Staff rationalization at Co-op Bank eats into profits

March 18, 2015
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The bank’s Managing Director Gideon Muriuki also attributed the decline to a higher tax bracket of 30 percent from 20 percent the previous year/FILE
The bank’s Managing Director Gideon Muriuki also attributed the decline to a higher tax bracket of 30 percent from 20 percent the previous year/FILE
NAIROBI, Kenya, Mar 18 – Co-operative Bank’s retrenchment process last year, which cost the bank Sh1.34 billion, contributed to a drop in net profit by 12 percent.

The bank posted a net profit of Sh8 billion compared to Sh9.1 billion in the previous year attributable to a one-off retrenchment where a total of 160 management staff were retired from the bank.

The bank’s Managing Director Gideon Muriuki also attributed the decline to a higher tax bracket of 30 percent from 20 percent the previous year.

The bank paid Sh3.4 billion in taxes in 2014 up from Sh1.9 billion in the previous year owing to expiry of a five year tax rebase by Capital Markets Authority on listing at the Nairobi Securities Exchange (NSE).

Total assets grew by 23.4 percent to Sh285 billion compared to Sh231 billion in the previous year while Net loans and advances grew by 31 percent to Sh179.5 billion compared to Sh137 billion in the previous year.

Deposits grew by Sh39 billion to Sh221 billion from Sh180.9 billion last year, a 22 percent increase while Borrowed funds increased to Sh18 billion from Sh10 billion reported in 2013.

Shareholders’ funds grew by 18 percent from Sh36.8 billion to Sh43.3 billion.

The bank has grown its network to 142 branches, 140 in Kenya and two in South Sudan with plans to expand to Uganda, Ethiopia and Rwanda in the next two years.

“Co-operative Bank of South Sudan subsidiary started operations in September 2013 and is currently operating two branches with a third one under renovations. Owing to the challenging economic environment arising from the conflicts in the country, the subsidiary is expected to break even mid-2015, “said Muriuki.

The bank engaged Mckinsey and Company a leading global advising firm in the last quarter of the year 2014 to undertake a “growth and efficiency review”.

In the period under review the bank also launched its mobile wallet, M-co-opcash, allowing customers and non-customers to make cash and utility payments from their mobile phones and also borrow. Over 1.5 million customers out of our 5.1 Million account holders are using the platform.

The bank is on target to grow its balance sheet and profitability significantly in the coming years with a projected at least 30 percent growth in its profitability in year 2015.

The Board of Directors has recommended a dividend of Sh0.50 per every ordinary share held.

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