At the tail end of February 2023, billionaire Kenyan investor Baloobhai Patel,85, bought an additional 14.6 million shares of the Cooperative Bank of Kenya worth Ksh 181.8 million ( $ 1.38 million)
The move raised Patel’s stake at Kenya’s third-largest lender by assets to 55.1 million shares at the end of February 2023 from 40.4 million shares as of December 31, 2022.
Presently, his stake at the bank has risen to 0.94 % –with a current market value of Ksh 683.8 million ( US$ 5,196,048.57) — from 0.69 % over the same period, entrenching his position as the second-largest individual investor in the lender.
The CEO of Co-op Bank, as the lender is widely referred to as Dr. Gideon Muriuki is the top individual shareholder with a 1.75 % equity.
Patel arguably acted prescient buying the Co-op shares as sector analysts have struck a bullish overview regarding the bank, named the best lender within the East African region for overall excellence in banking in 2022.
Ephantus Maina, a senior equity research analyst at Kestrel Capital says Co-op bank is within the buy rating – which is a type of recommendation given by analysts for a stock that is expected to dramatically outperform the market at large or its sector.
This March the bank reported a 33% surge in profit before tax of Kshs. 29.4 Billion (US $223,744,290.00), for the year ending 2022 compared to Kshs. 22.6 Billion (US $171,732,520.66), recorded in 2021.
“The strong performance by the Bank is reflective of the Group’s strategic focus on sustainable growth, resilience, and agility,” said Dr Muriuki
In the 2022 financial year, Co-op Bank’s total assets grew by 4.7% to Ksh 607.2 billion, (US$ 4,606,980,264.48), from Ksh 579.8 billion (US$4,399,089,521.32) in 2021. While net loans and advances grew by 9.4% to Ksh 339.4 billion (US $2,575,113,803.96), from Ksh 310.2 billion (US 2,353,566,004.68) in 2021. And customer deposits grew by 3.9 % to Ksh 423.8 billion ( US $3,215,477,990.92) from Ksh 407.7 billion (US 3,093,323,211.18)
“We expect Co-operative bank to record steady growth boosted by loan book with a strong customer base. Also improved efficiency levels are expected as the bank’s cost-to-income ratio without loan loss provisions decreased to 45.8% in Q3’2022, owing to management efforts to contain recurrent expenditures. These efforts, if sustained, will lead to increased profitability for the lender in the long-term as focus shifts to the top line,” says Victoria Mututu, a Research Analyst at NCBA Investment Bank.
A Kenya Bankers Association (KBA) survey ruled the bank possessed the best customer experience among the 38 registered commercial lenders in East Africa’s largest economy.
“Based on customer experience ranking, respondents were asked to rank on a scale of 1 to 5 their overall experience with the main bank, and the respondents’ views are resoundingly positive,” said KBA in the report released February 28, 2023.
Among the nine tier-one banks, Co-operative Bank, which is listed at the Nairobi Securities Exchange (NSE), led in the ranking. It was followed by Kenya Commercial Bank and Standard Chartered.
According to Maina, the lender is also focusing on propping up its non-performing loan coverage ratio (NPL), a move that will allow the bank to catch up on provisions with comparable peers, enabling it to withstand asset quality deterioration.
He adds to say that a review of the Bank’s credit management process through Project Kilele will prove to be critical, bearing the banking industry may suffer from elevated credit risk, on account of the macro weakness regime.
Project Kilele is a credit risk adoption plan launched in 2021 drawing in an international consulting firm with an end goal of achieving chiefly an end-to-end assessment of credit risk management by undertaking “a comprehensive diagnostic review touching on each area of credit risk, including credit risk management framework with a key focus on risk governance, credit risk appetite, credit approval process, and pricing.”
“ Furthermore, the bank’s alternative channels have enabled the bank to lower its cost-to-income ratio to below 50%, implying improving efficiency. Secondly, the non-funded income lines have gained a boost with increased non-branch transactions as they drive other fees and commission income,” says Maina
Solomon Kariuki a research analyst at AIB-AXYS Africa Ltd says the Bank’s revenue growth was powered by a myriad of factors including an increase in the non-interest income on the back of a jump in forex trading income and fees from loans, higher yields from government securities and a larger loan book.
“We foresee Co-op Bank’s growth is driven by interest income from lending (management guidance is at a 10% growth in key balance sheet items). Loan book performance will further be driven by the approval of the risk-based model and a focus on micro, small, and medium enterprises lending including through digital channels where the average mobile loan disbursed per month improved to Ksh 7.00Bn from Ksh 6.00Bn in FY’21,“ says Kariuki.
