Absa Kenya posts US$70.36m net profit as re-branding costs dent performance

KENYA – Absa Kenya, formerly Barclays Kenya, has posted a KSh7.45 billion (US$70.36 million) profit after tax for the year ended December 2019, despite high rebranding costs.

The profit, however, remained flat falling within the same range of the KSh7.41 billion (US$69.98 million) posted in 2018.

The bank incurred a KSh1.5 billion separation and re-branding cost as it moved away from the Barclays brand, costs which weighed down its final earnings.

Normalised profit after tax (excluding the KSh1.5 billion (US$14.17 million) exceptional item) however was KSh8.5 billion (US$80.28 million), reflecting growth in earnings in the year under review.

This was buoyed by growth in interest income from loans, government securities, and non-interest income mainly fees and commissions and foreign exchange trading.

“The separation from Barclays PLC continues to have an impact on our financial results. This includes a substantial change spend, as we invest in the systems required to be separated,” the lender noted in its full-year results.

During the period, the bank’s loan book expanded 9.8 per cent to KSh194.9 billion (US$1.84 billion) compared to KSh177.4 billion (US$1.68 billion).

Interest income from loans grew 4.6 per cent to KSh22.5 billion (US$212.5 million) from KSh21.5 billion (US$203.05 million) the previous year. Government securities earned the lender KSh8.1 billion (US$76.5 million) up from KSh7.3 billion (US$68.94 million) in 2018.

The growth in customer loans has been attributed to general lending, asset finance, mortgage and scheme loans that recorded strong growth year-on-year.

Non-interest income edged up to close at KSh10.6 billion (US$100.11 million) compared to KSh9.7 billion (US$91.6 million) a year earlier.

Total income grew from KSh31.7 billion (US$299.39 million) to KSh33.8 billion (US$319.22 million). Total assets equally grew to KSh373.9 billion (US$3.53 billion) from KSh324.8 billion (US$3.07 billion) the previous year.

“The main areas of growth were risk fees, fixed income trading and risk-managed products,” managing director Jeremy Awori said.

In the year to December, customer deposits stood at KSh237.7 billion (US$2.24 billion), up from KSh207.4 billion (US$1.96 billion) in 2018.

The listed lender completed its brand transition from Barclays to Absa in February this year, delivered 100 percent on separation projects including successfully migrating all technology systems that were previously hosted in Barclays UK.

Jeremy Awori said the lender expects a growth in loan book propelled by government’ move to boost advances to individuals and businesses amid the Covid-19 pandemic.

“It is no doubt that Covid-19 will have a far-reaching impact on the economy. We are still creating an agile strategy with the industry and government, and we expect the NPLS to grow as businesses’ working capital worsen in the next two to three months,” Mr Awori said.

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