Barclays to shoulder costs of rebranding

A man walks past the Barclays bank market branch along Muindi Mbingu Street in Kenya's capital Nairobi. [REUTERS]

Barclays Bank of Kenya expects a significant expense in rebranding to Absa and will ring-fence the one-off cost to guard shareholder returns.

Chief Financial Officer Yusuf Omari said the separation cost, which would include branding of property, signage and systems changes, would be handled separately and will have no impact on dividends.

“It is too early for numbers but it will be moving systems, investing in intangible assets and renegotiations with different vendors,” he said.

BBK, which posted a 6.2 per cent growth in net profit for the six months to June - Sh3.76 billion from Sh3.54 billion - said it would gradually embark on changing its brand this year.

The bank needs to rebrand after Absa bought a majority stake in Barclays Africa Group, which held the lender’s operations on the continent.

BBK recently trimmed its workers by five per cent, which helped it cut staff costs from Sh1.713 billion to Sh1.313 billion in the half-year.

Investment in digital channels moved transactions away from the branches, seven of which were closed.

Chief Executive Jeremy Awori said the launch of mobile lending application Timiza increased customer recruitment by two million in the first four months alone.

Mobile money

“About 68 per cent of transactions are no longer in branches, up from 65 per cent. Since we rolled out mobile money we have seen a change in our age profile from an average of 45 years to 30 years,” he said.

Bad loans, however, led to higher impairment costs from Sh1.3 billion in June 2017 to Sh1.7 billion this year.

The lender booked this on increased recognition of bad loans under the International Financial Reporting Standard, IFRS9, which took effect in January. It requires booking of distressed loans for periods as short as 30 days.

Mr Awori said this had spiked the administration of the loans and required reporting to credit reference bureaus even where non-payment is due to delays in remitting between banks.

BBK’s stock of bad loans stood at Sh14.3 billion by June this year from Sh11.9 billion in a similar period last year.