machines, and a 24-hour contact centre. Agency banking deposits rose 39 per cent to Sh139.37 billion.

The bank continued to expand its physical footprint, with 224 branches across Kenya, South Sudan and Kingdom Bank, complemented by 663 Sacco front offices. Staff numbers rose to 6,630, creating 804 new jobs since Q3 2025.

E-credit disbursements in the quarter reached Sh66.6 billion, bringing cumulative disbursements since inception to Sh568.5 billion, with 16.2 million cumulative e-credit customers. Some 273,783 MSMEs have been onboarded onto tailored packages, with the segment accounting for 16.7 per cent of the loan book and 23.7 per cent of customer deposits.

The bank also launched its youth proposition, "Ignite", targeting over 10 million youth customers in the medium term, and has so far disbursed Sh47.5 billion to more than 585,000 young customers.

During the period, Co-op Bank embarked on Project Angaza, an enterprise-wide transformation programme aimed at making it an AI-powered bank.

The bank was named Best Bank in Kenya 2026 by Global Finance, Best Retail and Best Digital Bank in Kenya at the Euromoney Awards for Excellence 2026, and SME Bank of the Year 2026 at the African Banker Awards.

"In line with our strategic focus, the Group remains steadfast in advancing its priorities, firmly grounded in resilience and growth across diverse economic sectors," said Muriuki.

The dividend makes Co-op Bank the latest tier-one lender to reward shareholders handsomely this season, signalling continued optimism about the economy despite persistent challenges.