Absa half-year profit falls to Ksh.589 million from Ksh.3.9 billion

Absa Bank Kenya has announced an 85 percent slide in half year profit to Ksh.589 million from Ksh.3.9 billion last year.

The sharp decline in earnings is largely attributable to ongoing one-off transition costs following the lender’s rebrand from Barclays Bank Kenya (BBK) earlier this year along with higher costs.

The bank saw the one-off costs hit Ksh.1.7 billion in the period from Ksh.560.8 million last year having migrated its technology systems and rebranded its assets to Absa.

Save for the one off costs, the lender’s normalized profit stood at Ksh.1.2 billion or a corresponding 72 per cent decline year on year.

Absa’s total operating expenses meanwhile soared by 36 per cent in the period as its cost of loan-loss provisions increased by three-fold to Ksh.5.4 billion.

The increased provisions have been an industry wide trend triggered by uncertainities arising from the COVID-19 pandemic.

Absa’s stock of gross non-performing loans (NPLs) similarly increased to Ksh.17 billion from Ksh.15.7 billion last year.

“The world is facing one of the most difficult challenges of our lifetime, one which governments, industries, businesses and societies around the world were not sufficiently prepared for and whose full impact is yet to be understood.  As management, we have taken the decision to increase credit impairment provisions to position ourselves for the uncertain future,” said Absa Bank Kenya Managing Director Jeremy Awori

“The fortunes of the banking sector follow those of its customers and the broader economy and therefore 2020 will be a tough year for the sector.”

The lender however continued to mark resilience in its comprehensive income with both interest and non-funded streams growing.

The bank registered a 2.7 percent growth in net interest income with gross earnings topping Ksh.15.3 billion while non interest funded income (NFI) rose by 3.8 percent to Ksh.5.5 billion.

More over the bank marked a balance sheet expansion with loans and customer deposits increasing by 8.1 and 8.3 percent to Ksh.201.9 billion and Ksh.248.7 billion respectively.

In spite of the tough operating environment, the bank projects continued resilience into the second half of the year.

“We expect an impact on revenue growth across the industry on the back of reduced business activity. With the proactive actions that we have taken in the first half to improve balance sheet resilience, we expect a more predictable second half,” added Mr. Awori.

Absa says it has restructured Ksh.57 billion worth of customer loans representing 28 percent of its advances to customers as cushioning during the pandemic.

The lender’s board has not declared an interim dividend in line with an industry-wide cash preservation stance with the group’s earning per share declining to 11 cents from a higher 71 cents last year.