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Co-Operative Bank Falls as Net Misses Estimates: Nairobi Mover

March 8 (Bloomberg) -- Co-operative Bank of Kenya Ltd. fell the most in more than three months after the East African nation’s fifth-biggest lender by market value reported full-year profit that missed estimates.

The stock declined 3.4 percent, the most since Nov. 25, to 12.75 shillings by the close of trading, after earlier retreating as much as 8.7 percent.

Net income increased 17 percent to 5.36 billion shillings ($65 million), or 1.53 shillings a share from a year earlier, Managing Director Gideon Muriuki told reporters today in Nairobi, the capital. That compares with a median estimate of 1.7 shillings a share by six analysts by Bloomberg

“The numbers were below our projections; we expected a pretax profit of 7.1 billion shillings,” George Bodo, an equity strategist at Nairobi-based Apex Africa Capital Ltd., said in an interview today. “Clearly the operating environment in the second half of the year was very challenging.”

Kenyan lenders raised interest rates to as high as 25 percent in the last quarter of 2011 after the central bank increased Kenya’s benchmark rate to a record 18 percent to rein in surging inflation as the shilling dropped to a record low against the dollar.

Expansion Plans

Net interest income, the money banks make from loans, rose to 11.9 billion shillings from 9.19 billion shillings a year earlier while the number of outlets increased to 94 from 87, Muriuki said. The bank has opened 8 branches this year with plans to add as many as 30 more, he said. The customer base increased to 2.3 million from 1.6 million, he said.

“Growth in the customer base ensured increased transaction volumes,” Muriuki said. “We remain focused on fees and commissions.”

The cabinet of Southern Sudan has approved a joint venture with Co-op Bank and the two parties are currently finalizing the shareholding structure, he said. The government of South Sudan will hold shares in the lender in trust for co-operative societies in the nation for five years, Muriuki said.

Co-op Bank increased its stake in Co-Operative Insurance Co. to 26.75 percent during the year, he said. In October 2010, the lender increased its holding in the insurer to 21 percent from 2 percent.

“For us it is diversification of our income streams,” Muriuki said. “For CIC it is diversification of their customer base.”

The lender announced a bonus offer of one share for every five held.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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