Absa Bank nine month profit falls by 66 per cent

Absa Bank Kenya PLC has reported a 66.1 per cent profit wipe out in nine months to September to Ksh.1.9 billion from Ksh.5.6 billion last year.

The steep earnings decline is broadly attributable to rising costs from loan loss provisioning and ongoing transition costs which are edging to conclusion.

The lender’s operational costs picked up by 28 per cent to Ksh.20.1 billion from Ksh.15.7 billion as the bank’s cover for loan defaults grew by 245 per cent to Ksh.7.6 billion.

Meanwhile, Absa’s transition costs from the Barclays Bank brand grew by 11.8 per cent in three months to Ksh.1.9 billion from Ksh.1.7 billion in June.

Cumulatively, the higher costs grew ahead of operating income which picked up by a mere 2.4 per cent to Ksh.25.4 billion from Ksh.24.8 billion last year.

This is as net interest income hit Ksh.17.1 billion from Ksh.16.8 billion and non-interest funded income (NFI) picked up to Ksh.8.3 billion from a flat Ksh.8 billion last year.

The lender has tied the weakened earnings which have seen the entire banking sector set billions aside to cater for potential loan defaults by borrowers who now exhibit riskier credit profiles.

Absa’s stock of gross non-performing loans for instance surged by 20.8 per cent to hit Ksh.16.8 billion from Ksh.13.9 billion at the same time last year.

“The level of uncertainty relating to the COVID-19 pandemic is high and unprecedented, and its impact on markets and the global economy is profound.  The impact of the pandemic on our financial performance has become clearer in the third quarter of 2020,” the bank noted in a statement.

Absa has nevertheless expanded its balance sheet in the period with loans & advances and customer deposits hitting Ksh.209.2 billion and Ksh.246.6 billion, respectively.

From the resulting profit decline, Absa’s earning per share has shrunk to 35 cents from Ksh.1.02 last year