The Co-operative Bank of Kenya has reported a robust financial performance for the third quarter, showcasing a 7.5 percent increase in profits to reach Sh18.4 billion. This growth is primarily attributed to a surge in interest income from loans, highlighting the bank’s strategic focus on sustainable growth. The resilience and agility demonstrated under Gideon Muriuki’s management spotlight appear lucrative.
A significant uptick in total interest income, rising by 12.8 percent to Sh49.3 billion, emerged as a key driver of the profit surge. This increase resulted from Co-op Bank expanding its loan book by Sh42.9 billion to reach Sh378 billion. Additionally, investments in government debt securities rose significantly, contributing an additional Sh2.7 billion, bringing the total to Sh185.1 billion. Playing a pivotal role in boosting lending margins, the bank capitalizes on and adapts to rising interest rates.
The increase of the deposit base by Sh835.7 million to Sh432.8 billion reflects depositor confidence in Co-op Bank. However, this growth necessitated higher interest payments to depositors—an ascent from Sh11.7 billion to Sh16.5 billion—a mirror image of prevailing upward trends in interest rates.
Characterized by escalating interest rates, the broader economic environment has evidently favored the bank. In August, fixed deposit accounts in the banking sector garnered an average rate of 8.39 percent—a positive backdrop for lending margins. Co-op Bank has consistently upheld stability in its lending margins around 5.4 percent, recording an average lending rate of 13.24 percent during the same month—August.
Co-op Bank reaped benefits not only from augmented lending income but also a reduction in operating costs. It managed to decrease total operating expenses by Sh629.1 million, bringing them down to Sh29 billion. This reduction was partially due to reducing the loan loss provision by Sh1.5 billion, ultimately settling at Sh4.2 billion.
The bank, however, did experience an increase in gross non-performing loans, rising by Sh10.1 billion to reach a total of Sh61.9 billion. Other operating costs saw a decline—from Sh9.8 billion down to just Sh8.8 billion. This reduction was encouraging despite the challenging circumstances.
Notably, Co-op Bank’s subsidiaries significantly contribute positive results. Kingdom Bank records a net profit of Sh784 million, showcasing growth at 28.7 percent from Sh609 million. Similarly successful is Co-op Consultancy & Bancassurance Intermediary Limited, announcing a pre-tax profit of Sh762.9 million. Even amidst hyperinflation, The Cooperative Bank of South Sudan manages to yield an impressive return with pre-tax profits amounting to approximately Sh43,500,000.
The subsidiary’s funds under management closed the period at Sh196 billion, contributing to Co-op Trust Investment Services Limited’s impressive addition of Sh154.5 million in pre-tax profit.
The positive performance of Co-op Bank also reflects its local expansion strategy in action: a burgeoning branch network, now standing at an impressive 193. Eight branches opened this year and five the previous year; these strategic moves underscore the bank’s commitment to enlarging its presence within Kenya’s market.