17 August 2017

Kenya: Co-Op Bank Profit Drops 10% as Interest Rate Cap Cuts Income

Co-op Bank recorded a 10.4 per cent net profit drop in the half year ended June as interest rate caps shaved off its income from loans.

The lender's net earnings in the period stood at Sh6.6 billion compared to Sh7.4 billion the year before, with interest income falling by a similar margin to Sh19.2 billion.

The lower interest income came despite the loan book expanding 14.1 per cent to Sh252.6 billion, underlining the impact of the narrowed spreads brought by interest rate controls.

A report prepared by Standard Investment Bank (SIB) in the wake of the rate cap projected Co-op Bank's weighted average lending rate to drop from 15.46 per cent in 2015 to 13.4 per cent this year.

Its average deposit rate was forecast to rise marginally to 5.37 per cent from 5.1 per cent over the same period, cutting its interest margin to 8.03 per cent from 10.36 per cent.

SIB also reckoned that the bank would need to increase lending by more than 50 per cent to match the interest income it would have earned if interest rates were not regulated.

Chief executive Gideon Muriuki said the lender is diversifying its revenues including through a joint venture it has formed with South Africa's Super Group to offer leasing in the local and regional market.


Suspects in Massive Corruption Scandal Freed on Bond

The High Court has freed all the suspects charged with the scandal at the National Youth Service, but with stringent… Read more »

See What Everyone is Watching

Copyright © 2017 The Nation. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 800 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.