Absa Bank Kenya Q1 Results: Profit Up 24% on Net Interest Income

The lender’s Net profit for three months to March 2021 hit KSh2.42 billion from KSh1.95 billion in a similar period last year.

Absa Bank Kenya, Waiyaki Way PHOTOI KHUSOKO

Absa Bank Kenya’s quarterly profit increased by 23.7 per cent, on the back of growth in net interest income and end of separation costs from Barclays Plc.

The lender’s Net profit for three months to March 2021 hit KSh2.42 billion from KSh1.95 billion in a similar period last year.

According to its unaudited financial results released Friday, net interest income rose by six per cent to KSh5.96 billion in line with increased lending as the loan book expanded by 7.5 per cent to KSh218.3 billion.

Other Highlights 

  • Earnings per Share (EPS) increased to Ksh.0.45 from Ksh.0.36 over the same period in 2020.
  • Total Assets grew marginally by 0.7 per cent to Ksh384.1Bn attributable to 1.1 per cent and 7.5 per cent growth in holdings of Government securities and loans and advances to customers.
  • Loan book rose to  Ksh 218.3Bn while investment in Government securities increased to Ksh 126.8Bn.
  • Customer deposits up 7.7 per cent to Ksh 257.1Bn compared to Ksh 238.7Bn Q1 2020.
  • Total operating income rose 2.3 per cent to Ksh 8.8Bn mainly driven by a 20 per cent decline in total interest expense.
  • Total Interest Income declined 0.3 per cent to Ksh.7.6Bn despite a 1.4 per cent increase in interest from loans and advances (Ksh.5.5Bn), on the back of a 1.9 per cent decrease in interest from government securities (Ksh.2Bn).
  • Non-funded income (NFI) shrunk 4 per cent to Ksh 2.9Bn exacerbated by an 18.4 per cent decline in income from foreign exchange trading.
  • Interest expense declined to Ksh 1.6Bn owing to a 6.5 per cent reduction in interest expenses on customer deposits to Ksh 1.4Bn and 58.8 per cent drop in interest from deposits and placements with banking institutions to Ksh 0.2Bn.
  • Total Operating Expenses – Up 4.6 per cent to Ksh 5.4Bn driven by a 27.3 per cent and 25.2 per cent increase in loan loss provisions (KES.1.4Bn) and other operating expenses respectively.
  • Asset Quality – Gross Non-Performing Loans (NPLs) declined marginally to Ksh 17.2Bn from Ksh 17.3Bn translating to a Gross NPL ratio of 7.9 per cent compared to 8.5 per cent over a similar period in 2020.

“The Group has set aside Ksh 1.6 billion for investment in digital transformation, rolling out over 60 different technology projects in the course of this year. This is expected to encourage revenue generation as well as improve cost efficiency. It launched an asset management arm that will diversify and grow its revenue stream. We note that due to the ongoing pandemic, most banks are increasing their loan loss provisions. As the government continues to reopen the economy, we are cautiously optimistic that economic conditions will gradually improve,” Commentary from Genghis Capital.