Absa Bank Kenya’s net profit increased sharply to Kes 8.2 billion in the nine months ended September as provision for bad debt fell sharply.
The lender’s net income rose 328.2 per cent from Kes 1.9 billion a year earlier attributed to the decline in provision for defaults by 55.2 % to Kes 3.4 billion.
The lower provision came despite the stock of gross defaults increasing by Kes 2.8 billion to Kes 19.6 billion.
Absa says the reduction in provision for bad debt reflects “an improving macroeconomic environment for our business and our customers.”
The lender added that its average loan loss ratio declined to 2 % in the review period compared to 4.9 % the year before. Absa’s total interest income rose by a marginal 1.3 % to Kes 23.5 billion as investment in government debt paper shrunk by Kes 12.9 billion to Kes 81.6 billion and interest rates on ordinary loans declined.
Loans and advances on the other hand increased by Kes 19.8 billion to Kes 229 billion. Absa benefitted from a 19.1 per cent fall in interest expenses to Kes 4.9 billion despite customer deposits growing nine per cent to Kes 268.8 billion.
The bank’s bottom-line was also boosted by the absence of exceptional expenses which stood at Kes 1.9 billion a year earlier.
Absa’s Dividend and Outlook
Absa said the performance has given it the confidence to announce the resumption of dividends for the full year ending December.
“We are confident, at this point in time, to resume payment of dividend at the full year 2021,” the bank said in a statement.
The lender previously paid annual dividends of up to Kes 1.1 per share before suspending the payouts in the wake of the economic uncertainty brought by the Covid-19 pandemic.
Absa had spent heavily in rebranding and technology change as part of its separation from its former London-based parent company Barclays Plc.
The lender says its balance sheet is strong enough to enable it to pursue growth and the resumption of dividend payments.
“Our business remains very well positioned to help our customers reposition for recovery. Our capital and liquidity levels are solid to navigate the coming quarters and we are seeing opportunities for growth in our balance sheet with recovery in revenue growth and profits expected.”