Kingdom Bank’s management is projecting at least Sh300 million pre-tax profit this financial year, riding on a confidence boost after being acquired by Co-operative Bank.
If realised, this will be the first profit— also the best performance in over a decade — ending a streak of five years in losses.
Co-operative Bank of Kenya last year acquired 90 percent stake in Jamii Bora at Sh1 billion, introduced a new management team and rebranded the tier III lender to Kingdom Bank.
The disclosures of the performance projections have been made by Co-op Holdings, the majority shareholder of Co-op Bank.
“Management noted that there had been significant improvement in performance due to association of the subsidiary with Co-operative Bank,” says Co-op Holdings.
“Further, management projects that the bank will turn around by 31 December 2021 with projected profit of Sh300 million.”
Kingdom Bank has already posted a net profit of Sh126 million in the three months ended March and wants to carry this momentum into the full year.
The lender had last year cut its losses to Sh169 million from Sh1.2 billion loss it had posted in 2019.
The improving performance has seen Cooperative Bank retain in its books the Sh3.2 billion it booked as goodwill when acquiring the small lender.
Firms that book goodwill on acquisition usually perform impairment tests to determine which level of goodwill to retain in their books in line with the performance of the acquired entity.
Kingdom is now compliant with all CBK capital and liquidity ratios. It had Sh1.15 billion core capital and a liquidity ratio of 387 percent in March.
The bank last year received Sh20.96 billion liquidity support financing from the Central Bank of Kenya. The loan is interest-free and repayable in 10 years but has a grace period of three years.
Kingdom Bank has a footprint 17 branches and three agencies serving over 136,000 customers.
Co-op Bank wants to use the acquired lender to create a niche bank to offer specialised credit offerings such as micro small and medium-sized enterprise banking, asset finance and leasing.
Small banks had suffered confidence crisis following the collapse of Imperial Bank, Dubai Bank and Chase Bank in quick succession but calm is now returning in the sector.