Coop Bank profit dips 24 per cent to Sh10.8bn on loan defaults

March 18, 2021 Newsroom

Coop Bank’s net profit for the year 2020 dropped 24.4 per cent to Kes.10.8 billion weighed down by a 219.5 per cent rise in bad loan provisions and an uptick in operating expenses.

In what could perhaps serve as an indicator of how the coronavirus pandemic has battered borrowers’ ability to service credit, Coop Bank loan loss provision has surged 219.5 percent to Kes.8.1 billion, the lender’s statement shows. In the period under review, Coop Bank’s non-performing loans increased by 87 per cent to close at Kes.59.1 billion.

Coop Bank, Kenya’s fourth largest lender by assets ($5.1 billion), expects a turnaround on non-performing loans as trade and manufacturing sectors recover from the effects on the pandemic.

The National Treasury projects that the economy will grow by 6.4 per cent in 2021 from an estimated 0.6 per cent last year.

In the latest financial year, the lender’s operating expenses surged 23.9 per cent to Kes.31.3 billion due to 8.5 per cent increase in staff costs and a 44.8 per cent jump in other operating expenses.

Coop Bank’s loan book registered 7.5 per cent uptick to Kes.286.6 billion subdued by slow economic activity across the industry in Kenya as Covid-19 continues to hurt businesses and individuals alike for the last one year.

In January, the lender secured $75 million long-term financing from the International Finance Corporation for onward lending to the micro, small and medium-sized enterprises undertaking climate-smart investments, agriculture, and renewable energy businesses in Kenya.

The bank, however, saw interest income post 11.9 per cent growth riding on a 30.5 per cent rise in income from government securities as increased liquidity due to slowed lending saw many financial institutions bet bug on government paper.

Shareholders will look forward to Kes.1 dividend per share turning into a dividend yield of 7.8 per cent on account of the current price of Kes.12 apiece.