Co-operative Bank has cut its bad loan provision by 14.4 per cent, an indication of improved repayment by borrowers.

Lenders have been raising the amount set aside to cover bad loans since 2020 as borrowers struggle to service debt. 

The lender went against the grain to slash loan provisioning to Sh2.8 billion in the first six months of the year. 

"Credit Management remains a key focus area, with the Group prudentially making provisions of Sh2.9 billion which have enhanced the coverage levels to 71.1 percent,'' Co-operative Bank Group MD Gedion Muriuki said. 

The bank reported a below-the-industry non-performing loan of 13.8 per cent.

According to the Central Bank of Kenya (CBK),  the ratio of gross NPLs in June to stood at 14.5 per cent compared to 14.9 per cent in May.

Decreases in NPLs were noted in the transport and communication, agriculture, manufacturing, and personal and household sectors. Banks have continued to make adequate provisions for the NPLs.

The stock of bad loans in the banking sector has been on the increase in the past three years, hitting a record  Sh540.8 billion in March and extending their share in the total loan book to a 10-month high, taking the shine off the sector’s growing profits.

The lender reported a net profit of Sh12.1 billion in the first six months of the year compared to Sh11.5 per cent same period last year, presenting a growth of 5.2 per cent.

Improved performance by subsidiaries also contributed to the growth in earnings, with Kingdom Bank 's half-year profit after tax up 28.6 per cent to Sh522 million.

Kingdom's non-funded income surged 137.6 per cent to Sh230.4 million on improved yields from the government bonds. 

Co-operative Bank of South Sudan, a joint venture with the Government of South Sudan made a gross profit of Sh205.1 million.

This performance however translated to a monetary loss of Sh36.5 million attributable to hyperinflation accounting occasioned by the currency devaluation of the South Sudanese pound.

Co-operative Bank's gross earnings for the period under review grew by 7.4 per cent to 16.4 billion compared to Sh15.3 billion recorded in the first half of 2022.   

The total operating income grew by three per cent from Sh34.4 billion to Sh35.4 billion. Net interest income grew on the other hand grew by 2.3per cent from Sh21.1 billion to Sh21.5 billion.

Total non-interest income grew by four per cent from Sh13.3 billion to Sh13.8 billion.

The lower loan provisioning and efficiencies in expenditure saw the Group's total operating expenses decrease by 0.1 per cent from Sh 19.2 billion to Sh19.1 billion.

During the half under review, the bank grew its total assets by 10.1 per cent to hit Sh664.9 billion, cementing its position as the third largest bank in Kenya after Equity and KCB Group. 

Net loans and advances grew to Sh365.4 billion from Sh330.1 Billion in 2022. Customer deposits also grew by almost 10 per cent to Sh463.9 billion. 

Shareholders’ funds grew to  Sh108.3 billion, an 11.9 per cent increase from Sh96.7 billion in 2022.