Absa Kenya Defies Uncertain Operating Environment to Outperform Peers

Absa Bank Kenya PLC has outperformed its peers in the country on the back of better returns largely driven by growth in interest income particularly in the small and medium enterprises segment.

In the recently released financial results, the bank registered a profit after tax of 5.6 billion shillings, an equivalent of 846 percent (9 times) growth for the period ending June 30, 2021. The profit before tax also grew five times growth (399 percent) for the period under review.

The stellar performance comes on the heels of the economical slumps experienced amidst the prevalence of COVID-19.

According to Absa Kenya’s Managing Director, Jeremy Awori, the pandemic, and its negative effects continue to persist, but Absa continues to draw inspiration from its customers to rise above the storm and continue working together to keep the wheels of our economy turning.

“We are optimistic that we shall make good our commitment to continue innovating and enhancing our customers’ banking experience,” added Mr. Awori.

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During the last quarter, Absa Kenya made a series of adjustments aimed at supporting businesses bounce back from the effects of the pandemic. This has better repositioned the lender for growth which saw all its business units remained profitable, registering good performance on key lines.

The bank incorporated the right decisive actions in capital management and supported customers with over 62-billion-shilling loan restructures and 103 billion shillings in gross lending in 2020.

“Our strong performance reflects an improving macro-economic environment, better quality of credit, and the resilience of customers. The decisions we’ve made so far continue to pay off in 2021 with a stronger balance sheet and faster growth amidst the uncertain operating environment,” said Mr. Awori.

Absa Bank Kenya’s total income increased by 6 percent to 17.8 billion shillings owing to the growth of net interest income, which was up 6 percent year on year on the back of increased lending.

The net interest income, however, was partially offset by margin compression resulting from the drops in Central Bank Rate (CBR). The regulator’s adjustment of the lending rates was accordingly passed to the customers to shoulder them from incurring high interests.

The capital and liquidity ratios remained strong with sufficient headroom above the regulatory requirement. The bank’s total capital adequacy ratio closed the first half of 2021 at 17.3 percent and liquidity reserve position at 38.1 percent against the regulatory limits of 14.5 percent and 20 percent respectively.

Non- funded income driven by the bank’s innovations and digitization grew by 6 percent and costs were well managed, dropping by 3 percent year on year.

Absa’s net customer loans grew by 8 percent to close at 219 billion shillings. This remarkably stellar performance was attributed to the lender’s key focus products including general lending, trade loans, mortgage, and scheme loans that also registered strong growth year on year.

The bank’s liquidity in the money market has remained favorable with household deposits increasing by 6 percent during the period under review to 264 billion shillings. About 68 percent of the total deposits were from transactional accounts.

This growth in deposits can be attributed to people’s persistence in preferring mobile money transactions, card payments, and internet banking.

“More recently, we introduced WhatsApp banking as part of its commitment to invest over 1.6 billion shillings in technology and innovation this year towards enhancing customer experience. Customers can now transact via WhatsApp including account-to- Mpesa/Airtel Money transfers, inter-account transfers, bill payments, and balance inquiry, among others,” said Mr. Awori.

The new WhatsApp banking product is poised for success, particularly now that 87 percent of the bank’s transactions are now happening outside the branch with 67 percent of them occurring via digital channels.

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In the period under review, the bank continued executing its growth strategy with the introduction of some exciting new propositions including the Absa Asset Management Limited (AAML), Absa SHE Business account, digital loan top-ups where customers can top up existing loans at the touch of a button.

As part of its commitment to innovating to bring easier, faster, and better services to the consumers, the bank also introduced new digital solutions including digital loan top-ups, debit card management, and the business banking App.