Co-op Bank Reports 3.6% Drop in Profit, HY Operating Costs Rise 15.7% on Loans and Staff

Co-op Bank Reports 3.6% Drop in Profit, HY Operating Costs Rise 15.7% on Loans and Staff

Co-operative Bank Group Thursday reported a 3.6 percent decline in Profit After Tax (PAT) to Ksh.7.2 billion in its half-year financial results on an increase in loan loss provisions.

As a result, the lender reported a  higher loan loss provision of KSh1.9 billion during the period under review compared to KSh1.18 billion the same period last year, an increase of 57.9 percent.

Its gross earnings shrunk marginally to KSh9.6 billion compared to KSh10.4 billion last year.

Co-op Bank Group MD Gideon Muriuki said, ”We are actively engaging our customers to support them through this period by re-aligning servicing of facilities, funding and transactional needs as the situation unfold.”

Its Total Operating expenses rose 15.7 percent to Ksh.14.6 billion due to 57.9 percent and 15.5 percent increase in loan loss provisions (Ksh.1.9 billion) and staff costs (Ksh.6.6 billion) respectively.

Gross Non-Performing Loans (NPLs) increased by 12.3 percent to Ksh.34.3 billion from Ksh 30.6 billion due to increased customer defaults as a result of COVID-19 pandemic.

“We expect the bank to put more emphasis on its operating expense management in order to reduce its operating expenses.

We do not think the recent 90% acquisition of Jamii bora will have a significant impact on its balance sheet although the strategic impact is positive in the long-term as the bank will help support business growth in the Medium and Small Enterprise segment (MSMEs),” comments Analysts from Sterling Capital Ltd.

“As a result of job losses, salary cuts, unpaid leave, and decline in corporates earnings due to coronavirus, the bank’s asset quality is likely to deteriorate further owing to increased NPLs. Asset quality deterioration also means an increase in loan loss provisions and thus total operating expenses which will erode the bank’s profitability.”