The Co-operative Bank has reported a loss in net profit for the first quarter of 2017 of Ksh3.2 billion from Ksh3.4 billion recorded in a similar period last year.
How South Sudan saw Co-op Bank loose Sh3.2 billion in just 3 months
Co-op bank joins KCB in reporting losses in the war-torn country
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This is a 6 per cent drop in profit compared to 2016 with the plunge reflecting further the negative effect interest rate cap law has had on banks’ earnings.
Managing Director Gideon Muriuki cited a tough operating environment as well as economic troubles in the South Sudan market among reasons for the dip in net profit.
“It is a commendable performance against the backdrop of a tighter operating environment especially with the capping of interest rates and currency devaluation and hyperinflation on our operations in South Sudan,”said Mr.Muriuki.
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The war torn country saw the bank run into losses of Sh34.7 million due to hyperinflation caused by the devaluation of the South Sudan currency which is currently exchanging at 108 units to the US Dollar compared to 2.95 units in early 2016.
"Co-operative Bank of South Sudan…made a loss of Sh34.7 million in the period under review owing to hyperinflation occasioned by devaluation of the South Sudanese currency,”Mr.Muriuki noted
South Sudan recorded one of the worst inflation rates in 2016 at 830 per cent creating a tough operating environment for businesses.
The bank also saw a drop in net interest income by 10.8 per cent to read at Sh9.5 billion in the first quarter of 2017 compared to Sh10.7 billion in 2016.
Co-op Bank joins KCB in recording losses blamed mostly on the interest rate cap and currency devaluation in S. Sudan.
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KCB’s net profit fell by 1.9 per cent for the period to Ksh4.54 billion ($45.4 million) from Ksh4.63 billion ($46.3 million).
It recently shut some of its branches in the country due to logistical and operational challenges that have proved difficult to sustain.
Mr. Muriuki said that the Co-op bank will now shift focus on digital banking to help grow business.
“We continue with our focus on digital banking which will ensure timely, business-led solutions delivery to our customers.”
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