Co-op Bank stock projected to hit target price of Sh21.40 in near future

Russian investment bank Renaissance Capital  has projected that Co-operative Bank  of  Kenya stock could hit a target price of Ksh21.40 in the near future, implying an upside potential of 45 per cent.

This comes a day after Co-op Bank announced a profit before tax of Ksh20.7 Billion for Full Year 2019 compared to Ksh18.2 billion recorded in 2018, a growth of 14 percent.

Profit after Tax was Ksh14.3 billion compared to Ksh12.7 billion in the previous year a 12,4 percent growth attributed to non-interest income.

“Co-op bank continues to clean-up its loan book, with the ratio of Non-Performing Loans (NPLs) improving to 9.9 percent in 2019 as compared to 10.3 percent in 2018. Co-opbank has improved operating efficiencies by controlling costs, with the Cost-to-Income Ratio (CIR) improving to 52.1 percent in 2019 as compared to 54.6 percent in 2018,” said Renaissance Capital in a statement.

Co-op bank’s proposed dividend of Ksh1.0 per share translates to a final Dividend Yield of 8 percent, as compared to 5 percent from KCB and 6 percent at Equity.

Net loans and deposits were up 9 percent YoY. Impairments were up 38 percent year-on-year (YoY) (down 56 percent quarter-on-quarter (QoQ). Resultantly, the bank reported combined operating ratio of 0.9 percent in in 2019 as compared to 0.7 percent in 2018.

Net loans stayed flat QoQ, with absolute NPLs up 5 per cent QoQ. The bank’s NPL ratio of 9.9 percent in 2019 improved slightly from 10.5 percent.

the Cost Income Ration improved to 52.1 percent in 2019 as compared to 54.6 percent in 2018.

“This came in marginally lower than our 52.6 percent forecast for 2019. Revenue grew 11 percent YoY (up 8 percent QoQ), while opex grew 6 percent YoY, (up 20 percent QoQ). The uptick in fourth quarter of 2019 cost was from a 48 percent QoQ growth in other operating income,” added Renaissance Capital.