Co-op Bank, I&M Ranked Top Performing Banks In Kenya 2020

The Co-operative Bank of Kenya has been ranked the second-best bank in Kenya during the first quarter of 2020 in a report released by Cytonn Investments Limited.

According to the report, the Co-operative Bank outshined others with a franchise value score of 49, an intrinsic value score of 4, and a weighted value score of 22. The bank improved from position 3 in 2019.

I&M Bank was ranked the best in Kenya, beating Co-operative Bank with 2 points. The lender had a franchise value score of 51, against 49 for Co-op.

“Kenya’s banking sector showed resilient performance despite the tough operating environment which was largely attributable to persistent revenue diversification,” said Cytonn Investments.

According to Cytonn, “Co-operative Bank of Kenya’s rank improved to Position 2 from Position 3 in FY’2019 mainly due to an improvement in the Gross Non Performing Loans ratio to 10.8 percent in Quarter one of 2020 from 11.2 percent in Full Year 2019, in turn, improving its franchise value score.”

According to the report, banks reported a decline in the quality of their loan books, as a result of compliance with the new accounting rules known as IFRS 9, together with the cautious stance that banks have taken to mitigate the impact of the Covid-19 pandemic.

Asset quality deteriorated in Q1’2020 with the gross NPL ratio increasing by 0.9 percentage points to 11.3 percent from 10.4 percent in Q1’2019. This was high compared to the 5-year average of 8.5 percent.

In accordance with IFRS 9, banks are expected to provide both for the incurred and expected credit losses. Consequently, this saw the NPL coverage increase to 57.4% in Q1’2020 from 54.5 percent in Q1’2019 as banks adopted a cautious stance on the back of the expected impact of the COVID-19 pandemic.

The Co-operative Bank has remained resilient despite the challenges in the sector that have been brought by uncertainties due to the ongoing Covid-19 pandemic. During the first quarter, Co-op Bank posted a profit after tax of Sh. 3.6 billion. This profit came even as profit before tax stood at Sh. 5.1 billion in the first quarter.

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