The Co-op Bank Group has recorded a pre-tax profit of Ksh10.5 billion, representing a 10% growth, for the second quarter of the year 2021. The profit jumped by almost a billion shillings from the Ksh9.6 billion recorded in a similar period last year.
The announcement was made by Co-op Bank Managing Director and CEO, Gideon Muriuku, on Wednesday, August 18. Muriuki noted that the growth represents a strong after tax profit of Ksh7.4 billion compared to Ksh7.2 billion reported in the second quarter of 2020.
"The Co-operative Bank Group continues to execute a proactive mitigation strategy anchored on a strong enterprise risk management framework, to enable uninterrupted access to banking services," stated the CEO.
"We shall - riding on the unique synergies in the over 15 million-member co-operative movement that is the largest in Africa - continue to pursue strategic initiatives that focus on resilience and growth in the various sectors as the economy continues to recover."
Key highlights of the Co-op report;
1.Financial Position; The Group has registered sustained growth as hereunder;
- Total Assets grew by Ksh59.1 billion) (+12%) to Ksh573 billion compared to Ksh513.9 billion in the same period last year.
- Net loans and advances book grew by Ksh29 billion (+11%) from Ksh272.2 billion to Ksh301.2 billion.
- Investment in Government securities grew by Ksh59.6 billion (+49%) to Ksh182 billion compared to Ksh122.4 billion in 2020.
- Customer deposits grew by 6% from Ksh384.6 billion to Ksh407.7 billion.
- Borrowed funds from development partners grew by Ksh18.8 billion (+73%) to Ksh44.4 billion from Ksh25.6 billion in 2020.
- Shareholders’ funds grew to Ksh92.6 billion (+16%) from Ksh80.1 billion in 2020 enabling us to continue pitching for big-ticket deals.
2. Comprehensive Income
- Total operating income grew by 20% from Ksh24.2 billion to Ksh29.2 billion.
- Total non-interest income grew by 24% from Ksh8.3 billion to Ksh10.3 billion.
- Net interest income grew by 18% from Ksh15.9 billion to Ksh18.8 billion.
- Total operating expenses grew by 28% from Ksh14.6 billion to Ksh18.7 billion on account of 123% prudential growth in loan-loss provisions.
3. Credit Management remains a key focus area in this season notably with the following key interventions;-
- The Credit Risk Adaptation Project dubbed ‘Project Kilele’ supported by a global consulting firm;
- End-to-end assessment of credit risk management practices by undertaking a comprehensive diagnostic review touching on each area of credit risk, including credit risk management framework with a key focus on risk governance, credit risk appetite, origination and underwriting process, credit approval process, credit scoring/rating models, and pricing.
- Strengthen portfolio assessment and risk frameworks.
- Enhance Collection platforms aligned to the new business operating environment.
The CEO detailed that the project is now in the implementation phase with ‘quick wins’ being realized in the underwriting process with improved turnaround time in the bank's lending operations, monitoring based on its new Early Warning System and Collections with Client-Level Action Plans.
- The Decentralization of Loan Portfolio Management, to the Branches, Lending Units and Relationship Management teams to enhance collection activities. The project dubbed ‘3C’ (Connect, Collect, Cure) entails proactive management of the Credit book re-assigned from Remedial Credit to Branches and Business Segments.
The Group prudentially increased loan loss provisions to Ksh4.2 billion in the second quarter of the year 2021, in appreciation of the challenges that businesses and households continue to face due to the economic effects of the ongoing pandemic.
"We continue to actively engage our customers to support them through this period, by re-aligning the servicing of facilities, funding and transactional needs as the situation unfolds. A total of Ksh49 billion in loans was restructured during the CBK restructure window that ended on March 31, 2021, to support customers impacted by the pandemic."
"The restructured facilities are largely performing as per the realigned agreements. Our customers continue to show resilience therefore improving their repayment as the economy picks up in various sectors," Muriuki highlighted.
4. A Strong Digital Footprint
- Through a multi-channel strategy, the Bank has successfully moved 93% of all customer transactions to alternative delivery channels, an expanded 24-hour contact centre, mobile banking, 576 ATMs, internet banking and over 25,000 Co-op Kwa Jirani banking terminals.
- A successful Universal Banking model and the implementation of Sales Force Effectiveness has seen the Group serve over 8.8 million account holders across all sectors.
- Key focus on digital banking, with the all-telco Mco-op Cash Mobile Wallet continuing to play a pivotal role in the growth of non-funded income with 5.2 Million customers registered and loans worth Ksh33.5 Billion disbursed year-to-date, averaging Ksh5.6 Billion per month.
- Over 127,760 customers have taken up the MSME packages that the bank rolled out in 2018, and 13,015 have been trained in business management skills. To date, Co-op has disbursed Ksh28 Billion to MSMEs through its E-Credit solution.
- Co-op's unique model of retail banking services through Sacco FOSAs enabled it to provide wholesale financial services to over 479 FOSA outlets, and issue over 1.4 million Sacco-Link cards.
5. Subsidiaries
- Co-op Consultancy & Insurance Agency posted a Profit Before Tax of Ksh433.8 million as of June 30, 2021, riding on strong penetration of the Bancassurance business.
- Co-operative Bank of South Sudan that is a unique joint venture (JV) partnership with the Government of South Sudan (Co-op Bank 51% and GOSS 49%) returned a monetary loss of Ksh290 million in Q22021 attributable to hyperinflation accounting due to currency devaluation of the South Sudanese pound.
- Co-op Trust Investment Services contributed Ksh47.9 million in Profit Before Tax in Q22021, with Funds Under Management standing at Ksh179.4 billion compared to Kshs120.3 billion as at Q22020.
- Kingdom Bank Limited contributed a Profit Before Tax of Ksh275 million in Q22021. This is compared to the 2020 full-year loss of Ksh124 million.
Co-op Bank holds a controlling 90% equity interest in Kingdom Bank, which is a fully-fledged Commercial Bank, regulated by the Central Bank of Kenya, with over 444,000 customers and 17 branches.
6. Long Term Financing: MSME, Sustainable Agriculture and Health sectors.
- In 2020 the Group secured a long-term financing facility from the IFC (International Finance Corporation) amounting to Ksh8.25 billion for on-lending to MSMEs at affordable terms. The proceeds of the facility will support customers operating in the following key business areas;
- Micro small and medium enterprises (MSMEs)
- Businesses undertaking climate-smart projects, including agricultural inputs and sustainable agricultural practices, renewable energy, energy efficiency and related areas.
- Co-op has partnered with IFC and Philips (a leading health technology company) to support Africa’s health sector operators purchase essential medical equipment and strengthen their response to COVID-19 and other medical technology needs. This partnership is the first in Africa under the IFC-led Africa Medical Equipment Facility that makes available a Ksh32.8 billion (US$ 300 million) kitty to provide risk-sharing facilities to help small businesses acquire the equipment and tools they need by way of loans and leases.
- The Group also secured a Ksh1 billion (US$ 10 Million) credit line in partnership with Eco Business Fund to finance Sustainable Agriculture.
7. Co-op Bank launches Kenya’s first Pension-Backed Mortgage
Following the enactment of the amendments to the Tax Act 2020, Retirement Benefits (Mortgage Loans) Regulations Amendments 2020, the bank rolled out a Pension-Backed mortgage facility whereby members currently contributing to a registered pension scheme, who are still in active employment, can access up to 40% of their accumulated pension benefits for the purpose of acquiring residential property for own occupation.
A first in the market, the facility is expected to be a game-changer in accelerating homeownership for the over 3 million Kenyans currently contributing to registered retirement benefits schemes.
The Co-op Bank Pension-backed Mortgage will support contributors whose 40% accrued pension may not be sufficient to purchase a home to apply for a top-up facility to meet the cost of acquiring a home.
8. Corporate Social investment
Co-operative Bank Foundation has provided Scholarships to gifted but needy students from all regions of Kenya. The sponsorship includes; fully paid secondary education, full fees for University education, Internships and career openings for beneficiaries.
The foundation is fully funded by the bank and has so far supported 8,340 students since the inception of the program.