The change of Name from Barclays Bank to Absa Bank Kenya has led to an 85percent decline in profits for the lender.
The one-off transition costs which hit Ksh.1.7 billion this year, saw the profits dip from Ksh.3.9 billion last year to Ksh.589 million this year
Last year the costs stood at Ksh.560.8 million.
Save for the one off costs, the lender’s normalized profit stood at Ksh.1.2 billion or a corresponding 72 per cent decline year on year.
Absa’s total operating expenses meanwhile soared by 36 per cent in the period as its cost of loan-loss provisions increased by three-fold to Ksh.5.4 billion And costs associated with having to migrated its technology systems and rebranding of its assets to Absa.
The ongoing Corona virus pandemic continued to take a toll on the banking sector as gross non-performing loans (NPLs) increased to Ksh.17 billion from Ksh.15.7 billion last year.
Absa says it has restructured Ksh.57 billion worth of customer loans representing 28 percent of its advances to customers as cushioning during the pandemic.
“The world is facing one of the most difficult challenges of our lifetime, one which governments, industries, businesses and societies around the world were not sufficiently prepared for and whose full impact is yet to be understood. As management, we have taken the decision to increase credit impairment provisions to position ourselves for the uncertain future,” said Absa Bank Kenya Managing Director Jeremy AworiLoading...
“The fortunes of the banking sector follow those of its customers and the broader economy and therefore 2020 will be a tough year for the sector.”
The lender however continued to mark resilience in its comprehensive income with both interest and non-funded streams growing.
The bank registered a 2.7 percent growth in net interest income with gross earnings topping Ksh.15.3 billion while non interest funded income (NFI) rose by 3.8 percent to Ksh.5.5 billion.
More over the bank marked a balance sheet expansion with loans and customer deposits increasing by 8.1 and 8.3 percent to Ksh.201.9 billion and Ksh.248.7 billion respectively.
In spite of the tough operating environment, the bank projects continued resilience into the second half of the year.
“We expect an impact on revenue growth across the industry on the back of reduced business activity. With the proactive actions that we have taken in the first half to improve balance sheet resilience, we expect a more predictable second half,” added Mr. Awori.
The lender’s board has not declared an interim dividend in line with an industry-wide cash preservation stance with the group’s earning per share declining to 11 cents from a higher 71 cents last year.
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