Co-op Bank net profit drops 10pc to $114m
Thursday March 15 2018
Co-operative Bank of Kenya Group CEO Gideon Muriuki. PHOTO | NMG
The Co-operative Bank of Kenya will issue a dividend payout of Ksh0.8 ($0.008) per share to its shareholders despite posting a 10 per cent drop in net profit for 2017.
Co-op Bank’s profit after-tax fell to Ksh11.4 billion ($114 million) for the full year ended December from Ksh12.7 billion ($127 million) in 2016.
The bank cited challenging business environment as a result of interest rates caps, reduced economic activity and volatile political environment. Co-op said many investors postponed their investments.
Co-op joins a list of other lenders such as KCB, Barclays and Stanbic that have posted flat or reduced profits for 2017.
“The environment for doing banking business has become progressively challenging, with the capping of interest rates and more lately the implementation of the International Financial Reporting Standards (IFRS) 9 Accounting Standard,” said Dr Gideon Muriuki, Co-op Group chief executive.
The new accounting standards require banks to make higher provisions for bad debts by assigning a risk element to investments in government securities which were previously not provided for thereby reducing their profitability.
Co-op Bank's only subsidiary in war-torn South Sudan made a loss of Ksh603 million ($6.03 million) due to hyperinflation and the devaluation of the South Sudanese Pound.
The Nairobi Securities Exchange-listed lender's operating income dropped 2 per cent to Ksh41.6 billion ($416 million) from Ksh 42.3 billion ($423 million) the previous year.
Total interest income reduced by 4 per cent to Ksh40.4 billion ($404 million) from Ksh42.3 billion ($423 million) in the same period.
Total deposits grew by 9 per cent to Ksh287.7 billion ($2.88 billion) from Ksh263.6 billion ($2.64 billion) while non-interest income increased by 6 per cent to Ksh13.5 billion ($135 million) from Ksh12.8 billion ($128 million).
The loan book also expanded to Ksh253.9 billion ($2.54 billion) compared to Ksh236.9 billion ($2.37 million) the previous year, representing a 7 per cent growth.
Co-op Bank's cost-to-income ratio dropped to 52 per cent from a high of 59 per cent in 2014, signalling the lender's efforts to trim its operating costs.
The bank said it will continue to focus on boosting efficiencies as part of its growth strategy.