Kenya’s Co-operative Bank may have lost around 18,000 customers in the first half of 2022-23, following a plethora of accusations and poor publicity precipitated by its own internal poor controls and alleged corruption.
A banking insider told reporters he regarded the loss of any customer as a “irreparable damage” but argued the numbers leaving were not as bad as might have been expected, given the negative publicity that has hounded the bank.
“When you consider what the bank has gone through I don’t think it’s a bad outcome, but I certainly don’t want to appear, or nor am I, complacent about it,” the banker said.
The recent move, by some members of the Kenya Military, Police and Prisons services follows the varying charges on the RTGS. This, compared to the rest of the players, gives the bank hefty profits for a service offered freely by industry players,” says an insider with knowledge of the goings on.
“In most cases, when an employee is paid his or her salary, it is expected that the transfer is done free of charge. But, in the case of Cooperative Bank, they charge an amount, which is its right meaning is theft or rip-off. The bank is simply stealing from millions of its customers and you can imagine the money they collect at the end of the month,” says a member of the Armed Forces, Mwangi Daniel.
The customer loss was revealed on after the bank reported a narrower profit for the first six months of 2022-23.
Hot on the heels of a case of the bank charging Sh42 for alert messages, a case in Migori County where the bank unleashed auctioneers on a customer and case where a dead client.
In January social media influencer Pius Kinuthia reported that a family in Mogori sued the bank for damages, something that took the social media community by storm leading to the affected family suffering irreparable losses. The move to sue the Migori branch manager invited a public outcry but as usual, the bank’s PR Department responded with hubris and condescending messages.
In another case, a customer accused the bank of deducting money from the mother’s account while the elederly customer was criticalluy ill in hospital.
Coop Bank, in their usual reply template, said in a message signed off by FN: “Hello, please DM the account holder details incluing the account number, mobile number and the date they visited Maua branch so we may do a follow up.”
A customer Edwin Ochieng said that money was educted from his account without his knowledge.
The bank was left fighting for its survival after a massive capital shortfall was exposed in June last year following a failed bid to buy of branches from loss making Jamii Bora Bank one of the worst performing financial institutions in the country.
Jamii Bora was rescued when investors including Saccos and farmers agreed to a recapitalisation which meant Co-op Group went from outright owner to holding just a small percent stake.
The bank’s problems were exacerbated when current Managing Director and CEO Gideon Muriuki was named in many cases and innuendos touching on his ownership of land and other property, including a case on his private life that generated lurid headlines in Kenyan social media platforms.
The negative publicity likely resulted in some customers becoming disillusioned with the bank, which had built its reputation around ethical credentials such as not investing in weapons, tobacco and alcohol manufacturers.
Despite that, insiders say Co-op Bank attracted nearly 10,000 new customers during the period, leaving it with a net loss of 28,199 current or checking account holders, equivalent to nearly 2 percent of the total.
Kenyans are often reluctant to move between banks because of the perceived difficulties involved, although new rules that guarantee the paperwork will be completed within seven working days have lifted the number switching.
Kenya’s third-biggest lender reported a pretax profit of more than Sh11 billion compared with a slight change over the same period the previous year, though banking insiders attribute the figures to massaging of the accounts.
“It is not rosy at the bank. Things have not been good and the net effect is that the management, using position and influence in the industry can make the figures glossy as they can be. Afterall, it is a private entity, only regulated by the Central Bank of Kenya,” says an insider.
Co-op Bank also said its core Tier 1 capital ratio, a key measure of financial strength, stood at 11.5 percent at the end of June and was expected to be significantly above the previous guidance of 10 percent at the end of 2020.
The bank raised an additional Sh400 million from investors in May after its Tier 1 ratio slipped to 7.2 percent, dangerously close to the 7 percent absolute minimum required by the financial regulator.
“A large proportion of our cost is in people and, consequently, we will continue to see job reductions. There have been one or two redundancy programmes and I believe there will be one or two more in that respect,” he said.
An independent review commissioned by the bank, published in April, concluded that the root of the bank’s problems lay in its 2009 takeover of the Jamii Bora Bank and poor management controls.
On the other end, it is claimed in many places that the bank made a hefty donation to the Kenya Kwanza campaign during the last General Elections in which William Ruto floored ODM leader an Azimio Presidential candidate Raila Odinga.
During the last days of the campaign run, Coop Bank CEO Muriuki is alleged to have visited the Hustler Campaign headquarters with a donation of Sh200 million, though some people quote a different figure.