Absa Bank Kenya PLC has reported a normalized profit after tax of 2.3 billion shillings for the period ended 31 March 2020, a growth of 13 percent compared to a similar period last year.
Normalized performance excludes exceptional items of 0.6billion shillings, which relates to costs incurred in the transition to Absa.
The performance is mainly attributable to an 8 percent growth in total income, a 5 percent drop in operating costs partially offset by a 75 percent growth in impairment.
Totals assets grew by 10 percent year on year driven by growth in customer loans, investments in Government securities as well as other liquid assets.
Net Customer loans were up 12 percent to close at 203 billion shillings driven by key focus products namely General lending, trade loans, mortgage, and scheme loans that recorded strong growth year on year.
Customer deposits grew by 7 percent to 239 billion shillings with transactional accounts making up 66 percent of the total deposits.
During the period, total income increased by 8 percent to 8.6 billion shillings driven mainly by the growth of non- interest income, which was up 16 percent year on year.
The main areas of growth were risk fees, fixed income trading, and risk-managed products. Interest income grew 5 percent from the prior year largely because of growth in the lending book; though partially offset by the margin compression as a result of a drop in Central Bank Reference rate (CBR).
The Bank costs were well managed at 4.1 billion shillings reflecting a 5 percent reduction year on year largely because of spend discipline and cost-saving initiatives.
The cost saves initiatives included the automation of the processing centers, investment in alternative channels, and branch rationalization programs. The savings derived were used to fund sustainable strategic investments, especially in automation and digitization.
Impairment increased by 75 percent compared to a similar period last year largely attributable to a few specific client names. The Bank’s average loan loss ratio increased to 2.2 percent (1.4 percent in 2019) and Net NPL ratio increased to 3.0 percent from 2.8 percent in 2019.
“Absa Bank Kenya Plc 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,” said Absa.
To help cushion customers against the effects of Covid-19, Absa Bank Kenya rolled out a number of initiatives to support their customers through this period ranging from loan repayment holidays, to loan restructures as well as training and mentorship programs for their SME customers.
“We have also waived transaction fees on digital channels so as to encourage more people to go cashless,” said the lender in a statement.
The bank ha also supported the government’s effort in the fight against the pandemic by making a contribution of 50 million shillings through the COVID-19 Emergency Response Fund.
“As part of this investment among others, we have purchased 210,000 3ply surgical masks and 10,000 KN95 masks to be used by medical personnel in the frontline,” said Absa Bank Kenya.
Absa Bank Kenya is the only one that has rolled out a psychosocial support program in partnership with Minet Kenya where they are providing a mental wellness care center for COVID-19 patients, medical workers, and caregivers.
“At Absa, we will continue to closely monitor the situation and explore opportunities to collaborate with the government and other stakeholders in order to flatten the curve and minimize the impact of COVID-19 on our economy,” the bank affirmed.
According to the lender, the Q1 financial results are a strong testament that the strategic choices under their Growth, Transformation, and Returns Strategy have set us firmly on a path to continue growing.
“We are cognisant that the COVID-19 pandemic continues to pose significant challenges for the industry and the economy at large. The level of uncertainty relating to this crisis is high and unprecedented and will have a negative impact on businesses globally including the banking industry in Kenya. The banking industry will feel the covid impact from April onwards and most likely continue throughout the year.”