Co-operative Bank Dividend Jumps to KSh 2.50 as Earnings Strength Surpasses Forecasts

Co-operative Bank of Kenya delivered a strong set of results for the year ended December 2025, underpinned by margin expansion, resilient income streams, and continued balance sheet growth. Profit after tax rose to KSh 29.75 billion, up from KSh 25.46 billion, representing a 16.9% year-on-year increase, reinforcing the bank’s position as a consistent earnings compounder within the NSE banking sector.

The improved profitability translated into higher shareholder returns, with total dividend rising to KSh 2.50 per share (KSh 1.00 interim + KSh 1.50 final), marking a 67% increase from KSh 1.50 in the prior year.

Dividend Growth Supported by Steady Earnings Expansion

The dividend uplift reflects both earnings growth and a structurally improving payout profile. Basic earnings per share increased to KSh 5.04, from KSh 4.33, demonstrating consistent bottom-line expansion.

For income-focused investors, the bank continues to offer a compelling combination of predictability, dividend growth, and capital strength.

Margin Expansion Drives Growth

Total operating income increased to KSh 91.89 billion, up from KSh 80.65 billion, reflecting strong growth in net interest income.

Net interest income rose sharply to KSh 62.85 billion, from KSh 51.52 billion, supported by a decline in interest expense, particularly on customer deposits, which fell from KSh 29.33 billion to KSh 25.00 billion.

This highlights a similar structural driver observed across the sector as observed in banks like the Equity Group where cost-of-funds normalization is driving margin expansion, enabling stronger earnings conversion even in a moderate loan growth environment.

Non-interest income remained broadly stable at KSh 29.03 billion, reflecting resilience in fees and commissions despite some volatility in forex income.

Balance Sheet Growth and Asset Quality

The bank’s total assets expanded to KSh 827.35 billion, up from KSh 743.19 billion, while customer deposits increased to KSh 574.17 billion, underscoring strong franchise growth.

Loans and advances grew to KSh 421.00 billion, supporting income expansion, while asset quality remained relatively stable. Gross non-performing loans increased modestly to KSh 73.52 billion, though provisioning levels remained strong, keeping net NPL exposure contained.

Capital adequacy remains robust, with core capital to risk-weighted assets at 20.3%, significantly above regulatory requirements, providing a strong buffer for future growth.

Forecast vs Actual: Earnings and Dividend Outperformance

ApexHub Insights’ prior model had projected next earnings per share (EPS) of KSh 4.69, with a bull case of KSh 4.90 and a bear case of KSh 4.39, based on historical growth trends, margin assumptions, and sector constraints.

The reported EPS of KSh 5.04 exceeded even the bull case, indicating stronger-than-expected margin expansion and operational efficiency.

Similarly, our dividend model had projected a next DPS of KSh 1.64, with a bull case of KSh 1.96 and a bear case of KSh 1.42. The actual dividend of KSh 2.50 per share significantly surpassed these projections, reflecting both earnings upside and a more aggressive payout stance than initially modeled.

This divergence highlights a key shift: the bank is transitioning toward a higher payout profile while maintaining capital strength, supported by improved profitability.

We will update our earnings and dividend forecasts in the coming days to reflect the latest financial performance, revised macroeconomic assumptions, and management guidance.

What This Means for Investors

Co-operative Bank’s latest results reinforce its positioning as a high-quality, income-generating banking stock, characterized by steady earnings growth, strong capital buffers, and increasing dividend payouts.

The key differentiator remains its earnings stability, driven by a diversified and relatively low-risk loan book, combined with consistent deposit growth.

However, upside potential from margin expansion may moderate as funding costs stabilize, suggesting that future earnings growth will increasingly depend on loan growth, fee income expansion, and cost efficiency gains.

• To analyse Co-operative Bank's reported numbers over the last four years, click here, or follow the payout record on its dividend view and how it prices against the other listed banks on its peer view.

Bottom Line

Co-operative Bank has delivered a solid earnings performance, with EPS exceeding expectations and dividends rising well above forecast levels. The results underscore a combination of earnings resilience, margin improvement, and an evolving payout strategy.

For investors, the stock offers a compelling mix of income stability and moderate growth, making it a key defensive holding within the NSE banking sector, with upside supported by continued operational efficiency and disciplined capital management.