Absa Bank profit drops 66% on Covid, transition costs

Absa Bank profit drops 66% on Covid, transition costs

Absa Bank Kenya PLC managing director Jeremy Awori celebrates with staff at the Sarit Centre branch during the official unveiling of the Absa brand in Kenya on February 10 Absa Bank Kenya is the latest listed lender to report a massive profit drop in the year to September, as net earnings sink by 66.1 per cent.

The Group’s profit after tax for the period dropped to Sh1.9 billion compared to Sh5.6 billion same period last year, amid a high loan loss provision during the period, where the value of Non-Performing Loans increased to 14.3 billion compared to Sh10.9 billion last year.

Management attributed the drop in profit to growth in impairment in light of the higher credit risk due to the economic effects of the Covid-19 pandemic and guided by the IFRS standards.

"We have taken high provisions to position for future potential deterioration in the macro-economic environment," it said in a financial statement.

During the period, the bank offered loan relief and restructures totalling Sh63 billion to customers, equivalent to 30 per cent of net customer loans and advances which grew 7.8 per cent to Sh209.3 billion.

"As a responsible lender, we passed the benefits of the reduction in CBR to our customers to give them the much-needed relief in this period," Awori notes.

Transition from Barclays also ate into the lender’s earnings with Sh1.9 billion being reported as an exceptional item, relating to the cost incurred in the transition project.

"The Bank will continue upgrading to more advanced systems, which will ultimately help enhance the service experience," the lender said in its financials through the Nairobi Securities Exchange.

During the period, interest income grew to Sh23.2 billion, driven mainly by returns in investment on government securities and loans and advances to customers.

Earnings from the securities grew 9.8 per cent to Sh6.7 billion compared to Sh6.1 billion same period last year.

Interest from loans however recorded a slight drop to Sh16.4 billion from Sh16.5 billion.Total operating expenses grew to Sh20.1 billion from Sh15.7 billion, mainly on a high loan loss provision and staff costs.Its assets closed the period at Sh387.9 billion, a growth from Sh381.5 billion last year."Our financial performance is a testament of our resilience and sustainable performance into the future," management notes.Other tier-1 listed lenders that have reported drop in profits include Equity Bank Group, whose net earnings for nine months to September fell by 14 per cent.The bank’s profit after tax dropped to Sh15 […]

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