Co-op Bank Kenya Q3 Profit Surge to KSh11.6 Bn

Co-operative Bank of Kenya‘s net profit for the nine months to September grew 18.4 per cent to KSh11.6 billion compared to KSh9.8 billion reported in a similar period last year.

The lender attributes the increase to high income and a return to profitability of its subsidiary Kingdom Bank.

Kingdom Bank Limited posted a profit before tax of KSh413 million in Q3 2021, compared to the 2020 full-year loss of KSh124 million.

The subsidiary’s loan book shrunk 15 per cent to Ksh.4.3 billion.

Results Highlights

• Total assets grew by 16 per cent mainly driven by a 7.8 per cent expansion of the loan book to Ksh.306.3 billion to KSh 592.9 billion and a 6.2 per cent increase in Holdings of Government Securities to Ksh193.3 billion.
• Customer deposits up 12 per cent to Ksh.420.4 billion.
• Total interest income grew 21.6 per cent to Ksh39.6 billion 
• Income from government securities grew to  Ksh 13.8 billion. It also recorded a 14 per cent growth in interest income from loans and advances to Ksh25.4 billion.
• Total interest expenses grew 22.4 per cent to Ksh.10.9 billion. 
• Total Operating expenses up 19.2 per cent to Ksh 28billion as a result of a 50.3 per cent increase in loan loss provisions to Ksh6 billion, as the bank was forced to increase provisions due to further loan book deterioration.
• Asset Quality – Gross Non-Performing Loans (NPLs) increased to Ksh .49.5 billion from Ksh.40.2 billion, representing a 23.2 per cent growth on a year-on-year (YoY) basis, however, on a QoQ basis, this represented a 2.7 per cent decline from Ksh50.8 billion.
• The Gross NPL ratio increased further from 14.1 per cent in Q3 2020 to 16.2 per cent in Q3 2021, significantly above the sector average of 13.9 per cent.

 The bank did not declare any interim dividend.

“The bank’s “Soaring Eagle” strategy continues to bear fruit as is evidenced by the significant organic growth of its loan book as well as the uptick in deposits due to deposit mobilization.  However, the deteriorating asset quality limits the bank’s top-line growth from extending further to its bottom line,” Sterling Capital said in the Banks Earnings Update.

“With regard to Kingdom bank, we are concerned over the shrinking loan book which is limiting growth in interest income,” they noted.