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Co-Op Banks Posts 24.5% Decline in Net Profits for FY2020

The Co-operative Bank of Kenya Group 2020 full year net profit declined by 23.8% to stand at Kes. 10.9 billion from Kes. 14.3 billion recorded in 2019.

Co-op Bank Group Chief Executive Officer Dr Gideon Muriuki attributes the profit decline to higher loan loss provisions related to COVID-19 and currency devaluation losses from its South Sudanese subsidiary.

“The Group has taken loan loss provisions of Kes. 8.1 billion, being a 220% increase from Kes. 2.54 billion in 2019 in appreciation of the challenges that businesses and households are grappling with from the disruptions occasioned by the ongoing pandemic,” said Dr Muriuki.

According to Dr Muiuki non-performing loans rose to Kes. 49 billion representing 17% of its total loan book which grew 8% to stand at Kes. 286.6 billion during the period under review.

Despite the decline, Co-op bank says it will pay Kes. 5.9 billion in dividends to its shareholders, majority of whom are cooperatives in what the lender says is meant to provide them with liquidity to support their members.

“The decision to pay one shilling per share dividend is supported by the fact that the bank has sufficient capital buffers to afford it, with shareholders funds standing at Kes. 90 billion.” – Dr Gideon Muriuki, CEO Co-operative bank of Kenya

However, while its South Sudan subsidiary made a Kes. 107.8 million in full year pretax profit, this translated to Kes. 1.65 billion monetary loss due to hyperinflation occasioned by currency devaluation of the South Sudanese pound.

On the other hand, Co-op bank grew its total assets by 18% to Kes. 537 billion.

Net interest income increased 16.1% to 36.3 billion shillings while shareholders’ funds grew 14.4% to 90.8 billion shillings.

Dr Muiuki says Co-op Bank has fortified its digital channels to support uninterrupted access to banking services by customers with 92% of services now on alternative banking channels.

Going forward, the lender says its new subsidiary Kingdom Bank which is undergoing significant recovery is likely to begin contributing to the bottom line in due course.