The Co-op Bank yesterday announced reduced Sh10.9 billion net profits for the year ending December 2020 on increased pandemic loan loss provisions.
This is a 23 per cent reduction compared to Sh14.3 billion profit after tax posted in 2019.
Group Managing Director Gideon Muriuki also attributed the reduction to increased loan provisions in Covid-19 related losses coupled with absorption of currency translation losses in it’s South Sudan operations.
“The South Sudan unit which is a joint venture deal with the Government of South Sudan at 51 per cent and 49 per cent, respectively, made a profit before tax of Sh107.8 million in 2020,” he said.
However, this translated to a monetary loss of Sh1.65 billion attributable to hyperinflation accounting due to currency devaluation of the South Sudanese pound.
The bank took loan loss provisions of Sh8.5 billion, a 235 per cent increment from Sh2.54 billion in 2019 as businesses and households grappled with disruptions occasioned by the ongoing pandemic.
Out of this amount, loans worth Sh49 billion have been restructured to support customers impacted by the virus.
Muriuki points out that however fundamentals remained strong, with top line growth being maintained as seen by growth in lending, earning assets, and net interest income.
During the period in review, the bank’s profit before tax also reduced to Sh14.3 billion compared to Sh20.7 billion recorded in 2019.
There was an 11 per cent growth in total operating income from Sh48.5 billion to Sh53.8 billion, same to total non-interest income which increased by 1.9 per cent, from Sh17.2 billion to Sh17.5 billion.
Lending to Saccos was a boon to the lender as majority derive membership from the government, and they continued receiving regular remittances from Government, meaning they honoured obligations.
“We continue to actively engage customers to support them through this period, by re-aligning the servicing of facilities, funding and transactional needs as the situation unfolds,” said Muriuki.
Total assets grew from Sh80 billion to Sh53 billion compared to Sh457 billion in the same period last year.
Net loans and advances books grew by Sh20 billion from Sh266.7 billion to Sh286.6 billion, with investment in government securities also growing by Sh44.1 billion to Sh161.9 billion compared to Sh117.8 billion in 2019.
Customer deposits also registered a 13.8 per cent growth from Sh332.8 billion to Sh378.6 billion, while borrowed funds from development partners grew increased by Sh19.6 billion to Sh46 billion from Sh26.4 billion in 2019.
Despite the challenges, the group was able to sustain its balance sheet growth with an asset base of Sh537 billion during the period under review.
The banks moved to pay dividends of Sh1 per shares on capital buffers, with shareholders funds standing at Sh90 billion.
The banks new subsidiary, Kingdom bank is undergoing significant recovery and is likely to begin contributing to the bottom line pretty soon.
“The acquisition offers Co-op Bank the opportunity to cross-sell and deepen product offering to the enhanced customer base and create a niche bank to offer specialized credit offerings that include MSME Banking, Microfinance, Youth & Women Banking, Asset Finance and Leasing,” said Muriuki.