Co-op Bank profit cut by loans cover

Co-op Bank Group MD and CEO Gideon Muriuki during the virtual Bank AGM October 22, 2020.

Co-operative Bank of Kenya’s net profits in the first nine months of 2020 have dropped by 10 per cent due to the adverse effects of Covid-19.

The lender made a profit after tax of Sh9.8 billion compared to Sh10.9 billion at the same time last year, a blissful period for the banking sector before the pandemic depressed the economy.

However, a 90 per cent increase in loan loss provisioning in the third quarter of this year has eaten into the bank’s bottom line despite a slight expansion in its loan book.

Co-op Bank Managing Director Gideon Muriuki said the increase in loan loss provisioning was a result of the challenges that businesses and households are grappling with from the disruption occasioned by the ongoing pandemic.

“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.

The bank restructured loans valued at Sh46 billion by the end of the third quarter in what was aimed at giving relief to customers negatively impacted by the pandemic.

Mr Muriuki said a net profit of Sh9.77 billion was good at a time when the economy is buffeted by the pandemic.

Among the four Tier One banks that have so far released their financial results, Co-op Bank has had the least drop in profitability while Absa Bank had the largest.

Absa made a net profit of Sh1.9 billion, which was a drop of 65 per cent compared to Sh5.5 billion that it made in the same period last year.

KCB Bank profits dropped by 43 per cent while Equity Bank’s declined by 14 per cent as the banking sector continued to grapple with a tough business environment that has seen a spike in bad loans.

The total operating income for Co-op Bank, majority owned by co-operative societies, grew by six per cent from Sh35.2 billion to Sh37.2 billion on the back of increased earnings from loans.

Fee waiver

Total interest income, which is earned from loans, increased by 12 per cent to Sh23.6 billion from Sh21.2 billion.

Non-funded income that comes from fees and commissions declined to Sh13.6 billion from Sh14.1 billion due to waiver of fees on mobile banking and loan restructuring.

The lender’s total operating expenses grew by 18 per cent from Sh19.8 billion to Sh23.5 billion on account of higher loan loss provision.

During the period, the publicly listed bank saw its balance sheet expand with total assets growing by Sh70.1 billion - 16 per cent - to Sh510.9 billion compared to last year.

The growth was mostly due to increased investment in government securities, which grew by half to Sh142.3 billion compared to Sh94.6 billion in 2019.

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