Companies

Co-op Bank withholds dividend payment of 5.86 billion shillings amid 24% drop in profits

Thursday, March 18, 2021

Co-op Bank shareholders approve a motion at a previous annual general meeting. PHOTO FILE | NMG

Co-operative Bank #ticker: COOP shareholders are set for a dividend of 5.86 billion shillings after the lender withheld payment despite a 24.4% drop in net profit over the year due to the ” increase in provisions for default.

The Co-op Bank board said Thursday morning that after-tax profit for the fiscal year ended December 2020 fell from 14.3 billion shillings to 10.81 billion shillings.

Tier I lender posted growth in interest and non-interest income, but net income was slowed by the 3.2-fold increase in loan loss provisions to 8.11 billion shillings , against 2.53 billion shillings.

The bank’s chief executive, Gideon Muriuki, said the sharp increase in provisions was in line with the economic hardships borrowers face as a result of the Covid-19 disruptions.

“The group has taken a loan loss allowance of 8.5 billion shillings in recognition of the challenges businesses and households are facing due to the disruption caused by the ongoing pandemic,” Muriuki said.

He said the bank restructured loans worth 49 billion shillings or 17 percent of the total loan portfolio during the review period to support clients.

Net interest income increased 16.1 percent to 36.3 billion shillings, in line with a 7.5 percent growth in the net loan portfolio to 286.6 billion shillings.

Total non-interest income, mainly from fees and commissions, increased 1.9 percent to 17.5 billion shillings.

However, operating expenses rose 41.8 percent from 27.8 billion shillings to 39.4 billion shillings due to higher loan loss provisions, slowing the bottom line.

The board cited a strong performance in the core lending business and an adequate capital cushion as reasons for maintaining the dividend payment at 1 shilling per share, as was the case last year.

The dividend payment, expected by the end of the month, will see the main shareholder, Co-op Holdings Co-operative Society Limited, receive 3.79 billion shillings from its 64.56 percent stake.

“It will be a much needed relief in this pandemic year for the cooperative movement of more than 15 million members which mainly owns the bank,” said Mr. Muriuki.

Subsidiaries

Co-op rivals KCB and Stanbic Bank also reported Sh1 and Sh3.80 per share respectively, but both were reductions from what was issued for the previous year’s performance.

Co-op’s joint venture in South Sudan in which it has a 51 percent stake made a pre-tax profit of 107.8 million shillings, but this resulted in a monetary loss of 1.65 billion shillings. shillings on hyperinflation accounting.

The newly acquired Kingdom Bank, formerly Jamii Bora, reported a net tax of 76.3 million shillings for the year, down 81% from the loss of 1.06 billion shillings in 2019.

Co-op Consultancy & Insurance Agency reported pre-tax profit of 788.6 million shillings from strong bancassurance business, while Co-op Trust investment services contributed 70 million shillings to pre-tax profit. shillings.