Co-operative Banks shareholders are set for a Sh5.86 billion dividend after the lender retained the payout despite full-year net profit declining by 24.4 percent on increased provisions for loan defaults.
Co-op Bank’s board on Thursday morning said after-tax profit for the year ended December 2020 dropped from Sh14.3 billion to Sh10.81 billion.
The tier I lender posted a growth in both interest and non-interest income but the bottom-line was slowed by the 3.2 times rise in loan loss provisions to Sh8.11 billon from Sh2.53 billion.
The bank’s chief executive Gideon Muriuki said the sharp rise in provisions was in line with the prevailing economic difficulties facing borrowers due to Covid-19 disruptions.
“The group has taken loan loss provisions of Sh8.5 billion in appreciation of the challenges that businesses and households are grappling with from the disruptions occasioned by the ongoing pandemic,” said Mr Muriuki.
He said the bank restructured loans worth Sh49 billion or 17 per cent of total loan book during the review period to support customers.
Net interest income grew by 16.1 percent to Sh36.3 billion in line with a 7.5 per cent growth in net loan book to Sh286.6 billion.
Total non-interest income, mainly from fees and commission, rose 1.9 per cent to Sh17.5 billion.
However, operating expenses grew by 41.8 per cent from Sh27.8 billion to Sh39.4 billion on account of higher loan loss provisions, slowing the bottom-line.
The board has cited a strong performance in the mainstay business of lending and adequate capital buffer as the reasons for retaining dividend payout at Sh1 per share as was the case last year.
The dividend payout, expected by the end of month, will see top shareholder, Co-op Holdings Co-operative Society Limited, receive Sh3.79 billion on its 64.56 per cent stake.
“This will be a much-needed relief in a pandemic year to the over 15-million-member Co-operative movement that predominantly owns the bank,” said Mr Muriuki.
Co-op rivals KCB and Stanbic bank also declared Sh1 and Sh3.80 per share respectively but the two were reductions from what was issued for the previous year performance.
Co-op’s South Sudan joint venture in which it owns 51 per cent stake made a before tax profit of Sh107.8 million but this translated to a monetary loss of Sh1.65 billion on hyperinflation accounting.
Newly acquired Kingdom Bank—formerly Jamii Bora—returned a net tax of Sh76.3 million for the year, being 81 per cent cut from Sh1.06 billion loss in 2019.
Co-op Consultancy & Insurance Agency posted Sh788.6 million pre-tax profit on strong bancassurance business while Co-op Trust Investment Services contributed Sh70 million pre-tax profit.