Co-op Bank Group is pleased to report a Profit Before Tax of Ksh16.4 Billion for the first half of 2023, representing a 7.4 per cent growth compared to Ksh15.3 Billion recorded in the first half of 2022. This represents a Profit after Tax of Ksh12.1 Billion compared to Ksh11.5 Billion reported in 2022.
The strong performance by the bank is in line with the Group's strategic focus on sustainable growth, resilience, and agility.
Key Performance highlights:
1. Financial Position: The Group has registered sustained growth as follows;
Total Assets grew to Ksh664.9 Billion, a 10.1% growth from Ksh603.9 Billion in the same period last year.
Net loans and advances grew to Ksh365.4 Billion, a 10.7% growth from Ksh330.1 Billion in 2022.
Customer deposits grew to Ksh463.9 Billion, a 9.7% increase from Ksh423.0 Billion.
External funds from development partners have increased by 43.6 per cent to Ksh59.4 Billion from Ksh41.4 Billion in 2022.
• Shareholders' funds have grown to Ksh108.3 Billion, an 11.9 per cent increase from Ksh96.7 Billion in 2022.
2. Comprehensive Income
Total operating income grew by 3.0 per cent from Ksh34.4 Billion to Ksh35.4 Billion.
Net interest income grew by 2.3 per cent from Ksh21.1 Billion to Ksh21.5 Billion.
Total non-interest income grew by 4.0 per cent from Ksh13.3 Billion to Ksh13.8 Billion.
Total operating expenses decreased by 0.1 per cent from Ksh19.2 Billion to Ksh19.1 Billion.
3. Cost Management
The Group reports excellent efficiency gains from the various initiatives to record a Cost-to-Income Ratio of 46.0 per cent in H12023 from 59 per cent in FY2014 when we began our Growth & Efficiency journey.
4. Credit Management
Credit Management remains a key focus area, with the Group prudentially making provisions of Ksh2.9 Billion which has enhanced the Bank's Loan Loss
Reserve/Coverage levels to 71.1 per cent.
5. A Strong Digital Footprint
New Core Banking System Goes Live
The Bank successfully upgraded the core banking system to the latest version of Finacle from Infosys, which was rated globally as the top core banking system in 2022 by Gartner. This upgrade is part of our ongoing digitization journey to enhance service experience and provide the most innovative and advanced banking solutions.
The new banking system delivers enormous benefits which include;
1. Enhanced Security: The new system features advanced security measures to protect customer data and assets more effectively.
2. Improved Performance: The new system is more efficient, processing transactions and requests faster.
3. Increased Flexibility and agility: The new system is designed to be more flexible, allowing us to respond to changing customer needs more effectively.
4. Better User Experience: The new system features a more intuitive and user-friendly interface, making it easier for customers to access and manage their accounts.
• Through our digital channel strategy, the Bank has successfully moved 91 per cent of all customer transactions to alternative delivery channels, a 24-hour
contact centre, 546 ATMs, mobile & internet banking and over 17,000 network of Co-op kwa Jirani agents.
• We have successfully migrated our customers to the Omni-channel, integrating accessibility and user experience. Our omnichannel interfaces online banking through personal computers, mobile phones and USSD availing our services to all customers through their preferred channel yet retain the same experience from wherever they are.
• Mco-op Cash Mobile wallet continues to drive substantial non-funded income streams with 5 Million customers registered and Ksh41.3 Billion in loans disbursed in the first half of 2023, averaging Ksh6.9 Billion per month.
• Over 185,000 customers have taken up the MSME packages we rolled out in 2018, and 38,000 have been trained on business management skills. Year to
date, we have disbursed Ksh11.7 Billion to MSMEs through our Mobile E- Credit solution. MSMEs make up 15.8 per cent of our total Loan Book.
• Our unique model of retail banking services avails access to cash for FOSA operations, enabling 484 FOSA outlets to support over 15 million Sacco members access banking services even in rural/remote areas.
6. Wide Branch Network
The Bank has grown the branch network to 191 (4 in South Sudan). Seven (7) Branches (Kimana, Matuu, Thika Kwame Nkrumah, Greenwood Mall - Meru,
Kenol Makuyu, Hindi - Lamu and Bamburi - Mombasa) opened in 2023, whereas 5 Branches (Kabarnet, Iten, Kasarani, Kamakis and Chwele) opened last year.
7. Subsidiaries
Co-op Consultancy & Bancassurance Intermediary Ltd posted a Profit Before Tax of Ksh591.3 million in Q22023, riding on strong penetration of
Bancassurance business.
Co-operative Bank of South Sudan which is a unique joint venture (JV) partnership with the Government of South Sudan (Co-op Bank 51 per cent and GOSS 49 per cent) made a Profit before tax of Ksh205.1 Million in Q22023. This performance however translated to a monetary loss of Kshs 36.5 Million attributable to hyperinflation accounting occasioned by currency devaluation of the South Sudanese pound.
Co-op Trust Investment Services Ltd contributed Ksh106.8 Million in Profit Before Tax in Q22023, an impressive 25 per cent growth. The Subsidiary has Funds Under Management of Ksh197.3 Billion.
Kingdom Bank Limited (A niche MSME Bank) has contributed a Profit before Tax of Ksh521.9 million in Q22023, a remarkable growth of 29 per cent from Ksh405.9 million reported last year.
8. External funds from Development Partners
The Bank signed a Ksh12.6 Billion long-term credit agreement with global institutional investors led by the German fund, Deutsche Investitions- und Entwicklungsgesellschaft (DEG). The fund will strengthen the bank's capital base and support appropriate lending to MSMES for future growth. The facility was
drawn in April 2023.
9. Environmental Social and Governance (ESG)
The Bank continues to implement a best-in-class ESG policy framework supported by an ESG implementation roadmap, groupwide ESG champions and ESG
Governance.
Our portfolio of loans above USD 1 Million comprises Ksh37.4 Billion that is Green (33.2%) and Social (66.8%) affirming our commitment to sustainable banking.
Additionally, the Bank has published its first TCFD (Task Force on Climate-related Financial Disclosures) report with the Central Bank of Kenya and is getting ready to report as per ISSB (International Sustainability Standards Board) inaugural sustainability standards-IFRS S1 and IFRS S2 effective 01 January 2024.
Co-op Bank Foundation, the Group's social investment vehicle, continues to provide 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 supported 10,264 students since inception of the program.
Co-op Bank Capacity-building & Technical Assistance Fund.
The Bank established a Kshs. 100 Million Fund to support agricultural co-operatives with capacity-building and digitization. The Bank has carried out capacity-building at 30 Co-operatives in the coffee, dairy, potatoes, poultry, cotton, and cereals subsectors, expected to impact over 50,000.00 individual farmers.
Co-op Bank to provide the Direct Settlement System to the Coffee Exchange. Following a competitive selection process, the Bank has been appointed to provide the clearing and settlement platform for coffee trade by the Nairobi Coffee Exchange (NCE). The Direct Settlement System (DSS), developed internally by the bank's ICT and Innovations team, is a mission-critical infrastructure for the delivering of the much-desired transparency in the trading and settlement of
trades at NCE for the benefit of all players in the coffee value chain notably farmers.
10. Accolades
The Bank's Director Finance and Strategy Caroline Karimi was recognized at the Angaza Awards 2023 for her role in steering and shaping the financial services
sector through her leadership. Angaza Awards were established in 2020 to recognize Africa Leading Women in Banking and Finance.
The Bank's Head of Agriculture Co-operatives Business Esther Kariuki was named the African Banker of the Year 2023 for driving innovative agricultural lending
models and practices that not only made small-holder farmers bankable but also made them attain competitive credit records superior to comparable borrowers in other sectors.
Conclusion
The Co-operative Bank Group continues to pursue strategic initiatives that focus on resilience and growth in the various economic sectors. This is anchored on a successful universal banking model supported by an innovative digital presence, a wide physical footprint, and the unique synergies in the over 15-million-member co-operative movement that is the largest in Africa.
Dr. Gideon Muriuki - CBS, MBS
Group Managing Director & CEO