Rising revenue pushes Absa’s profit up 32 percent to Sh8.3 billion

Absa Bank Kenya has announced a 32 percent surge in net earnings, reaching Kes8.3 billion for the first half of 2023, compared to the same period last year. This growth was propelled by sustained double-digit revenue expansion across key sectors, firmly positioning the bank as a robust player in Kenya’s financial landscape.

The half-year results, unveiled during an investor and media briefing, underscore the Nairobi Securities Exchange-Listed bank’s commitment to supporting economic growth and recovery within Kenya, particularly focusing on Small and Medium Enterprises (SMEs).

As part of their new strategy, the bank experienced a 22 percent surge in loans and advances to Kes317.9 billion contributing to a dynamic shift in the economic landscape.

Absa Bank assets

A core driver of the Pan-African bank’s financial performance was the sustained quality income mix, marked by a strong and high-quality balance sheet. The bank’s asset base displayed an upward trajectory, surging by 13 percent to Kes504 billion, maintaining its position above the half-trillion mark. At the same time, revenue saw an impressive 31 percent increase, hitting Kes27.4 billion, with net interest income surging by 33 percent to Kes19.2 billion.

This growth was complemented by a 26 percent rise in non-funded income, reaching Kes8.1 billion, attributed to the successful diversification of revenue streams. Further, strong growth was witnessed in forex income, fees and commissions, Asset Management, Bancassurance, and stock brokerage, reflecting the lender’s multi-faceted approach to income generation.

Customer deposits grew by 18 percent to Kes333 billion, providing ample room for further balance-sheet expansion. Operating expenses experienced a 15 percent increase due to strategic new hires aimed at driving business growth, showcasing the bank’s dedication to both enhancing its workforce and expanding its market share.

Mr. Abdi Mohamed, Managing Director of Absa Bank Kenya, emphasized the bank’s resilience and commitment to aiding customer growth in an unpredictable business environment.

He stated, “Absa is at a critical point of a transformative era, with our new strategy presenting an all-round approach towards delivering enhanced social and economic transformation in the societies in which we operate.”

Following improved performance, the Board approved an interim dividend payment of Kes0.20 per share, amounting to Kes1.086 billion, for the six-month period.

During the half, the bank accelerated its innovation agenda, launching Mobi-Tap, a novel payment solution enabling small businesses to accept secure card-based payments via mobile phones. The Absa Buy Now Pay Later initiative was also introduced, offering customers the flexibility to manage expenses by spreading the cost of purchases over time. Additionally, the Wezesha Biashara proposition continues to empower SMEs by providing both financial and non-financial support.

Read also: In a first, Absa credit card offers buy now, pay later options

Improving lives and livelihoods

Furthermore, the bank reinforced its connection with customers through various brand initiatives, including the Magical Kenya Open Golf Tournament and Absa Kip Keino Athletics Championships. Strategic community investments were also initiated, aligning with the bank’s commitment to improving lives and livelihoods.

Other highlights from the half-year results included an impressive efficiency drive, as the bank’s operating expenses increased by 15 percent while managing to improve its cost-to-income ratio to 37 percent, a remarkable improvement from 42 percent during the same period last year.

Additionally, despite a 74 percent increase in impairment, the bank maintained portfolio quality above industry standards, demonstrating prudent risk management.

Capital and liquidity remained robust, with the bank’s total capital adequacy ratio closing at 17.7 percent and liquidity reserve position at 28.7 percent, both surpassing regulatory requirements of 14.5 percent and 20 percent, respectively.

Mr. Mohamed expressed confidence in the bank’s strategy, stating, “The strong H1 performance gives us confidence that our strategy is delivering the desired results both for our customers and shareholders.”

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