Absa Bank Kenya PLC has today reported a Normalised profit after tax of Kshs. 2.3 billion for the period ended 31 March 2020, a growth of 13% compared to a similar period last year. Normalised performance excludes exceptional item of Kshs 0.6billion, which relates to costs incurred in the transition to Absa. The performance is mainly attributable to a 8% growth in total income, 5% drop in operating costs partially offset by a 75% growth in impairment.
Totals assets grew by 10% year on year driven by growth in customer loans, investments in Government securities as well as other liquid assets.
Net Customer loans was up 12% to close at Kshs.203 billion 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% to Kshs.239 billion with transactional accounts making up 66% of the total deposits.
During the period, total income increased by 8% to Kshs 8.6 billion driven mainly by the growth of non- interest income, which was up 16% year on year. The main areas of growth were risk fees, fixed income trading and risk managed products. Interest income grew 5% from prior year largely because of growth in the lending book; though partially offset by the margin compression as a result of drop in Central Bank Reference rate (CBR).
Other Highlights include:
The Bank costs were well managed at Kshs 4.1billion reflecting a 5% reduction year on year largely because of spend discipline and cost saves initiatives. The cost saves initiatives included automation of the processing centres, investment in alternative channels and branch rationalisation programmes. The savings derived were used to fund sustainable strategic investments especially in automation and digitization.
Update on the transition to Absa
We have made significant progress in our separation journey having unveiled our new Absa brand in our Kenya market in February 2020. We have:
- Delivered the vast majority of separation projects including successfully migrating most of our technology systems that were previously hosted in Barclays UK. The bank is still upgrading to more advanced systems which will ultimately help enhance the customer service experience
- Rebranded our legal assets including changing of our trading ticket at the NSE
The investment in our transition program will continue to have an impact on our financial results. This includes a substantial spend on modernizing our systems as well as the continued investment towards building awareness, consideration and love for the Absa brand. In the period under review, we have reported separation costs of Kes 0.6billion; this is an exceptional item and will be incurred throughout the separation period.
Impairment increased by 75% compared to similar period last year largely attributable to a few specific client names. The Bank’s average loan loss ratio increased to 2.2% (1.4% in 2019) and Net NPL ratio increased to 3.0% from 2.8% in 2019.
Capital & Liquidity
Absa Bank Kenya Plc capital and liquidity ratios remain strong with sufficient headroom above the regulatory requirement; total capital adequacy ratio at 16.5% and liquidity reserve position at 37.9% against the regulatory limits of 14.5% and 20% respectively.
These results are a strong testament that the strategic choices under our 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.
As we fight COVID-19, we have rolled out a number of initiatives to support our customers through this period ranging from loan repayment holidays, to loan restructures as well as training and mentorship programmes for our SME customers. We have also waived transaction fees on digital channels so as to encourage more people to go cashless.
As part of our support to the government’s effort in the fight against this pandemic, we have made a contribution of KES50 million 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. Additionally, we have rolled out a psychosocial support programme in partnership with Minet Kenya where we are providing a mental wellness care centre for COVID-19 patients, medical workers and caregiv.
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.
For more information, please contact:
Absa Bank Kenya PLC