Absa Bank Kenya PLC has reported a strong growth in profit after tax to Kshs.8.2 billion for the period ending 30 September 2021 compared to a similar period last year.
Growth in interest income, notably in the small and medium enterprise segment, drove the bank’s solid performance as it stepped up its efforts to help these businesses recover from the pandemic’s effects and reposition for growth.
While announcing the results, Absa Bank Kenya Managing Director Jeremy Awori attributed the bank’s performance to the strengthening macro-economic environment, quality of credit and resilience in customer operations.
Despite the negative economic effects of the pandemic, all business units remained profitable, registering growth on key lines.
Total income increased by 7% to Kshs.27.3 billion, primarily due to higher interest income, which increased by 9% year on year due to increased lending.
This was however partially offset by margin compression as a result of drops in Central Bank Rate (CBR) whose benefits the bank passed to customers as a responsible lender. Non-funded income grew by 5% as a result of our new innovations and digitization, while costs fell by 3% year over year.
Net customer loans increased by 9% to Kshs.229 billion, owing to robust year-on-year growth in key core products such as general lending, trade loans, mortgages, and scheme loans. Customer deposits increased by 9% to Kshs.269 billion, with transactional accounts accounting for 69% of the total deposit book.
“The pandemic and its negative effects continue to persist, but we have drawn inspiration from our customers to rise above the storm and continue working together to keep the wheels of our economy turning. We are optimistic that we shall make good our commitment to continue innovating and enhancing our customers’ banking experience,” Mr Awori added.
In line with our commitment to continue enhancing our customer experience, we upgraded our Timiza App making it more interactive and significantly reducing the customer journey and consequently, transaction time. We also introduced a goal-based saving feature where our customers can set their saving target at a certain amount and track their progress.
Partnerships are becoming increasingly important in ensuring relevance, creating purpose, and providing returns and customer value in an increasingly complex business environment. One of our main collaborations is in Agency Banking, where we teamed up with Postbank and Kenswitch to help us deliver Agency Banking and ATMs, respectively, expanding our reach and propelling our quest for inclusive financing. Furthermore, as a responsible partner to our clients, we played a leading role in the recently concluded historic Kshs.11 billion medium-term note to EABL, cementing our ambition of being a powerful Corporate and Investment Bank business in East Africa.
As part of our ongoing commitment to innovation, we have added a new feature to our internet and mobile banking platforms that allows customers to view and manage their frequently used debit card functionalities online. These include temporary card freezing and unfreezing, card replacement, PIN setting and resetting, and card withdrawal limit management.
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The bank’s costs were well managed, coming in at Kshs.12 billion, down 3% year on year due to spend discipline and cost initiatives, which built on previous periods of underlying cost savings. Automation of the processing center and continuing movement of consumer transactions to alternative channels were among the cost-cutting strategies. The savings were used towards long-term investments, particularly in automation and digitization. The firm’s efficiency ratio improved to 44 % of in Q3 2021, down from 49% in the third quarter of 2020.
Impairment decreased by 55% compared to similar period last year reflecting an improving macroeconomic environment for our business and our customers. The bank’s average loan loss ratio reduced to 2.0% (4.9% in Q3 2020).
Capital & Liquidity
Our capital and liquidity ratios remain strong with sufficient headroom above the regulatory requirement. The bank total capital adequacy ratio closed the third quarter of 2021 at 17.3% and liquidity reserve position at 39.7% against the regulatory limits of 14.5% and 20% respectively.
We have been working hard alongside our clients in preparation for a world beyond the pandemic and a more stable economic environment. Our business remains very well positioned to help our customers reposition for recovery. Our capital and liquidity levels are solid to navigate the coming quarters and we are seeing opportunities for growth in our balance sheet with recovery in revenue growth and profits expected. We are confident, at this point in time, to resume payment of dividend at the full year 2021.
The bank will continue investing in digital transformation in order to grow and improve customer experience.