Absa Bank Kenya Thursday reported a profit of Ksh5.57 billion for the half-year ended June 31, 2021, over KSh589 million for the corresponding period of last fiscal.
The profit is an equivalent of 846 per cent (9 times) growth attributed to a drop in loan loss provisioning from KSh5.4 billion last year to KSh1.9 billion.
The strong performance was largely driven by growth in interest income particularly in the small and medium enterprises segment as the Bank accelerated its efforts in supporting businesses to recover from the effects of the pandemic and reposition for growth.
Announcing the results, Absa Bank Kenya Managing Director Jeremy Awori, attributed the bank’s performance to the improving 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 62-billion-shilling loans restructures and 103 billion shillings in gross lending in 2020. 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 Mr Awori.
Despite the negative economic effects of the pandemic, all business units remained profitable, registering growth on key lines.
Total income grew by 6 per cent to 17.8 billion shillings mainly driven by the growth of net interest income, which was up 6 per cent year on year 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.
Non- funded income driven by our innovations and digitization grew by 6 per cent and costs were well managed, dropping by 3 per cent year on year.
The Group has concluded its separation and rebranding costs and can now focus on re-investment for growth.
The Group has set aside Ksh 1.6Bn for investment in digital transformation, having launched its first-in-market WhatsApp banking platform dubbed Abby.
Other projects include digital loan top-ups, securities trading automation, diaspora remittances. These projects seek to grow non-interest income as well as boost cost efficiencies.
As the Group seeks to diversify its revenue through various service and products offerings, it launched an asset management arm.
Though the Board of Directors did not recommend an interim dividend payment in 1H21, we anticipate an FY21 dividend on the back of improved performance.
We maintain a HOLD recommendation on ABSA at a fair estimated value of Ksh 11.94.