Co-operative Bank ventures into leasing business as 6month profit dips to Sh6.6bn
The Co-operative Bank has announced plans to venture into the leasing business as part of efforts to diversify its revenue.
The bank will partner with South African leasing firm Super Group Limited, under a joint venture arrangement.
Through the deal Co-operative Bank will financing as well as customers to take up products introduced by the Super Group.
“The joint venture will take advantage of key strengths by the two partners and focus on the emerging opportunities in leasing business with the bank providing the customer base and Super Group providing proven products, technology and expertise on the running of a scalable leasing business,” Co-operative Bank Group chief executive Gideon Muriuki said in a statement.
Mr Muriuki said the bank is tracking changes to the way government is doing business, favoring leasing programs to acquire assets.
Co-operative bank will also angle for business from the mining, oil and gas as well as manufacturing sectors in rolling out its leasing business.
“The joint venture is expected to substantially boast the bank’s strategy of diversifying revenues and is being operational zed immediately,” he said.
Banks have been moving to develop new business lines since the introduction of regulations capping interest rates that have eroded margins.
The announcement came as the bank posted a 10.6 percent drop in net profit from Sh7.4 billion to Sh6.6 billion in the six month period ended June 30.
This was attributed to a 10.1 percent drop in interest income during the period to Sh19.26 billion despite the bank’s ability to grow its loan book.
During the period, Co-operative Bank issued Sh252.6 billion worth of loans up from Sh221 billion a year earlier.
The bank was able to increase its income from fees and commissions by 3.5 percent to Sh3.89 billion.
Co-operative Bank also earned Sh1.37 billion from fees and commissions for processing loans.
As banks continue to grapple with a changing regulatory environment, Co-operative Bank has managed to migrate 90 percent of its customer transactions to alternative channels using mobile banking as well agency banking.
The bank’s board did not recommend an interim dividend.
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