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Absa profit jumps 833pc to Sh5.6 billion

BUSINESS
By Dominic Omondi | August 27th 2021
From left, Absa Country Director Moses Muthui, Managing Director Jeremy Awori and Anthony Mwithiga during the launch of WhatsApp banking. [Wilberforce Okwiri, Standard]

Absa Kenya’s profitability in the first half of this year grew more than nine-fold to Sh5.6 billion on increased repayment and aggressive cost management including retrenchments.

In the first six months of 2020, the lender recorded a profit after tax of Sh600 million as it set aside a huge chunk of its revenues as insurance against possible loan defaults.

Like other banks, Absa's stock of restructured loans dropped by 93 per cent to Sh3.8 billion in the period under review, from Sh59 billion in the first half of last year.

This unlocked liquidity with the listed lender’s loan-loss provisions or default charge fees declining by 64 per cent to Sh1.9 billion.

By the end of June last year, the bank had set aside Sh5.4 billion as insurance against possible loan defaults as job and pay cuts pushed a lot of borrowers to request for debt repayment moratorium.

Absa Kenya Managing Director Jeremy Awori said the bank is “cautiously optimistic” the favourable business environment will hold to the end of the year, a situation that might see the board return to dividend-paying after a one-year hiatus.

“We are now moving from a psychological space where everyone was locked down. As that confidence will come back, more people will invest in their businesses and they will start hiring,” said Awori in a press briefing yesterday.

He observed that as Covid-19 raged on last year and little of the viral disease known, capitalisation preservation was a priority. “But now we have gone through that. If the bank does well, then we would like to give dividend.”

However, revenues did not contribute significantly to this profitability with the lender’s net interest income growing to Sh12 billion in the period under review from Sh11.3 billion in the same period last year.

Non-funded income went up to Sh5.8 billion compared to Sh5.5 billion. However, the lender was able to manage its costs which marginally went down from Sh8.2 billion to Sh8 billion due to increased automation.

The bank which last year cut its staff number to 1,991 from 2,152 also reduced its payroll expenses in the period under review. Staff costs went down from Sh5 billion in the first six months of 2020 to Sh4.4 billion following a reduction in staff. Rental cost also went down to Sh467 million from Sh708 million.

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