In the recently released financial results, Co-operative Bank reported a 7.6% increase in net profits, to KES 18.4 billion in Q3 2023, from the KES 17.1 billion recorded in Q3 2022. This was primarily supported by the 2.5% increase in Net Interest Income (NII) to KES 32.8 billion in Q3 2023, from KES 32.0 billion in Q3 2022.
Similarly, Non-Funded Income (NFI) recorded a 2.1% growth to KES 20.6 billion, from KES 20.2 billion in Q3 2022, supporting the profitability of the listed lender. Notably, the interest income from government securities recorded an 8.1% increase from a similar period last year, to KES 16.8 billion from KES 15.5 billion, mainly due to a general increase in government borrowing rates, especially in newly issued bonds.
On the balance sheet, net loans and advances to customers recorded a significant growth of 12.8%, to KES 378.1 billion in Q3 2023, from the KES 335.2 billion recorded in Q3 2022. As such, total assets recorded an increase of 6.3% to KES 661.3 billion, from KES 622.1 billion in Q3 2022. However, customer deposits recorded minimal growth of 0.2% to KES 432.8 billion from KES 432.0 billion in Q3 2022, pointing to the increased struggle by banks to attract funds, with a number of banks now aggressively advertising for short-term deposits. Despite the minimal deposit growth, interest expense on deposits increased by 27.5% to KES 13.4 billion from KES 10.5 billion recorded in the same period last year, following the rate hikes by the CBK.
Impressively, the total operating expenses decreased by 2.1% to KES 29.0 billion, from KES 29.6 billion in Q3 2022, attributable to the 26.5% decrease in loan loss provision to KES 4.2 billion, from KES 5.7 billion in Q3 2022, coupled with a 10.4% decrease in other operating expenses to KES 8.8 billion from KES 9.8 billion in Q3 2022, which outweighed the 12.4% increase in staff costs to KES 12.2 billion from KES 10.8 billion in Q3 2022. However, a major uptick in the loan loss provision is expected in Q4 2023, leading to a possible slower net profit growth due to an uptick in non-performing loans.
Notably, from a similar period last year, the Return on average equity increased to 26.7%, from 26.6%, while the Return on average assets increased to 3.9% from 3.8%, on the back of increased profits. Similarly, the Earnings per share recorded an 8.2% increase to KES 3.15 from the KES 2.91 recorded last year.
Kingdom Bank, which is 90.0% owned by Co-operative Bank, registered a growth of 28.7% in net profits to KES 784.0 million from KES 609.2 million in Q3 2022. Likewise, Co-op Consultancy and Bancassurance Intermediary Limited posted a pre-tax profit of KES 762.9 million, while Co-operative Bank of South Sudan posted a pre-tax profit of KES 43.5 million. Co-op Trust Investments Services Limited contributed KES 154.5 million pre-tax, and the funds under management closed the quarter at KES 196.0 billion.
The Managing Director of Co-operative Bank, Mr. Gideon Muriuki, attributed the strong performance to the group’s strategic focus on sustainable growth, resilience, and agility.