26 August 2008

Kenya: Co-Op Bank Profit Up 50 Percent

Nairobi — The Co-operative Bank of Kenya on Tuesday reported a 50 per cent rise in its half-year profit ahead of its planned October initial public offering.

The bank's pre-tax profit hit Sh1.7 billion indicating that it was well on course to surpass its Sh3 billion target at the end of the year.

The results, which according to sources were delayed by the audit process for the IPO, were a marked improvement over the Sh1.1 billion reported in the first six months in 2007.

Tentatively and subject to approval, the offering comes to the market in the third week of October.

An improvement in earnings was recorded in the two streams of income. Non-interest income was up 33 per cent from Sh1.7 billion to Sh2.2 billion.

"This growth was mainly due to an increase in non-funded income streams such as foreign exchange income, fees and commissions on loans and advances, electronic banking services, trade finance and personal and business banking," managing director Gideon Muriuki said.

Interest income rose 30 per cent, from Sh2.5 billion to Sh3.3 billion. The co-operative movement's main banker said lending to businesspeople and farmers grew 45 per cent, from Sh30 billion in June of last year to Sh43.4 billion.

Over the same period, customer deposits rose from Sh50.8 billion to Sh59.1 billion representing a 16 per cent rise. The balance sheet grew from Sh58.7 billion to Sh72.1 billion.

"The impressive performance by the bank during the half-year is testimony that it has successfully sustained the strategic business and operational restructuring reflected in the historic profitability of Sh2.3 billion last year," said the CEO.

According to him, the profit growth is in line with the business strategy adopted in the last seven years.

Co-op Bank wants to raise Sh10 billion for expansion in an increasingly competitive industry. The IPO at the Nairobi Stock Exchange will be the largest after Safaricom's, and the biggest fully private IPO in Kenya's history.

Two weeks ago, investment banker Dyer & Blair was appointed as the lead transaction advisor. The board of the bank said it would ensure ordinary Kenyans are guaranteed minimum allocation in the IPO. The cash raised in the issue will finance its mortgage products, ICT infratsructure and expansion of its branch network.

Co-op Bank's other subsidiaries include Co-op Consultancy Services which has chalked up Sh17 billion to make it the top locally owned fund manager. The other, Co-op Consultancy Services, offers Front office service activities (Fosa) support. Some 100 Saccos will open Fosas this year to serve their seven million members.

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