Bloomberg News

Cooperative Bank of Kenya Expects 42% Profit Growth in 2011

August 03, 2011

(Updates with closing share price in the final paragraph.)

Aug. 3 (Bloomberg) -- Cooperative Bank of Kenya Ltd., the East African nation’s fifth-largest lender, forecast that profit will rise by 42 percent this year to 6.5 billion shillings ($71 million), supported by credit growth.

Net income climbed 41 percent to 3.31 billion shillings, or 95 cents per share, in the six months through June, compared with 2.34 billion shillings, or 67 cents, in the same period a year earlier, Chief Executive Officer Gideon Muriuki told reporters in the capital, Nairobi, today.

Net interest income, the money banks earn from loan charges, surged 46 percent to 5.96 billion shillings, he said. Profit last year grew 55 percent to 4.59 billion shillings.

“Even though there will be pressure on the cost of funds in the second half of the year, we expect sustainable growth because we’ve diversified our asset portfolio, which has been very good for us,” Muriuki said in an interview today.

Interest rates in East Africa’s largest economy have risen this year after the central bank twice boosted the key lending rate from a record low in January, and imposed tougher restrictions on borrowing from its overnight window.

The central bank left the benchmark interest rate unchanged at its last meeting on July 27. The cost of borrowing will probably remain steady for the rest of the year, Muriuki said.

Customers increased 57 percent to 2.2 million in the first half while the number of branches stands at 89, compared with 36 in 2009, Muriuki said. Cooperative Bank is not planning a rights offer, as some observers have speculated, he said.

Peer Comparison

Cooperative Bank’s 33 percent return on equity in the first half outpaces many of its Kenyan peers, highlighting it as an appealing investment option, said Judd Murigi, head of East African research for African Alliance Securities Ltd.

“The bank is still one of the most attractive in the banking sector on the basis of return on equity,” Murigi said in an interview in Nairobi today.

The shares rose 1 percent to 15.15 shillings by the 3 p.m. close in Nairobi today.

--Editors: Ana Monteiro, Ben Holland, Karl Maier, Eddie Buckle

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.


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