Barclays registers flat quarterly growth as transition to ABSA hits earnings

Barclays Bank Kenya (BBK) has announced a flat Ksh.1.9 billion growth in quarterly earnings to March 31, 2019, this as the lender’s transition into the new ABSA outfit eats into earnings.

The bank for instance incurred an additional Ksh.243 million over the quarter taking its total transition costs to date to Ksh.517 million.

The additional costs which make for an exception to the traditional lender’s profit and loss disclosure comprise of investments in new banking systems and transitional service agreement costs for the provision of various services under the impending separation.

“In 2019, the bank’s separation program will involve immense investments and implementation of over 70 technology-specific projects, which will further eliminate service dependency on Barclays Plc and move the bank to superior efficient, robust and customer centered systems. I am happy to report that all technology changes achieved so far have been implemented with minimal impacts on our customer,” noted Barclays Kenya Managing Director Jeremy Awori.

While the separation costs ate into year to date earnings for the bank, the lender’s other performance indicators remained on course for growth represented largely in the rise of both interest and non-interest funded income.

Barclay’s total interest income was for instance up by 7.2 percent over the quarter as the lender’s investments in government’s treasury instruments increased rapidly to Ksh.1.94 billion in the first three months against a reported Ksh.1.8 billion in the preceding period.

Non-interest funded income meanwhile soared by 13 percent to Ksh.2.6 billion to signify growth in the lender’s fee and commission based revenue.

Further, the bank’s operating expenses remained muted over the quarter easing by 2 percent to Ksh.4.9 billion in spite of a sharp hike to the depreciation of property and equipment.

The separation costs are expected to feature as a recurring theme in the lender’s financial reporting over the next two years, this as Barclays Kenya incurs extra costs to its separation from its mother company.

“The normalization concept is adopted to show the underlying performance of the bank after adjusting for one-off separation costs. This includes a substantial change in spend as we invest in systems required to be separated, the transitional service agreements costs we pay to Barclays Plc for the provision of various services during the separation period together with the costs that we shall incur for rebranding,” added Mr. Awori.

The separation of Barclay’s Kenya from its parent UK Company is expected to also feature the lender’s transition into the red ABSA ticker by June 2020.

The detachment from Barclays Plc was triggered back in 2017, following the reduction of the entity’s shareholding in its African subsidiary- the Absa Group Limited from a majority 62.3 percent.

Barclay’s Plc reduced its shareholding to 14.9 percent in the transaction to effectively pass the buck of control to the ABSA Group which has its headquarters in South Africa.

From the separation, the sees the opportunity to transform into a more scalable and digitally-led bank having already launched products such a Timiza– a mobile-based loan application for micro,small and medium enterprises (MSMEs)