NAIROBI: Co-operative Bank of Kenya forecast annual profits could jump by more than 30 percent this year after the cost of job cuts left pre-tax profits flat in 2014. Co-operative Bank of Kenya Ltd., the East African nation’s third-largest lender by market value, said 2014 profit dropped 12 percent, missing analyst’s estimates, after it took a one-time charge for job cuts.
Net income declined to 8.01 billion shillings ($86.9 million) from 9.11 billion shillings a year earlier, Chief Executive Officer Gideon Muriuki told reporters Wednesday in the capital, Nairobi. The median estimate of 12 analysts surveyed by Bloomberg was for net income of 9.19 billion shillings.
The Kenyan lender spent 1.34 billion shillings to cut 160 senior staff jobs, which will result in annual savings of 500 million shillings, Muriuki said. The bank’s unit in South Sudan, where civil war broke out 15 months ago, also reported a loss, while 23 of the lender’s outlets have yet to break even, he said.
“If you remove the one-off restructuring cost, profit after tax grew 3 percent because they were also impacted significantly by a higher tax rate,” Faith Atiti, a research analyst at Nairobi-based CBA Capital Ltd. said by phone on Wednesday.
Co-op Bank, which competes with bigger rivals Kenya Commercial Bank Ltd. and Equity Group Ltd. for customers in East Africa’s largest economy, is targeting a 30 percent increase in 2015 profit as it implements a five-year reorganization plan. The lender is considering expanding to Ethiopia, Rwanda, Tanzania and Uganda by 2018.
Net interest income, earnings from charges on loans, climbed 8.7 percent to 21.3 billion shillings in 2014, the lender said.
Co-op Bank was unchanged at 20.50 shillings by 1:15 p.m. in Nairobi trading. The stock has advanced 2.5 percent this year compared with a 5.7 percent gain in the FTSE-NSE 25-Share Index.
The benchmark share index recovered after two straight sessions of losses.
The shilling closed trade at 91.85/95, stronger than the previous day’s close of 92.05/15.
“There is a bit of profit-taking and inflows which came in for the bond auction next week,” said John Muli, a trader at ABC Bank.
The central bank will sell a 12-year bond worth up to 25 billion shillings ($272 million) on March 25 whose proceeds will be used to improve infrastructure. The bond is favoured by offshore investors as it is exempted from withholding tax.
The shilling fell to its lowest since Nov. 2011 on Monday, under pressure from strong demand for dollars by energy sector importers, forcing the central bank to pump in dollars to stem the volatility.
In the stock market, the share index rose 0.5 percent, or 28.52 points, to close at 5,342.36 points.
The index has only risen twice in the past 11 straight sessions after investors started booking gains from a rally that sent it to a seven year peak early this month.
In the debt market, bonds worth 2.5 billion shillings were traded, up from 779 million shillings in the previous
