By: OTIATO GUGUYU
Co-operative Bank Group expects growth for the year to rise 35 per cent based on continued effect of job cuts effected in December 2014, which has now been included in its balance sheet.
Group Managing Director Gideon Muriuki said the transformation process, which will be completed by June next year, offering its 2.5 million clients more products, is expected to drive growth.
The group cut 528 jobs last year and put a freeze on recruitment, which saw it reduce overall costs by 7 per cent in nine months to September, saving the firm Sh400 million.
The transformation, conducted with consultation from McKinsey, has been concluded in 40 of the bank’s 140 branches.
“We have completed reorganisation of top 40 branches contributing over 72 per cent profitability while offering better customer service,” Mr Muriuki told an investor briefing in Nairobi on Thursday.
The bank recorded 36 per cent jump in profit after tax, posting a Sh8.6 billion for the third quarter.
The group’s only subsidiary in South Sudan earned it Sh246 million compared to a loss last year and the company announced intentions to expand its footprint across East Africa in partnership with governments.
Co-op renegotiated contracts with vendors, reviewed procurement processes and procedures, including frequent re-tenders, with significant savings.
Mr Muriuki said the company focused more on electronic delivery channels, thus reducing the cost of building physical branches and cutting cost-to-income ratio to 49 per cent from 59 per cent in December last year.
The company’s mobile banking platform M-Coop cash grew to 2.5 million users and dispensed Sh1.3 billion worth of loans.
Mr Muriuki said only 72 per cent of its clients had more than one product with the bank, which offered a potential market for growth.
The bank’s total assets grew 23 per cent from Sh270 billion to Sh332 billion, while its loan book expanded from Sh176 billion to Sh212 billion.
Co-operative Group increased its provision for non-performing loans from Sh750 million to Sh1.5 billion and projects bad loans to increase to 4 per cent full year.
The bank increased its exposure to the property market with its loan portfolio on mortgages increasing from 9 per cent to 13 per cent.
The agri-business portfolio grew from 1 per cent to 3 per cent of its loan book, while personal loans shrunk from 34 per cent to 28 per cent.
SOURCE: DAILY NATION