Co-Op Bank of Kenya Forecasts Jump in Profit on Cost Cuts

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Co-Operative Bank of Kenya Ltd. expects profit to rise by as much as 35 percent this year on cost cutting and increased lending, Chief Executive Officer Gideon Muriuki said.

“We are realizing gains out of the restructuring we have been going through since last year focusing on cost reduction and efficiency,” Muriuki said in the capital, Nairobi, as he discussed first-quarter earnings. The bank cut 160 jobs last year, which will save 600 million shillings ($6.35 million) in 2015, he said. Loans may rise by 25 percent to 30 percent.

Co-Op Bank, as the lender is known, is recording higher transaction income after customer numbers climbed to 5.3 million by the end of March from 4.4 million a year earlier, Muriuki said Wednesday. Net income will rise by at least 30 percent this year, he estimated. Profit in 2014 was 8 billion shillings.

Co-Op Bank posted a 28 percent increase in first-quarter net income to 3.17 billion shillings, Muriuki said. Net interest income, the money banks earn from interest charges on loans, climbed 21 percent to 5.8 billion shillings, he said.

Kenya’s fourth-biggest bank is considering expanding into Rwanda, Uganda, Tanzania and Ethiopia, Muriuki said. Operations in South Sudan, where a civil war erupted in December 2013, almost broke even in the first quarter and the business is expected to contribute 200 million shillings to annual profit, he said. Three new outlets will be opened in South Sudan this year, adding to the existing two.

Shares in the lender advanced 2.5 percent to 20.50 shillings by 11:43 a.m. in Nairobi. As of Tuesday’s close, the stock was unchanged this year, compared with a 5.7 percent gain in the benchmark FTSE-NSE 25-Share Index.

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