GROWTH

Absa Bank's Q3 profit up by 4 times to Sh8.2bn

Last year, the bank's profits fell by 65 per cent.

In Summary

•Total income increased by seven per cent to Sh27.3 billion, primarily due to higher interest income, which increased by nine per cent year on year due to increased lending.

•Despite the negative economic effects of the pandemic, all business units remained profitable, registering growth on key lines.

Absa Kenya MD Jeremy Awori during the launch of Whatsapp banking in Nairobi on August 10, 2021
Image: CHARLENE MALWA

Absa Bank Kenya has reported a growth in profit after tax to Sh8.2billion in first nine months to September compared to Sh1.9 billion similar period last year.

The growth was attributed to high interest income, notably in the small and medium enterprise segment,  as these businesses recover from the pandemic's effects and reposition for growth. 

Last year, the bank's profits fell by 65 per cent in sharp rise in loan loss provisions due to the heightened credit risk during this pandemic season.

Despite the negative economic effects of the pandemic, all business units remained profitable, registering growth on key lines.

Total income increased by seven per cent to Sh27.3 billion, primarily due to higher interest income, which increased by nine per cent year on year due to increased lending.

This was however 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.

Non-funded income grew by five per cent as a result of our new innovations and digitization, while costs fell by three per cent year over year.

Net customer loans increased by nine per cent to Sh229 billion, owing to robust year-on-year growth in key core products such as general lending, trade loans, mortgages, and scheme loans.

Customer deposits increased by nine per cent to Sh269 billion, with transactional accounts accounting for 69 per cent of the total deposit book.

Absa Bank Kenya managing director Jeremy Awori attributed the bank’s performance to the strengthening macro-economic environment, quality of credit and resilience in customer operations.

“The pandemic and its negative effects continue to persist, but we have drawn inspiration from our customers to rise above the storm and continue working together to keep the wheels of our economy turning,” Awori said.

The bank's costs were well managed, coming in at Sh12 billion, down three per cent year on year due to spend discipline and cost initiatives, which built on previous periods of underlying cost savings.

Automation of the processing center and continuing movement of consumer transactions to alternative channels were among the cost-cutting strategies.

The savings were used towards long-term investments, particularly in automation and digitization. The firm's efficiency ratio improved to 44 per cent during the period under review down from 49 per cent in same period last year. 

Impairment decreased by 55 per cent compared to similar period last year reflecting an improving macroeconomic environment for the  business and  customers.

The bank’s average loan loss ratio reduced to two per cent compared to 4.9 per cent last year.