By PATRICK ALUSHULA

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Co-operative Bank of Kenya has maintained a dividend of Ksh1.5 ($0.001) per share for the year ended December after it recorded a 5.2 percent net profit growth to Ksh23.1 billion ($173.68 million).

The lender’s net profit in the previous year stood at Ksh22 billion ($172.93 million).

The dividend, amounting to Ksh8.8 billion ($66.17 million), will be paid on June 10 to shareholders on record as of April 28.

The growth of the bank’s earnings was driven by a lower cost base and a slight jump in non-interest income.

“The strong performance has led to a sustained increase in shareholder value as reflected in the competitive return on equity of 21 percent,” said Gideon Muriuki, the managing director. “The Co-operative Bank Group continues to pursue strategic initiatives that focus on resilience and growth in the various economic sectors.”

Read: Kenya’s Co-op Bank tops EA retail banks’ dividend stock

Net interest income declined to Ksh45.23 billion ($340 million) as the bank incurred higher interest expenses to grow customer deposits in a rising interest rate environment.

Total interest expenses rose 46.9 percent to Ksh23.8 billion ($178.95 million) as customer deposits expanded by Ksh27.8 billion ($209 million) to Ksh451.6 billion ($3.4 billion).

The cost of keeping interest-bearing deposits rose by a larger margin compared with total interest income which, grew by Ksh7.3 billion ($54.89 million) to Ksh69 billion ($518.8 million).

Income from lending to customers increased to Ksh44.8 billion ($336.84 million) from Ksh40.4 billion ($303.76 million) while income from government securities rose to Ksh23.1 billion ($173.68 million) from Ksh20.8 billion ($156.39 million).

The loan book expanded by Ksh34.8 billion ($261.65 million) to Ksh374.2 billion ($2.81 billion), helping to grow interest income in an environment where banks also benefitted from upward revision of interest rates in line with the Central Bank of Kenya’s tightening of monetary policy.

Co-op Bank also purchased more government securities, boosting its portfolio of the fixed income assets by Ksh15.7 billion ($118.05 million) to Ksh189 billion ($1.42 billion).

The CBK’s auction of new T-bills and bonds over recent months has seen a steady jump in the interest rates of the securities, raising the income of banks and other investors.

Read: Co-op Bank's net profit surges 33pc

Co-op Bank cut its operating expenses by six percent to Ksh39.67 billion ($298.27 million) on reduced provisioning for loan losses and a drop in other operating expenses.

The provision for loan defaults fell 30.8 percent to Ksh6 billion ($45.11 million) despite gross non-performing loans increasing to Ksh66.9 billion ($503 million) from Ksh52.3 billion ($393.23 million).

Other operating expenses reduced by 16 percent to Ksh12.2 billion ($91.73 million) and helped to absorb the rise in staff costs.

Co-op’s staff costs increased to Ksh16.69 billion ($125.49 million) from Ksh14.78 billion ($111.13 million) on salary increase as well as the hiring of 536 new employees.

The expanded workforce came in the period when the bank increased its branch network in Kenya by eight, raising its total outlets to 194. Co-op Bank also runs a banking subsidiary in South Sudan.

The lender is planning to open an additional 15 branches in Kenya this year, keeping with its strategy of local expansion.

“The bank continues to invest in a competitive team set to serve at existing functions and at the same time tap new growth opportunities across all areas of the business,” Mr Muriuki said.

Kingdom Bank, in which Co-op Bank owns a 90 percent stake, saw its net profit retreat to Ksh655 million from Ksh930 million due to a higher tax liability. Its pre-tax earnings had grown 32 percent to Ksh1.1 billion.

Co-op Consultancy & Bancassurance Intermediary Limited posted a pre-tax profit of Ksh877.1 million while Co-operative Bank of South Sudan returned a pre-tax profit of Ksh291.3 million.

Co-op Trust Investment Services Limited contributed Ksh226 million in pre-tax profit as the subsidiary’s funds under management closed the period at Ksh218.4 billion.

The review period saw Co-op’s asset base grow 10.5 percent to Ksh671 billion while customer deposits grew 6.6 percent to Ksh451.6 billion.

External funds from development partners increased by 40 percent to Kh67.3 billion from Ksh41.9 billion.