Barclays Kenya has announced flat earnings of Sh1.9 billion in the first three months of the year ended March, as costs of rebranding to Absa ate into its bottom-line.
The Nairobi Securities Exchange-listed lender’s first quarter net profit would have grown nearly 10 percent to more than Sh2 billion if it did not incur the rebranding expense of Sh243.4 million.
Barclays has disclosed it will spend billions of shillings to rebrand its branches and stationery as well as refit its IT systems as part of its separation from London-based Barclays Plc. The expenditure is expected to hit its earnings over two years.
The British multinational reduced its stake to 14.9 percent in South Africa’s Absa Group, its former subsidiary through which it owned the Kenyan bank and nine other lenders on the continent including in Botswana, Ghana, Uganda and Zambia.
Barclays Kenya #ticker:BBK has announced flat earnings of Sh1.9 billion in the first three months of the year ended March, as costs of rebranding to Absa ate into its bottom-line.
The Nairobi Securities Exchange-listed #ticker:NSE lender’s first quarter net profit would have grown nearly 10 percent to more than Sh2 billion if it did not incur the rebranding expense of Sh243.4 million.
Barclays has disclosed it will spend billions of shillings to rebrand its branches and stationery as well as refit its IT systems as part of its separation from London-based Barclays Plc. The expenditure is expected to hit its earnings over two years.
The British multinational reduced its stake to 14.9 percent in South Africa’s Absa Group, its former subsidiary through which it owned the Kenyan bank and nine other lenders on the continent including in Botswana, Ghana, Uganda and Zambia. All the institutions are now taking up the Absa brand and cutting their ties with Barclays Plc, which provided them with technical and software support, among other back office operations.
“The separation from Barclays Plc will have an impact on Barclays Kenya’s financial results over the next two years,” the Kenyan bank’s chief executive, Jeremy Awori, said in a statement.
“In this quarter, we have reported separation costs of Sh243 million; which are an exceptional item and will be incurred throughout the separation period.” Barclays benefited from higher non-interest earnings and income from lending and government debt.
Its total interest income rose 7.1 percent to Sh7.4 billion as the loan book expanded nine percent to Sh180.4 billion while investment in government bonds and T-bills increased 24 percent to Sh83.1 billion. Non-interest income including fees and commissions jumped 14 percent to Sh2.5 billion.
Interest expenses surged 38.8 percent to Sh2 billion, partly reflecting a 15.8 percent rise in customer deposits to Sh223.9 billion.
Operating expenses dropped marginally to Sh4.9 billion, serving to boost the bottom-line. Barclays raised its loan loss provision 10.6 percent to Sh636.6 million as gross defaults increased 22 percent to Sh15.4 billion.
Barclays’ chief financial officer Yusuf Omari said the lender’s parent company, Absa, is expected to help the Kenyan subsidiary absorb part of the separation costs by either providing capital or forfeiting part of its dividend entitlement.
This is designed to help the bank maintain its dividend payout to minority shareholders over the transition period. Barclays is among the generous dividend payers of the NSE listed firms, having made per share distributions of Sh1 for years before raising the payout to Sh1.1 for the year ended December.
“In 2019, the bank’s separation programme will involve immense investments and implementation of over 70 technology-specific projects, which will further eliminate service dependency on Barclays Plc and move the bank to superior, efficient, robust and customer centric systems,” Mr Awori said.
“I am happy to report that all technology changes achieved so far have been implemented with minimal impact on our customers.”
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