Absa Bank profits jump 12.9pc on higher loans earnings – Business Daily
Absa Kenya head office in Westlands, Nairobi. FILE PHOTO | NMG
Absa Bank half year net profits increased 12.9 percent to Sh6.3 billion on higher yields from loans and advances as the bank adjusted to prevailing lending rates and increased lending to private sector.
The lender’s profits grew from Sh5.6 billion in a similar period last year as the lenders loan book increased by Sh44 billion to Sh262 billion.
The lender says its average yield have risen to 10.4 per cent from 9.5 per cent last year as the Central Bank of Kenya bumped up the Central Bank Rate by fifty basis points to 7.5 percent.
The higher rates and increase in lending pushed up the banks’ interest income 21 percent to Sh14 billion.
“The average yield has gone up by about a hundred basis points which means revenue has picked up in line with the yields. We have also seen quite a vibrant business environment and our balance sheet has continued to pick up on loans to the private sector,” Barclays Chief Finance officer Yusuf Omari said.
Banks are turning to private sector lending with government borrowing losing luster with increase in Central Bank rates that devalues bond portfolios.
Absa Bank says its diversified loan portfolio has allowed it to increase lending while balancing risk.
The lender has also seen a 10 percent increase in non-funded income to Sh6.4 billion on higher returns ate the foreign currency market that saw a surge in volumes and margins.
Non-interest income also came from the lenders Bancassurance arm, service and account maintenance fees as customers increase deposits 7 per cent to Sh281.6 billion.
The lender’s Ceo Jeremy Awori says it plans to further diversify revenues by increasing investment in areas it has limited presence including asset management, consumer payments, custody business and investment banking with an eye on advisory, mergers and acquisition.
“We are looking to increase our presence and commercialize new business to get into banking tools where we are limited and focusing on key areas of strategic opportunities,” Mr Awori said.
Mr Awori said the lender has been aggressive on its growth into a customer-centric lender and hired over 200 workers in sales and marketing roles.
Higher staffing however pushed up the lenders costs that jumped 11 per cent to Sh8.8 billion.
Absa Bank’s loan loss provision costs also jumped 52 percent from Sh1.9 billion to Sh2.9 billion on forward looking standards requirements and reversal of the huge provisioning cuts done in a similar period last year.
The lender’s dud loans rose from Sh18.3 billion to Sh19.7 billion reflecting the tough macroeconomic environment that has hit lenders asset quality.
