Billionaire Baloobhai Patel takes 1.29pc stake in Co-op Bank

Billionaire investor Baloobhai Patel has taken a 1.29 percent stake in Co-operative Bank of Kenya after buying an additional 20.5 million shares that were valued at Sh232 million at Wednesday’s market close.

The businessman, whose interests span real estate and listed equities, has been accumulating shares of Co-op Bank over the years amid the bear run that has left most banking stocks undervalued.

Regulatory filings show that Mr Patel had acquired a cumulative 75.6 million shares of Co-op Bank—currently valued at Sh855.2 million—at the end of December 2023.

Read: Baloobhai to save ShSh10m in transfer of Carbacid stake

This was an increase from 55.1 million shares equivalent to a 0.94 percent stake he held in February 2023. The additional share purchases have cemented his position as the second-largest individual investor in the bank. Co-op Bank chief executive Gideon Muriuki is the top individual investor in the institution where he has a two percent stake.

The bank now ranks among Mr Patel’s major investments on the Nairobi Securities Exchange, with the stake set to earn him more than Sh100 million in dividends per annum.

Co-op Bank had the second-highest dividend yield among the listed banks at 13.3 percent based on Wednesday’s share prices after Standard Chartered Bank Kenya whose cash return stood at 13.6 percent.

Co-op raised its dividend per share by 50 percent to Sh1.5 in the year ended December 2022 from Sh1 a year earlier, saying the decision was consistent with its policy of balancing shareholder returns and long-term growth.

“The group has pursued a balanced funding strategy with an attractive dividend payout ratio (averaging 43.3 percent over the last five years) that enables us to reward shareholders while at the same time reserving sufficient funds to fuel our growth strategy,” says the bank in its latest annual report for the year ended December 2022.

The listed banks are set to announce their results for the full year ended December 2023 from next month. In the nine months ended September 2023, Co-op posted a 7.5 percent net profit growth to Sh18.4 billion, driven by higher interest income from loans.

Read: Baloobhai Patel buys extra 2.5 million Absa shares

The net earnings grew from Sh17 billion a year earlier. Co-op Bank’s total interest income increased 12.8 percent to Sh49.3 billion as the lender increased its lending to ordinary customers and the government via purchase of treasuries.

Lending margins

The bank expanded its loan book by Sh42.9 billion to Sh378 billion while its investments in government debt securities increased by Sh2.7 billion to Sh185.1 billion.

Rising interest rates are expected to lift lending margins for banks, especially those that can avoid a substantial increase in their cost of funds as well as non-performing loans. Besides Co-op Bank, Mr Patel has substantial investments in Carbacid Investments Plc, Absa Bank Kenya and Sanlam Kenya among others.

→ (email protected)