Absa full year profit falls by 44pc to Ksh.4.2B

Absa Bank Kenya has reported a 44 per cent decline in profit after tax for the year ended in December 2020 to Ksh.4.2 billion.

The lender’s significant profit deceleration is largely attributable to an increased cover on expected credit defaults by borrowers alongside transition costs from the Absa brand which now stand complete.

The bank’s loan loss provisions increased by more than twice at 115 per cent to total Ksh.9 billion from Ksh.4.2 billion with the COVID-19 pandemic forcing the lender to raise its buffer on unexpected credit impairments.

Meanwhile, Absa’s ongoing exceptional costs hit Ksh.3.2 billion at the end of 2020 from Ksh.1.6 billion a year earlier.

This to include the bank’s separation costs from Barclays, a process which now stands closed, re-branding expenses and costs related to a volunatary early retirement (VER) program whose details are presently undisclosed.

Nevertheless, Absa has shrugged off the tough operating environment to grow both its dual-income streams with net interest income and non-funded income (NFI) rising by one and five per cent respectively to Ksh.23.4 and Ksh.11.1 billion.

Further, Absa’s balance sheet remained in expansion with customer deposits for instance rising by 7 per cent to Ksh.254 billion

Holding off the one-off transition costs, profit after tax (normalized profit) stood at Ksh.6.5 billion representing an equivalent 23 per cent decline.

Absa Bank Kenya MD Jeremy Awori termed the performance as resilient amidst the uncertain operating environment during the year as the bank sticks to digitization to consolidate on its position.

“I think we’ve all seem extreme difficulties in 2020. We are however optimistic about the future. This is the Group’s biggest operation outside of South Africa and we are committed to growing our business and supporting our economy,” he said.

The bank restructured a total of Ksh.62 billion in the period representing reviewed payments on loans by over 59,000 accounts.

Awori says the bank will consider extending terms on loans beyond the lapsed CBK deadline as the COVID-19 crisis remains fluid.

“A number of businesses will not make it out of the pandemic. We will consider restructures where there is a strong need basis as we are keen on supporting customers in the economy,” he added.

The board of Absa has not recommended the payment of a final dividend as it keeps a cash-preservation stance in the face of uncertainty.