Interest income grew by 8 percent to Sh31.9 billion due to increased lending to small and medium enterprises recovering from the Covid-19 pandemic.
Total income from all business units rose by 7 percent to Sh36.9 billion.
Absa Bank Kenya has reinstated dividends, announcing a payout of Sh1.1 per share for the year ended December when its net profit rose 161 percent to Sh10.8 billion.
The dividend, totaling to Sh5.9 billion, will be paid on May 26 to shareholders on the April 25 register.
“Return on equity has materially recovered to 19 percent and we are pleased to resume dividend payment demonstrating recovery of our business and strength of our capital. The board has recommended dividend per share payment of Sh1.1 which is at the same level as 2019,” the bank said in a statement.
Absa suspended dividends for the previous financial year after its net earnings dropped 43.8 percent to Sh4.1 billion, driven by higher loan loss provision and exceptional items.
The bank’s strong earnings growth in the year ended December was largely driven by lower costs including reduced credit impairment and the absence of rebranding costs.
Absa’s loan loss provision shrunk by Sh4.3 billion to Sh4.7 billion, contributing to total operating expenses contracting by the same scale to Sh21.3 billion.
The reduced provisions came despite the stock of loan defaults rising by Sh2.7 billion to Sh19.8 billion, indicating the relatively more optimistic outlook banks have adopted compared to the prior year when the economic fallout from the Covid-19 pandemic was worse.
Absa also benefitted from the absence of costs of separation from its former parent firm Barclays Plc including rebranding to reflect its new majority ownership by South Africa’s Absa Group.
The Nairobi Securities Exchange-listed firm had incurred separation costs of Sh3.2 billion in the prior year.
The bank’s total interest income rose by a marginal 1.9 percent to Sh32 billion, indicating reduced yields on loans and other financial assets.
The loan book expanded 12.1 percent to Sh234.2 billion while investment in fixed income government securities increased 5.1 percent to Sh132.5 billion.
Absa’s interest expenses shrunk by Sh1.2 billion to Sh6.7 billion despite customer deposits rising by Sh15 billion to Sh268.7 billion.
Non-interest income rose 4.7 percent to Sh11.6 billion, contributing to the bottom-line.
Absa’s reinstatement of dividends adds to the list of banks that have either resumed or enhanced cash distributions to shareholders on the back of a surge in earnings.
Standard Chartered Bank Kenya is set to pay a record dividend of Sh7.1 billion or Sh19 per share for the year ended December when its net income rose by two-thirds to Sh9 billion.
Stanbic Holdings more than doubled its dividend payout for the review period to Sh9 per share or a total of Sh4.2 billion after its net profit jumped 38.8 percent to Sh7.2 billion.
