Genghis Capital has issued a BUY recommendation for ABSA Bank Kenya in anticipation of the release of its H1’2023 financial results.
This recommendation is based on the firm’s strong earnings momentum and above-average coverage ratio against protracted credit risks.
“This is on the back of the firm’s strong earnings momentum coupled with the firm’s above-average coverage ratio against protracted credit risks,” Genghis said in its Equities Trading Idea for the week on Monday.
As of August 25, 2023, ABSA Bank Kenya’s share price closed at Ksh 11.10 per share on the Nairobi Securities Exchange (NSE), recording a 4.3% drop from its previous closing price of Ksh 11.60.
Absa began the year with a share price of Ksh 12.30 but has since lost 9.76% off that price valuation, ranking it 44th on the NSE in terms of year-to-date performance.
ABSA Bank Kenya’s H1’2022
During this period, core earnings per share increased by 13.0% in H1’2022, driven by a 17.2% increase in total operating income.
This growth was weighed down by a 19.2% increase in total operating expenses.
Total operating income rose due to an increase in both Net Interest Income (NII) and Non-Funded Income (NFI).
Interest income grew mainly due to an increase in interest income from loans and advances and government securities.
The Yield on Interest-Earning Assets (YIEA) increased, while the bank was able to mobilize cheaper deposits with the Cost of funds (COF) marginally declining.
Non-Funded Income (NFI) increased mainly due to an increase in Foreign Exchange trading income and other fees and income.
Total operating expenses increased mainly due to an increase in Loan Loss Provisions (LLPs) and staff costs.
The Cost to Income Ratio (CIR) deteriorated, while profit before tax and exceptional items increased by 14.7%.