Co-op Bank breaks dividend ceiling as profit hits Sh22 billion – Weekly Citizen

By Bernard Matumbai

The Co-operative Bank of Kenya has announced record dividend payout to shareholders by half against a background of surging net earnings to KSh22 billion for the full year period to December 2022.

The net profit, which rose 33 per cent when compared to KSh16.5 billion the Tier 1 lender recorded a year earlier, was supported by growth in key income streams, including an increase in interest and non-interest income, a turnaround of its subsidiary in South Sudan.

On the other hand, total operating income grew by 17.9 per cent from KSh60.4 billion to KSh71.3 billion, with total non-interest income growing by 33.2 per cent to hit KSh25.7 billion from KSh19.4 billion realised in 2021.

Net interest income grew by 10.9 per cent from KSh41 billion to KSh45.5 billion as the lender’s net loans and advances grew 9.4 per cent to KSh339.4 billion.

Managing Director and Chief Executive Officer Dr Gideon Muriuki attributed Co-op Bank’s strong performance to the Group’s strategic focus on sustainable growth, resilience, and agility.

Total operating expenses increased by 10.9 per cent to KSh42.2 billion from Ksh 38.1 billion recorded in 2021, as customer deposits grew 3.9 per cent to KSh423.8 billion from KSh407.7 billion, with total assets breaking the ceiling to hit KSh607.2 billion, representing a 44 per cent growth when compared to KSh579.8 billion recorded a year earlier.

Dr Muriuki disclosed that credit management remained a key focus area, with the Group strategically making provisions of KSh8.7 billion which has enhanced the Bank’s Loan Loss Reserve levels to 74 per cent from 69 per cent in 2021.

The board recommended a dividend pay-out of KSh1.50 per share, representing a 50 per cent enhancement on the KSh1.00 per share paid out last year subject to approval by the regulators and shareholders.

The most recent dividend payout translates to a total of KSh8.8 billion, the highest dividend since the lender’s listing at the Nairobi Securities Exchange in 2008.

The bank currently processes more than 90 per cent of all customer transactions through alternative delivery channels

Dr Muriuki was assertive that the strong performance has led to a sustainable increase in shareholder value as reflected in the competitive return on equity (ROE) of 21.2 percent.

The bank’s resurgent South Sudan subsidiary returned a profit of KSh132.7 million  compared to a loss of KSh421.7 million ($3.25 million) in the previous year.

In 2022, Co-op Bank pumped an additional capital of KSh372 million in its subsidiary in South Sudan as part of effort to save an investment that has accumulated losses of KSh3.29 billion in eight years of operation.

The lender, which is 64.6 percent owned by co-operative societies, in 2013 invested KSh2.27 billion for a 51 percent stake in its South Sudan subsidiary with the remaining 49 percent held by the Government of South Sudan through a joint venture agreement.

The subsidiary, which is based in Juba, commenced operations in September 2013 and currently runs four branches.

In 2021, Co-op Bank extended this joint venture by three years, arguing the transfer of the minority stake to the South Sudanese co-operative movement had been delayed by economic and political challenges in the country.