NAIROBI, Kenya, Aug 16 – Co-operative Bank’s recent efforts to significantly grow its customer base have paid off with the bank reporting a 50 percent rise in pre-tax profit to Sh2.9 billion for the half year ended June 2010.
Managing Director Gideon Muriuki told investors at a briefing on Monday that client accounts grew from 812,000 to 1.24 million over the period under review, which in turned helped to grow customer deposits to Sh110 billion.
“A key focus for us in the last one year has seen growth in our customer numbers to over 1.2 million accounts and this has driven a lot of our transaction-based income in the bank. One of the strategies that we came up with was that every staff in the bank would over and above what they do, bring five accounts every month and this has worked tremendously,” he disclosed.
Net interest income went up from Sh3.1 billion in June last year to Sh4.1 billion while the loan book increased to Sh70 billion buoyed by their new and competitive product lines.
This is the highest pre-tax increase that has been reported in the local industry so far which was also supported by the bank’s corporate and institutional banking services.
“We are very happy with what we have been able to do. For those who know our history, we have come from being a bank that was faced with an imminent risk of closure. So for us, to be where we are today it is incredible,” the MD pointed out in reference to its loss-making streak at the beginning of the millennium.
In the year, 2000 Co-op bank, which became a fully fledged commercial bank in 1994, made a Sh2.3 billion loss but this was significantly reduced in 2001 when it registered a Sh800 million loss. This streak was however broken in 2002, when it posted a Sh103 million profit and has since managed to remain on that profitability path.
Co-op bank also managed to largely hold down its operating costs which only went up by 23 percent. Mr Muriuki attributed this to their decision to redeploy over 300 staff to manage new branches instead of hiring new ones.
“Despite the good growth in our branch network, we optimised our staff from within and this has seen us record a very good return this year,” he said of their 27 new outlets that were opened during the period and which represented a 50 percent increase in their network.
Although only 12 of them contributed to the company’s bottom line in the first six months, the MD was optimistic that the rest of the branches would break even before the end of the year.
This, coupled with the continued growth momentum in the economy, would greatly contribute to the bank’s profitability which it forecasted would double in the second half.
Its mortgage business, which has over Sh2 billion in committed funds, agency banking and points of sale with which it has managed to increase its outreach are all expected to contribute significantly to the bank’s margin.
Kingdom Securities Limited, the brokerage firm that the bank acquired from troubled broker Bob Mathews in May 2009, has also made a turnaround posting a profit of Sh15 million as at June 30, 2010.
The broker made a Sh8 million loss in the corresponding period last year but Mr Muriuki is confident that it will achieve its target of Sh50 million this year as it continues to tap into the over seven million member co-operative movement.
Mr Muriuki restated that Co-op Bank has adequate capital to run its affairs in the next few years although its main focus in the second half will be the implementation of a new core banking software at a cost of Sh1.5 billion.
It also hopes to be in the Southern Sudan market where it has entered into a strategic venture with the government before the end of the year. Once this happens, the bank hopes to open an initial five branches. Mr Muriuki also disclosed that they are eyeing the wider East Africa Community market as part of their expansion plans into the region.
Finer details of that plan are still under wraps because negotiations are still at an early stage but the bank hopes to adopt the same partnership model where it will own a majority stake in the operation with the remainder being held by the host government.