Absa declares dividend as net earnings rise 13 percent to Sh6.3 billion
Absa Bank financial results for the half-year ended June made the most of rising interest rates and intensive lending to the private sector as the lender’s net profits for the period shot up 13 percent to Kes6.3 billion from Kes5.6 billion in a similar period last year.
Absa reported a 0.9 percent uptick in its average yield from 9.5 percent last year to 10.4 percent on the back of interest rate hikes by the Central Bank of Kenya which revised how the lender could charge for loans.
The higher rates and revived loan demand shored up the bank’s interest income 21 percent to Kes14 billion as the loan book gained Kes 44 billion to close the half at Kes262 billion.
Absa Bank Kenya CEO Jeremy Awori said: “We are pleased with this performance, which reflects our customers’ resilience and tenacity. It also validates the relevance of our brand to our customers’ needs and demonstrates the role we continue to play in enabling our customers to participate rightfully in the economic development of our nation.”
The period also saw the enhanced investment in the Bank’s innovation and transformation agenda, resulting in the launch of the instant online account opening platform as well as the introduction of Cash Deposit Machines across the country.
Other transformation initiatives included the expansion of the agency banking platform, with over 655 Absa outlets commissioned.
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Absa Group Chief Financial Officer Yusuf Omari said, “the average yield has gone up by about a hundred basis points which means revenue has picked up in line with the yields.”
He added Absa‘s balance sheet has continued to pick up on loans to the private sector as escalating inflation impairs the appeal of lending to the government.
The lender’s non-interest income surged 10 percent to Kes6.4 billion helped by a boom in the foreign currency market which posted higher volumes and margins.
Bancassurance, service and account maintenance fees also expanded the non-funded income as customer deposits increased 7 percent to Kes282 billion.
Operational costs for the bank ballooned 11 percent to Kes8.8 billion primarily due to workforce expansion.
Expenses related to loan losses also increased by Kes1 billion to Kes2.9 billion as non-performing loans rose to Kes19.7 billion to reflect challenging market conditions.
“We remain cognizant of the challenges and opportunities presented by our operating environment, which is characterised by rising inflation due to high fuel and food prices, geopolitical instabilities which are negatively impacting the local economy, as well as the government transition process that is currently underway,” Mr Awori said.