Absa Bank Kenya is set to pay out a record dividend of Sh8.4 billion after its net profit for the year ended December rose 12.2 percent to Sh16.3 billion.
The lender on Monday declared a final dividend of Sh1.35 per share, adding to an interim payout of 20 cents per share paid in October last year, taking the total to a new record of Sh1.55 per share.
This represents a 14.8 percent increase from the total distribution of Sh1.35 per share (Sh7.3 billion) for the previous financial year. The new dividend will be paid on May 23 to shareholders on the register as of April 30.
Despite the higher payout, Absa's share price fell 1.79 percent to close at Sh13.75 at the Nairobi Securities Exchange (NSE) on Monday, indicating that investors had higher expectations.
The stock had rallied recently to reach a new 52-week high of Sh14.3 on Friday last week.
Absa joins its peer Standard Chartered Bank Kenya in setting a record dividend after the latter declared a total payout of Sh29 per share last week, marking a 31.8 percent increase from the Sh22 per share distribution for the prior year.
Absa's earnings growth was supported by higher income from lending, further buttressed by a jump in non-interest income.
Total interest income increased to Sh54.2 billion from Sh40.8 billion, driven by income from loans to customers as earnings from investment in government securities declined.
The bank benefitted from the repricing of loans amid rising interest rates. The loan book also expanded to Sh335.7 billion from Sh283.5 billion, helping to raise the interest income.
Meanwhile, non-interest income grew by 6.6 percent to Sh14.5 billion on higher fees and commissions.
Absa’s management has credited the improved performance to the delivery of a new strategy anchored on business diversification which has seen the bank grow its non-lending related revenues to about 20 percent of total income.
“From the onset, we decided that we wanted a one-stop shop or service center for our clients where they will not have to transfer their funds to another bank over the lack of a particular service,” Absa's Chief Finance Officer Yusuf Omari said Monday.
The bank has revamped its bancassurance and asset management business while returning to custodial services in a move to diversify revenues away from just lending.
The lender's total operating expenses however picked up in the period reaching Sh30.8 billion from Sh25.1 billion from an increase in loan loss provisioning.
Absa topped up its cover for expected credit losses to Sh9.2 billion from Sh6.4 billion as gross defaults edged higher to Sh35.2 billion from Sh22.5 billion.
Absa Bank Kenya Managing Director Abdi Mohamed expects the bank’s profitable run to continue anchored on the successes of its new business lines.
“We see continued momentum in our revenues having crossed the Sh50 billion mark for the first time. Our NPL (non-performing loans) ratio remains in the single digits and well below the industry’s average despite the uptick in non-performing loans,” he said.
