Co-operative Bank of Kenya (Co-op Bank) has recorded a net profit of Sh7.4 billion in the first half of the year despite an upsurge in bad loans.
This was a marginal increase from Sh7.2 billion that the listed lender made in profit after tax by the end of June 2020.
This even as the bank increased its insurance buffer against possible loan defaults or loan-loss provisions by a record 123 per cent, reflecting increased lending activities that saw it fill up the Sh4.2 billion hole left behind by the increase in the provisions.
By the end of June last year, the lender had set aside Sh1.9 billion as insurance against possible defaults.
Consequently, the lender announced that it had embarked on undertaking aggressive credit risk management aimed at bringing down its fraction of bad loans.
“The project is now in the implementation phase with ‘quick wins’ being realised in underwriting process with improved turnaround time in our lending operations, monitoring based on our new early warning system and collections with client-level action plans,” said Coop Bank Chief Executive Gideon Muriuki in a statement yesterday.
The lender, which is majority-owned by Savings and Credit Cooperatives (Saccos), saw its total operating income grow by a fifth to Sh29.2 billion – from Sh24.2 billion in the first six months of last year.
Non-funded income, which comes from fees and commissions grew by 24 per cent – from Sh8.3 billion to Sh10.3 billion for the third-largest bank in asset size.
Interest from lending income grew by 18 per cent from Sh15.9 billion to Sh18.8 billion in a period that saw the economy begin to show signs of recovery with a lot of activities resuming.
The huge provisions against bad loans pushed the bank’s total operating expenses by almost a third – from Sh14.6 billion in June last year to Sh18.7 billion this year in what Muriuki attributed the “prudential growth in loan-loss provisions.”
“The group prudentially increased loan loss provisions to Sh4.2 billion in the second quarter of this year, in appreciation of the challenges that businesses and households continue to face due to the economic effects of the ongoing pandemic,” said Muriuki.
Co-op Bank, which has since overtaken NCBA to become the third-largest lender after acquiring Kingdom Bank, saw its total assets grow by Sh59.1 billion to Sh573 billion. This compares to Sh513.9 billion in the same period last year.
Its loan book expanded by 11 per cent from Sh272.2 billion to Sh301.2 billion, with the lender pumping much of its funds in government securities.
Investment in government securities grew by nearly 50 per cent to Sh182 billion compared to Sh122.4 billion in the same period last year.
Customer deposits grew by six per cent Sh407.7 billion. Long term funds for development partners critical for lending grew Sh18.8 billion (73 per cent) to Sh44.4 billion from Sh25.6 billion in 2020.
Co-op Bank was among the lenders that paid a dividend at a time when some banks such as Equity Bank shied away.