Kingdom Bank management projects at least Sh300 million in pre-tax earnings this financial year, thanks to a confidence boost after being acquired by Co-operative Bank.
If realized, this will be the first gain, also the best performance in more than a decade, ending a five-year streak of losses.
Co-operative Bank of Kenya #ticker: COOP last year acquired a 90 per cent stake in Jamii Bora for 1 billion shillings, introduced a new management team and renamed the Tier III lender to Kingdom Bank.
Disclosures of performance projections have been made by Co-op Holdings, the majority shareholder of Co-op Bank.
“Management noted that there had been a significant improvement in performance due to the subsidiary’s association with Co-operative Bank,” says Co-op Holdings.
“Furthermore, management projects that the bank will turn around by December 31, 2021 with a projected profit of Sh300 million.”
Kingdom Bank has already posted a net profit of Sh126 million in the three months ending in March and wants to carry this momentum throughout the year.
The lender had cut its losses last year to Sh169 million from the Sh1.2 billion loss it had posted in 2019.
Improved performance has led the Cooperative Bank to retain on its books the 3.2 billion shillings that it recorded as goodwill when acquiring the small lender.
Companies that record goodwill on acquisition generally perform impairment tests to determine what level of goodwill they should retain on their books based on the performance of the acquired entity.
Kingdom now meets all CBK capital and liquidity ratios. It had a base capital of 1.15 billion shillings and a liquidity ratio of 387 percent in March.
Last year, the bank received liquidity support financing of 20.96 billion shillings from the Central Bank of Kenya. The loan is interest-free and repayable in 10 years, but has a three-year grace period.
Kingdom Bank has a footprint of 17 branches and three agencies serving more than 136,000 clients.
Co-op Bank wants to use the acquired lender to create a niche bank to offer specialized credit offerings such as micro and medium business banking, asset financing and leasing.
Small banks had suffered a crisis of confidence after the collapse of Imperial Bank, Dubai Bank and Chase Bank in quick succession, but now calm is returning in the sector.