Pan-African lender Absa Bank Kenya has reported a 29 percent surge in net earnings to Kes10.7 billion for the six months ending June 30, 2024, attributable to an increase in revenue.

In the half, Absa saw total revenues increase by 16 percent to close at Kes31.8 billion, with funded income accounting for the lion's share at Kes23 billion.

"The board of directors has approved the payment of an interim dividend for the year 2024 of Kes0.20 per ordinary share of the company to be paid on or about Tuesday, 15th October 2024 to shareholders registered as at close of business on Friday, 20th September 2024," Absa Bank CEO Abdi Mohamed said during the release of half-year performance in Nairobi.

He added, “This commendable outcome, realized amidst a challenging macro-economic environment, underscores the efficacy of the Bank's growth strategy and its unwavering dedication to providing relevant financial solutions that address the diverse needs of individuals, enterprises, and communities because we want to continue being a critical enabler to their growth stories."

Headwinds: High interest rate regime

Key headwinds for businesses in the first half were spiraling geopolitical conflict in the Middle East that negatively impacted the global supply chain. At the same time, interest rates in the US and the Eurozone area remained high, leaving businesses struggling with expensive credit.

Additionally, the bank highlighted Kenya suffered two downgrades by rating agencies Fitch and Moody's dampening the nation's outlook even as consumer purchasing power remained constrained.

Disclosures show that the non-funded income stream expanded by 8.4 percent to Kes8.8 billion from Kes8.1 billion recorded in June 2023. At the same time, net interest income posted strong growth, increasing by 20 percent to Kes23 billion from Kes19.2 billion reported in June 2023.

The lender said the rise in non-funded income was as a result of its strength in legacy revenue streams as well as the robust double-digit growth from new income sources during the period. Absa Bank Kenya Chief Financial Officer said the lender’s subsidiaries, that is, securities business, asset management, and bancassurance, all registered growth in the period under focus.

Additionally, loans and advances closed at Kes316.3 billion, with the Bank booking Kes64 billion in new gross lending to critical sectors of the economy, including green financing initiatives that accounted for Kes18 billion of the total loan disbursements.

Absa Bank CEO Abdi Mohamed pointed out that in the period under review, a total of Kes12 billion was loaned to startups and youth-owned businesses largely through the lender's virtual platform Timiza.

Digital finance

"We are committed to becoming a sustainable financial services company that addresses the evolving needs of a modern-day consumer through innovation and strong partnerships. Our focus is on diversifying revenue streams with scalable payment solutions, enhancing customer experience, and advancing financial inclusion through digital finance, digital savings, affordable housing, and SME offerings like Wezesha and Microinsurance," Mr. Mohamed explained.

To boost women in business, Mr Mohamed said MSMEs and women-led businesses received Kes5.4 billion in loans during the half with 30 percent of the benefitting businesses being led or owned by women.

As part of its programmes in promoting women entrepreneurs in Kenya and across Africa, Absa organized a key forum in June on the sidelines of the Absa InspireMe Conference, aimed at creating new business linkages and expanding economic opportunities for women-led businesses from the continent and the United Kingdom (UK).

According to the bank, this year's Absa InspireMe Conference brought together over 10,000 women entrepreneurs in Africa.

Meanwhile, financial disclosures show that Absa Bank experienced a rise in impairments with the stock of non-performing loans increasing by 11.2 percent to Kes39.4 billion compared to the comparable half in 2023.

As a result, the bank’s loan provision for loan losses increased slightly to Kes5.17 billion from KSh5.16 billion as of June 2023.

Personal loan defaults

The bank explained that the bulk of the non-performing loans or about Kes4 billion were attributable to personal and household borrowers due to the high interest rate regime that prevailed during the period.

Other sectors that contributed to the increase in non-performing loans were manufacturing and borrowers in the real estate industry, Mr Omari noted.

To help cushion borrowers, Absa said it has restructured roughly Kes1.4 billion in loans for retail consumers impacted by tough economic times while also enhancing the provision of non-financial skills towards supporting the growth ambitions of MSMEs and Women in Business, impacting more than 14,000 entrepreneurs in the year to June 2024.

The Bank’s capital and liquidity ratios also remain strong because the Bank's total capital adequacy ratio closed the quarter at 18.6 percent and liquidity reserve position at 35.2 percent against the regulatory limits of 14.5 percent and 20 percent, respectively.

Looking forward, Mr Mohamed noted, "We are mindful of the macroeconomic challenges ahead. However, we are well positioned for growth, leveraging our strategic prudence, enhanced digital capabilities, and the dedication of our staff to support our customers and stakeholders. We remain committed to driving meaningful transformation in our communities and making a greater contribution towards economic progress in the country.”

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