Absa profit jumps 846pc to Sh5.57bn in half year

Absa Bank Kenya’s net profit surged 9.4 times to Sh5.5 billion in the half year ended June, helped by a large drop in expenses.

The lender reported net earnings of Sh588.9 million a year earlier.

Absa’s profit growth is the largest among the big banks that have announced their results so far.

The bank did not declare an interim dividend, joining other lenders that continued to preserve cash despite record earnings.

Absa last paid a dividend of Sh1.1 per share for the year ended December 2019, including an interim distribution of Sh0.2 per share.

The lender says it may pay a dividend in the future based on new considerations.

“This position will be reviewed in future based on the commercial prospects and a new dividend framework has been developed,” the firm wrote in its latest annual report.

Absa’s loan loss provision in the review period dropped 63.9 percent to Sh1.9 billion despite gross non-performing loans increasing 7.8 percent to Sh18.3 billion.

Banks have reduced the funds set aside to absorb defaults as reduced Covid-19 restrictions, increased vaccinations and an uptick in business activity brighten the economic outlook.

“The performance was also supported by a significant reduction in impairments related to improving macro-economic variables,” Absa said in a statement.

The lower provisions contributed the most to operating expenses falling 26.9 percent to Sh9.8 billion.

Absa also benefitted from the absence of costs of rebranding from Barclays which stood at Sh1.6 billion in the same period last year.

The lender has spent billions of shillings in one-off costs to separate from its previous London-based parent company Barclays Plc.

Other areas where the lender recorded significant reduction in costs include employee compensation which shrunk from Sh5 billion to Sh4.4 billion.

The bank spent Sh1 billion in a staff retrenchment exercise last year that saw its workforce drop by more than 150.

Loan book growth

Absa also deferred taxes worth Sh637.3 million, boosting the bottom-line in the review period.

Deferred taxes are obligations arising in the current period but which will be paid in the future.

Total interest income declined marginally to Sh15.1 billion as the lender cut its investment in government bonds and T-bills by Sh14.9 billion to Sh77 billion.

Its loan book expanded 8.3 percent to Sh218.8 billion. Customer deposits increased 6.1 percent to Sh263.9 billion but interest expenses dropped 20.3 percent to Sh3.1 billion, boosting lending margins.

Non-interest income, including fees on transactions, rose six percent to Sh5.8 billion.