Lower Costs Push Up Absa Bank Kenya Profits in Q1 2020

Absa Bank Kenya HY Results: Profit Drops 85% on Covid-19 Provisioning 

ABSA KENYA Nairobi Office

Absa Bank Kenya Thursday said it made a net profit of KSh1.95 billion in the first three months of this year, a growth of 6.5 percent compared to KSh1.83 billion recorded last year.

This was attributed to growth in Non-interest revenue (NIR) and a rise in Net interest income (NII).

However, its cost, Ksh Sh0.6 billion to transition from Barclays Kenya to Absa Kenya was not factored in as an exceptional item as a result, it reported a normalised profit after tax of KSh2.3 billion for the period ended 31 March 2020.

This represents a growth of 13 percent.

On the other hand, Genghis Capital says the lenders’ 3.0 percent y/y growth in Earnings per Share (EPS) to Ksh 0.36, weighed down by 75.2 percent y/y increase in loan loss provisions (Ksh 1.1Billion) and rebranding costs of Ksh 552Million which dampened performance.

Its revenues from net interest and non-funded income grew by eight percent to KSh8.6 billion.  Net interest from loans and advances remained flat at KSh5.4 billion. Earnings from government securities increased from KSh2.07 billion to KSh2.08 billion.

Performance highlights:

  • Total assets up 10% to Kshs 382 billion
  • Customer deposits grew by 7% to Kshs. 239 billion
  • Customer Loans and advances up 12% to Kshs 203 billion
  • Total revenue growth at 8% to Kshs 8.6 billion
  • Normalised Profit after tax growth of 13% to Kshs 2.3 billion
  • Operating profit growth of 24% to Kes 4.5billion
  • Kshs 0.6 billion exceptional item related to spend towards the transition to Absa.

“These results are a strong testament that the strategic choices under our Growth, Transformation and Returns Strategy have set us firmly on a path to continue growing,” Absa Kenya said in a statement.

“The bank costs were well managed at KSh4.1billion reflecting a five percent reduction year on year largely because of spending discipline and cost saves initiatives. The cost saves initiatives included automation of the processing centres, investment in alternative channels and branch rationalisation programmes,” said Absa Kenya Chief Executive Jeremy Awori.

Awori said the bank’s capital and liquidity ratios remain strong with sufficient headroom above the regulatory requirement; total capital adequacy ratio at 16.5 percent and liquidity reserve position at 37.9 percent against the regulatory limits of 14.5 percent and 20 percent respectively.

The bank will hold its 41 AGM virtually on June 19.

READ

*****

“The Ksh 0.90 final dividend payment (Ksh 1.10 total dividend) translates to a dividend yield of 10.8 percent, which should be very attractive for income investors, with the highest dividend yield in our coverage,” Genghis Capital in the lender’s earnings note.