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ABSA Kenya Posts 66% Decline in Quarterly Earnings

Absa​ Bank Kenya Plc yesterday posted 3rd​ Quarter normalized profit after tax of Kes 3.0 billion, a 51% decline compared to a similar period last year. Normalized performance excludes an exceptional cost item of Kes 1.9billion relating to separation and brand transition to Absa which is largely concluded.

Performance was significantly impacted by a 147% growth in impairment as customers struggled to keep up with loan repayments due to the economic effects of the COVID-19 pandemic, and a decisive action by the management to increase provisions in order to best position for future potential credit losses.

The Bank continued to support its customers manage through the adverse economic effects of the COVID-19 pandemic through increased lending, capacity building and other financial solutions. For instance, the bank advanced over Kes 57 billion in lending, an uplift of 41% compared to the same period last year. A majority portion of this was advanced to retail as well as small and mid-sized business customers to support their resilience efforts and growth through this period.

In addition, the Bank offered loan relief and restructures totaling over Kes 62 billion to customers, equivalent to 30% of loan portfolio, alongside other response interventions such as provision of PPE to public hospitals and psychosocial support for frontline health workers.

“The evolving impact of the pandemic has required us to re-visit our strategic priorities. Our focus in the last few months has been to help our customers manage through the pandemic through various interventions such as loan moratoriums and restructures, fee waivers for digital transaction, capacity building for SMEs and other Force for Good initiatives. We continue to improve on our channels optimization with significant increase in customer using alternate channels. In the period, our digitally active customers grew by 49% YoY,” said Jeremy Awori, Managing Director, Absa Bank Kenya PLC.

Despite the raging effects of the pandemic, all business units remained profitable and resilient, registering growth on key lines, with Business Banking and Global Markets divisions revenue growing in double digits.

Total income grew by 3% to Kes 25.4 billion mainly driven by the growth of non- interest income, which was up 4% year on year. Costs were well maintained, dropping by 1% year on year. Total assets grew by 8% year on year driven by growth in customer loans, investments in Government securities as well as other liquid assets.

Net Customer loans was up 8% to close at Kes 209 billion driven by key focus products namely General lending, trade loans, mortgage and scheme loans that recorded strong growth year on year.

Interest income grew 2% from prior year largely because of growth in the lending book; though partially offset by margin compression as a result of drops in Central Bank Rate (CBR) whose benefits the bank passed to customers as a responsible lender.

Customer deposits grew by 5% to Kes 247 billion with transactional accounts making up 68% of the total deposits.

The lender said management chose to take a huge impairment in light of the higher credit risk due to the economic effects of the pandemic and guided by the IFRS standards.

“Performance was significantly impacted by a 147 per cent growth in impairment as customers struggled to keep up with loan repayments due to the economic effects of the Covid-19 pandemic, and a decisive action by the management to increase provisions in order to best position for future potential credit losses,” said Jeremy Awori, the Absa Bank Kenya managing director.

” The bank will continue upgrading to more advanced systems which will ultimately help enhance the service experience, ” reads the firm’s statement.

ABSA has painted a level of  uncertainty in its outlook relating to the COVID-19 pandemic where it has highlighted that it is high and unprecedented, and its impact on markets and the global economy is profound.

“The impact of the pandemic on our financial performance has become clearer in Q3 2020. Our capital and liquidity levels are solid. We are in a strong position to navigate the future and we are seeing opportunities for growth in our balance sheet with recovery in revenue growth and profits expected in 2021,” it added