Co-operative bank of Kenya has posted a 7.6 per cent rise to Ksh 7.1B in its half year results compared to Ksh 6.6 B in the same period last year.
Total interest income improved by 7.9% to Ksh 20.8B attributed to interest income from government securities which grew by 17.5% to Ksh 4.6B. Interest income from loans & advances increased by 5.7% rise to Ksh 16.1B.
Loans and advances remained almost flat with a drop of 0.6% to Ksh 251.1B a result of the bank’s stringent lending, amidst the prevailing rate cap. In effect, income from gross fees and commission declined 2.6% to Ksh 5.1B.
Net NPLs surged 188% to Ksh 19.5B from Ksh 6.75B a result of stringent liquidity in the market and challenges at the national treasury in meeting supplier payment dues on time.
Customer deposits grew 8.5% to Ksh 393.7B fueled by increased foreign inflows with the bank able to attract cheap deposits (cost of risk at 0.3%). In effect, interest expense grew marginally at 2.2% to KES 6.0B.
In line with other banking players’ actions, preference for government securities drove investment in government securities up 37.5% to Ksh 158.9B. Foreign exchange income compressed 1.7% to Ksh 1.2B with margins inhibited by a stable shilling against the dollar in 1H18.
Operating expenses rose 10.6% to Ksh 10.9B fueled by a 13.0% increase in staff costs to Ksh 5.3B and a 10.1% increase in other operating expenses to Ksh 3.5B.
“Looking ahead we expect the bank to act more aggressively in improving asset quality given its high NPL ratio. As liquidity opens once the government releases payment to suppliers, we expect to see a decline in NPLs. To boost its bottom-line, we expect the bank grow its non-funded income and optimize costs. With the bank anticipated to sustain its dividend of Ksh 0.80 (full year) and improved performance in FY18, we encourage exposure in the counter.” Linda Kiraithe Research Analyst Apex Africa Capital Limited.
