Co-operative Bank of Kenya has reported a 6.8% increase in net earnings for the first quarter of 2018 to Ksh 3.4 Bn up from Ksh3.2 Bn posted in the same period last year.
Total interest income shot up 9.1% to Ksh 10.4Bn as the lenders loan book grew 2.8% driven by an uptake in SACCO loans, mortgage loans and a marginal increase in personal banking loans.Interest income from government securities rose 13.4% y/y to Ksh 1.9B in line with a 21.3% y/y spike in the total stock of government securities held by the group to Ksh 78.1Bn. The portfolio of government securities accounted for 22.5% of total interest yielding assets.
Gross NPLs ballooned 152.5% to Ksh 28.4Bn as a result of aggressive lending to the real estate sector, which has experienced a slowdown due to the interest rate cap. Co-op bank had financed various projects in real estate in the past year, which are already complete however, developers have booked slow sales as liquidity has been poor.
Consequently, the lender’s NPL ratio worsened to 10.9%, which is slightly higher than the industry average of 10.2%.
The bank is planning to tighten credit policies and mobilize data analytics aimed at evaluating changing behavior patterns in customers to early detect customers who are likely to default on loans.
Meanwhile Co-op bank’s subsidiary in South Sudan made a Profit before tax of Ksh 32.4Mn in 1Q18 compared to a loss of Ksh 34.7Mn in 1Q17. The bank will continue to offer financial inclusion and management remains optimistic about the subsidiary’s future operations.
