Co-operative Bank Group has announced that it is increasing its financial muscle to fund its foray into the regional market.
According to a statement from the banking group announcing 2016 financial results, shareholder funds had increased by 22 percent or Sh11 billion owing to a deliberate board decision to capitalise the bank for regional growth.
“Shareholders’ funds grew from Sh50.2 billion to Sh61.3 billion, supported by the Board of Directors policy to recapitalize the bank for regional expansion leveraging on retained earnings,” said group managing director Gideon Muriuki in the statement announcing financial results.
Currently, the bank’s footprints in the region are only in South Sudan where it operates a joint venture the government.
However, South Sudan operations have been hit by the devaluation of the local currency leading to a significant monetary loss.
“Co-operative Bank of South Sudan that is a unique Joint Venture (JV) partnership with Government of South Sudan (Co-op Bank 51 percent and GOSS 49 percent) made a monetary loss of Sh498.3 million in 2016 mainly attributable to hyperinflation accounting occasioned by currency devaluation,” said Muriuki when announcing the results.
In spite of the South Sudan loss, the banking group’s net profit for 2016 grew 8.5 percent to Sh12.7 billion from Sh11.7 billion the previous year.
Muriuki said profit increase was a result of improved efficiencies that saw its cost to income ratio fall to 52.1 percent in 2016 down from 59 percent the previous year.
“The good performance in a tough operating environment is mitigated by the gains from the bold “Soaring Eagle” Transformation Project that the bank has been implementing since 2014 with a clear focus on improvement in operating efficiencies, sales force effectiveness and innovative customer delivery platforms,” said Muriuki.
Profit before tax grew 15 percent to Sh17.7 billion compared to Sh15.4 billion in 2015.
Interest income grew 15 percent to Sh42.3 billion from Sh36.8 billion driven by 40 percent increase in interest income from government securities from Sh6.1 billion to Sh8.5 billion and 11 percent growth in interest income from loans and advances from Sh30 billion in 2015 to Sh33.4 billion in 2016.
Lower cost of funding cut the banking group’s interest expense by 6 percent to Sh12.8 billion from Sh13.6 billion boosting total operating income by 16 percent from Sh36.4 billion to Sh42.3 billion.
Muriuki said the banking group’s total assets grew by Sh9.5 billion or 3 percent to Sh352 billion compared to Sh342.5 Billion in the same period last year.
“Net loans and advances book grew by Sh23.5 billion or 11 percent to Sh236.9 billion compared to Sh213.4 Billion in the same period last year. Total deposits declined slightly by 2 percent from Sh268.8 billion to Sh263.6 billion,” said Muriuki.
Directors have recommended dividend payment of Sh0.80 per share.
Further, the board has also recommended one bonus share for every share held subject to regulatory.