Cooperative Bank Group has reported a 10.8 percent net profit fall for the half year 2017 to Sh6.6 billion from Sh7.4 billion attributed to a fall in interest income on loans and advances.
But the bank avoided an adverse effect from the interest rates capping on its profitability with a significant growth in its non-interest income streams.
Total interest income reduced by 10.3 percent from Sh21.47 billion in a similar period in 2016 to Sh19.26 billion in 2017. Interest on loans fell by 9 percent despite a 14.2 percent increase in net loans and advances.
However, in the results announced yesterday, the banking group’s non-interest based income registered growth led by earnings from foreign exchange which grew 28.2 percent to Sh1.24 billion from Sh969.5 million the previous year.
Fees and commissions from loans and advances increased by 14.3 percent from Sh1.20 billion to Sh1.37 billion while other fees, such as ATM, mobile banking charges and other transactions grew 3.5 percent from Sh3.76 billion to Sh3.89 billion.
Interest expense fell by 17 percent from Sh7 billion in 2016 to Sh5.84 billion in 2017 on account of reduced cost of funding.
In spite of the tight interest regime, the bank’s loan book expanded 14.2 percent Sh252.6 billion from Sh221.3 in 2016 driving banks total assets growth by 5.6 percent to Sh383 billion from Sh363 billion.
Group managing director Gideon Muriuki said the performance was commendable given the operating environment during the period.
“This is a commendable performance against the backdrop of a tight operating environment especially with the capping of interest rates, general economic slowdown in an election year, currency devaluation and hyperinflation in South Sudan,” said Muriuki.
In the meantime, the banking group has announced its entry to lease financing in a joint venture with South African firm Super Group.
Yesterday, Muriuki said the banking group had received regulatory approval from Central Bank of Kenya for the joint venture which is eyeing leasing business opportunities in infrastructural projects, government equipment acquisition as well as mining and energy projects.
“The joint venture is expected to substantially boast the bank’s strategy of diversifying revenues and is being operationalized immediately,” he said.