Co-operative Bank of Kenya has begun the year with a Sh6.93 billion net profit for the first quarter of 2025, reflecting a 5.3 per cent uptick from Sh6.58 billion in the same period last year, as the lender tightened provisions in the face of rising loan defaults.

The Group's net interest income climbed 21.7 per cent to Sh14.24 billion, buoyed by increased earnings from loans and government securities.

Interest income rose by 14.4 per cent to Sh22.21 billion, comprising Sh13.96 billion from loans and Sh7.03 billion from securities.

Despite this growth, non-interest income edged down 1.9 per cent to Sh6.94 billion, even as commissions and loan fees contributed Sh3.06 billion and Sh2.77 billion respectively.

"Total operating income grew to Sh21.18 billion in Q1 2025 from Sh18.78 billion the previous year, a 12.8 per cent increase," the bank reported.

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However, asset quality deteriorated further. Gross non-performing loans (NPLs) climbed 11.4 per cent to Sh74.1 billion, prompting the bank to raise its loan loss provision by 32.7 per cent to Sh2.11 billion.

Net loans and advances recorded marginal growth of 1.7 per cent to reach Sh384.5 billion, suggesting cautious lending during the period.

Customer deposits rose by 9.0 per cent to Sh525.2 billion, reinforcing liquidity as total assets expanded by 8.3 per cent to Sh774.1 billion.

At the subsidiary level, the main banking unit, Co-operative Bank of Kenya, posted a standalone net profit of Sh6.21 billion, up 7.6 per cent from Sh5.77 billion a year earlier.

Net interest income surged 23.7 per cent to Sh13.16 billion, while non-interest income fell by 6.7 per cent to Sh5.96 billion.

The unit’s total operating income stood at Sh19.12 billion, marking a 12.3 per cent increase.

"Customer deposits grew to Sh493.9 billion, up from Sh461.5 billion last year, reflecting a 7.0 per cent rise,” the bank indicated in its update.

Meanwhile, gross NPLs reached Sh69.6 billion, representing an 11.9 per cent increase, while loan loss provisions rose 25.4 per cent to Sh2.02 billion.

Kingdom Bank, the Group’s subsidiary, registered a substantial decline in profitability. Its net profit for the quarter stood at Sh144 million, down 58 per cent from Sh342 million in Q1 2024.

Still, deposits surged to Sh25.2 billion and operating income reached Sh707 million.

Interest income rose to Sh1.14 billion, but interest expenses grew to Sh617 million, compressing net interest income to Sh524 million.

The performance comes at a time when the industry is grappling with deteriorating loan books and inflationary pressures.

While Co-op has managed to grow its core income streams and maintain profitability, the uptick in provisions signals caution over the quality of its lending portfolio.