Co-operative bank’s profit hits 5.8 billion shillings on revenue growth

Co-op Bank Group MD and CEO Gideon Muriuki at the previous AGM. [File, Standard]

The Co-operative Bank of Kenya reported a net profit of 5.8 billion shillings in the first three months of 2022, supported by non-interest income and cost management.

This is a growth of 65.7% from an after-tax profit of 3.5 billion shillings in the first quarter of 2021. This means that shareholders of the listed lender are getting a return of 24 shillings for every 100 shillings they have invested in the business.

Along with its revenue growth, the lender’s profitability also increased after managing its operating costs, freeing up 760 million shillings that had been set aside as insurance against possible defaults. Co-op Bank, Kenya’s third-largest lender by asset size, picked up where it left off at the end of 2021, with revenue rising 17% to 16.8 billion shillings in the first trimester.

In the same period last year, its total operating income was 14.4 billion shillings as the banking sector continued to battle the effects of the Covid-19 pandemic. Unfunded revenue, which includes fees and commissions, rose 41.7% to 6.4 billion shillings, during a period in which Co-op resumed charging fees for the use of its mobile application.

Net interest income – levied on loans – fell from 9.8 billion shillings to 10.4 billion shillings. Operating expenses fell 3%, or 300 million shillings, as the bank released cash that had been set aside as insurance against possible defaults, technically known as the provision for losses on loans.

“The group prudently provided Sh1.5 billion compared to Sh2.3 billion provided in 2021, indicating an improvement in the quality of our asset portfolio as businesses and households continue to recover. the impact of the Covid-19 pandemic,” Co-operative Bank chief executive Gideon said. Muruki.

The bank’s stock of bad debts, those that have not been repaid for more than three months, also fell 5% from a year ago. Provisions for loan losses were reduced after customers who had defaulted on their loans, most of whom had been negatively affected by the Covid-19 pandemic, resumed repaying their loans. As a result, Co-op Bank’s ratio of non-performing loans (NPLs) to total loans improved to 13.3% in the first quarter of 2022 from 15.2% in a similar period last year. last.

“This confirms our credit quality and growth strategies and will continue to improve to reach pre-pandemic single-digit NPL levels,” Muriuki said.

The increase in revenue relative to a reduction in expenses resulted in a decline in the cost-to-revenue ratio, a measure of a bank’s profitability. The cost/income ratio decreased from 59% in the year ended December 2014 to 44.6% in the reporting period.

“The bank’s strong performance is in line with the group’s strategic focus on sustainable growth, resilience and agility,” the CEO said.

Kingdom Bank, a recent acquisition of Co-op Bank, also saw its profit rise 57.3% to 199.3 million shillings in the first quarter, from 126.7 million shillings in a similar period in 2021. Total assets reached 597 billion shillings, an expansion of eight percent from 552.9 billion shillings in the same period last year.

The bank’s loan portfolio rose 9% to 324.5 billion shillings as the economy recovered and businesses sought credit to expand their businesses.