Absa-Kenya half-year profit up 10 times on zero rebranding costs

Its profit grew to Sh5.6 billion compared to Sh588.9 million same period last year

In Summary
  • The lender officially changed from the Barclays brand in February last year. 
  • Last year, the banks net profit for six months dropped 85 per cent compared to the same period in 2019.
Absa Kenya MD Jeremy Awori during the launch of Whatsapp banking in Nairobi on August 10, 2021

Absa Bank Kenya's profit for the first six months of the year grew to Sh5.6 billion, almost ten-fold compared to Sh588.9 million last year as its rebranding from Barclays ended. 

The lender's earnings same period last year was dragged down by costs of the changeover from its former parent company Barclays Plc and high loan-loss provisioning due to Covid-19 economic challenges. 

The costs, including technology change and marketing expenses, nearly tripled to Sh1.6 billion from Sh560 million.

Its loan loss provisions also rose 3.2 times to Sh5.3 billion despite the stock of bad loans increasing at a slower rate of 8.3 per cent to Sh17 billion.

This saw the bank's net profit for six months to June 30, 2020, drop 85 per cent compared to the same period in 2019.

Speaking at a virtual investor briefing on Thursday, Absa Bank Kenya MD  Jeremy Awori said improved results signify improving the macro-economic environment, quality of credit and resilience in customer operations.

“In confronting the challenges posed by the pandemic, we made the right decisive actions in capital management and supporting customers with over Sh62 billion loan restructures and Sh103 billion in gross lending in 2020,'' Awori said. 

He also linked the improved performance to growth in interest income, particularly in the small and medium enterprises segment as the lender accelerated its efforts in supporting businesses to recover from the effects of the pandemic and reposition for growth.

Total income grew by six per cent to Sh17.8 billion mainly driven by the growth of net interest income, which was up six per cent year on year.

This was on the back of increased lending; though partially offset by margin compression as a result of drops in Central Bank Rate (CBR) whose benefits the bank passed to customers as a responsible lender.

Net customer loans went up by eight per cent to close at Sh219 billion driven by key focus products namely general lending, trade loans, mortgage and scheme loans that recorded strong growth year on year.

Customer deposits grew by six per cent to Sh264 billion with transactional accounts contributing 68 per cent of the total deposits.

Non- funded income driven by our new innovations and digitization grew by six per cent and costs were well managed, dropping by three per cent year on year.

''These decisions are paying off in 2021 with a stronger balance sheet and faster growth for our franchise. We have been greatly inspired by the ingenuity and undying determination adopted by our fellow Kenyans to rise above the storm and keep getting things done,” said  Awori.

Absa did not declare an interim dividend, saving Sh1 billion based on its previously unbroken tradition of pa

In the period under review, the bank continued executing its growth strategy with the introduction of some new exciting propositions.

This included the launch of a fund and wealth management subsidiary, Absa Asset Management Limited (AAML).

The asset firm is at the forefront in providing investment services for Absa customers with a diverse portfolio of local and international capital markets options.

The lender also launched  SHE Business account which aims to support at least 1 million women-led SMEs with both financial and non-financial resources.

This account enables women entrepreneurs to access unsecured lending of up to Sh10 million thus facilitating access to the requisite financing to grow and access markets. 

The bank also recently introduced WhatsApp banking as part of its commitment to invest over Sh1.6 billion in technology and innovation this year towards enhancing customer experience.