Absa Bank Kenya's decision to increase its portfolio in government bonds yielded in the first six months of the year, growing net earnings by 32 per cent.
The lender pumped Sh4 billion more into government papers as yields surged beyond 16 per cent to hit a portfolio of Sh35.3 billion up from Sh31.07 billion same period last year.
The lender has in the first half maintained its portfolio at Sh47.2 billion, having slashed it from Sh42 billion in December last year.
"Our diversification and multi-year transformative investments continue to deliver desired results which has led to a 26 per cent growth in our non-funded income,' Absa Kenya boss Abdi Mohamed said.
Even so, shareholders will not enjoy the yields as the board has decided to maintain dividends at Sh0.2 per share year-on-year.
This will see investors take home Sh1.09 billion in interim dividends for the six-month period.
The listed lender reported profits after tax of Sh8.3 billion in the review period, supported by sustained double-digit revenue growth across key revenue streams.
The bank also saw strong growth in forex income, fees and commissions, asset management, Bancassurance, and stock brokerage arm driving its performance in 2023.
Customer deposits increased by 18 per cent over the six-month period to Sh333 billion, enabling further expansion of the bank’s balance sheet to Sh504.1 billion from Sh503.7 billion in the same timelines last year.
Mohamed said that in the review period, operating expenses increased by 15 percent on account of new anchored plans to drive business growth.
"The strong H1 performance gives us confidence that our strategy is delivering the desired results both for our customers and shareholders," said Mohamed.
Following the announcement, the bank's board said the dividends would be paid on or around Thursday, October 12, 2023.
Shareholders must be registered by the close of business on Thursday, September 21, 2023, to be eligible for this dividend payout.
Revenue increased by 31 percent to Sh27.4 billion, boosted by a 33 percent rise in net interest income to Sh19.2 billion.
At the same time, non-funded income increased by 26 percent to Sh8.1 billion, owing to positive outcomes from the ongoing revenue diversification.
Impairment costs increased by 74 per cent compared to the same period last year in what the lender says is in line with the bank’s principles of prudence in risk management given balance sheet growth and tough operating environment.
“Despite this increase, portfolio quality remains better than the industry. In addition. We have provided adequate coverage ratio to ensure future credit losses are better managed,” said Absa finance director of corporate and investment banking Moses Muthui.
