Cooperative Bank Hires McKinsey Advisory and Consulting Firm to Cut Loan Default Risk

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Cooperative Bank one of the leading Tier 1 bank’s in Kenya has hired American management consulting firm McKinsey  & Co. to review its lending processes with an aim at reducing default risks in its loan portfolio.

In 2014, the Cooperative gave McKinsey its first assignment to cut costs and transform its digital lending platform.

Due to effects of the Covid-19, the banking sector is facing high rate of defaults with an increase in non-performing loans in the balance sheet.

The Chief Executive Officer, Gideon Muriuki said during the virtual annual general meeting held on Thursday that the bank is giving a focus on credit risk management as a result of the pandemic economic shocks.

He added that the bank may be forced to change its lending template, job descriptions, and loan profiles at the headquarters and branch level to ensure that the bank remains competitive.

Earlier, the bank had restructured loans totaling to Shs 1.1 trillion translating to 30 percent of the total book value of Shs 2.9 trillion according to the Central Bank of Kenya.

Co-op Bank has nearly half of its loan book in the energy, manufacturing, water, transport and tourism which are the hardest hit by the Covid-19 pandemic.

The tourism and hospitality industry has suffered the worst with international bans in March.

Though analysts have questioned the move by the bank to hire a foreigner at a premium fee, the advisory is meant to have a recovery plan post the pandemic.

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The Author of this Article is a registered Financial & Investment Analyst with Institute of Certified Investment and Financial Analyst. If your require more information Email: info@finsolutions.co.ke or +254 780216631

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