@jerry bonus issues do not raise any cash..

@mastermind the rights issue will most likely be in 2013 after the macroeconomic dust has completely settled.. The bonus issue is to enable shareholders to compete with the bond/bill yields without giving too much cash..

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Opening additional branches this year would amount to a massive gamble for Co-op;- fraught with significant downside.

What co-op needs now, is to rationalize and consolidate what they have got and add efficiency. KCB are at it, Equity are deep in that channel. Co-op must believe that there isn't too many unbanked customers out there at the moment and reaching the few remaining out there will involve more tact and brain (alternative channels & technology) than brawn (concrete branches). In other words, opening branches from now on, will be have to be very opportunistic rather than a hit and miss operation.

Co-op is trailing peers (KCB & Equity) on most metrics and opening branches will diminish the only metric they seem to be competitive in which is cost to income.

Their branch expansion strategy hasn't worked since Jan 2011, and by now it should be obvious to management, they need to spend a bit more time critiqing the numbers and evaluating which between strategy and environment is undermining performance as opposed to pushing all out. Deposits only grew at 2.3% from Q4 of 2011 to Q1 of 2012, whereas from since Q1 2011 to Q1 of 2012 only 7.3%. If you consider cost of deposits has gone up from 1.7% in Q1 -2011 to 6.6 in Q1 - 2012 it's obvious co-op went has been out aggressively buying deposits which is not what you want to do when you are 30++ branches bank. The logic of cheap deposits falls off. Equity Bank's cost of deposits moved from 1.1% to 3.3% during the same period and with 29% growth in deposits. KCB's cost of depos moved from 1.0% to 4.3% during the same period while deposits grew by 24.3% again both easily reeling in transaction based deposits. Co-ops deposits are 146B, Equity's 151B and KCB's 260B. Co-op's loans only grew by 3.8% from Q4 of 2011 to Q1 of 2011. KCB's loan book shrank by (1.7%) and Equity's grew by 6.4% during the same period. Equity and KCB have larger loan books. Effectively the credit markets are in comatose at the moment. I also don't see the CBR dropping over the next 2 months. So the question is what's the rationale of Co-op 30 new branches this year? I don't see the opportunity cost for Co-op NOT opening branches this year!

@fyatu,
What do you define fundamentals as, branches or buildings??????I can't seem to see the fundamentals you refer to....

Co-op Bank’s 1Q12 EPS up 19.2% y/y, strong recovery q/q. Co-operative Bank of Kenya (Co-op)released 1Q12 performance figures for the period ended March, marking 19.2% y/y growth in EPS to KES 0.47. Recovering from a poor run in 3Q11 & 4Q11 (25.7% & 34.2% q/q decline in EPS) 1Q12 EPS was up 140.2% q/q (NIR up 83.2% q/q recovering from realized loss on sale of AFS instruments). Riding on FY11’s strong growth in SME and personal unsecured loan books, NIM was up 150bp y/y & 110bp q/q. Surprisingly, total operating costs declined 10.3% q/q on the back of fall in other operating expenses. Loan loss provision was up 25% y/y (+18.5% q/q). Being the first bank to show strain in NPL’s, NPL ratio rose to 4.2% in 1Q12 from 3.8% in 4Q11. Balance sheet performance q/q (+3.8% loans & +2.3% deposits) outperformed KCB’s but underperformed Equity’s. Given market, brand and product positioning, Equity and KCB are Co-op’s two main competitors. Based on our forecasts, Equity will continue outperforming both Co-op and KCB on RoaA & RoaE, while KCB will outperform both Co-op & Equity on dividend payout and possibly dividend yield. Seeing better value in KCB & Equity and after factoring the planned 1 for 5 bonus issue we retain our HOLD recommendation on Co-op Bank . ](Fair Value KES 12.42, 12.2% below current share price). Currently, Co-op is trading cum-dividend (final DPS KES 0.40; book closure 28 May). We retain our FY12 EPS forecast of KES 1.54 (+20.6% y/y).

c/p _ sib