Compared to a similar period last year, Absa bank has posted a thirteen per cent jump in normalised profit after tax (PAT) to Ksh 2.3 billion within the first three months of 2020.
Gains realized during this period excluded Ksh 600 million, a cost that lender incurred following the separation from Barclays PLC and subsequent transition to what is now Absa Bank, Kenya.
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The double-digit growth is attributed to an eight per cent growth in total income and a five per cent drop in operating costs.
Cost-saving measures included the automation of the processing centres, investment in alternative channels and branch rationalisation programmes.
The bank says that the savings will be diverted to further investments in automation and digitization as it continues to upgrade to more advanced systems for the sole purpose of enhancing its customers’ experiences.
But it is a sustained strong momentum since 2019 that awarded a seven per cent jump in customer deposits to Ksh 239 billion. This is despite transactional accounts constituting sixty-six per cent of the total deposits.
Loans to customers grew in line with loans to the state, earning the lender interest income which grew from Ksh 7.4 Billion to 7.6 Billion while interest expenses increased from Ksh 5.3 billion to Ksh 5.6 Billion.
During the period, net customer loans grew by twelve per cent to close at Ksh 203 billion representing a twelve per cent growth compared to a similar period last year.
Absa says that the transition program will continue to have an impact on its financials as it spends heavily on technology and visibility.
“This includes a substantial spend on modernizing our systems as well as the continued investment towards building awareness, consideration and love for the Absa brand”, reads a statement from the bank.
So crucial is technology to drive robust and efficient lending, especially via mobile that the separation program involved investments and implementation of over 70 technology-specific projects meant to move the bank to superior efficient, robust and customer-centric systems.
Absa’s capital and liquidity ratios remained strong with sufficient headroom above the regulatory requirement; total capital adequacy ratio at 16.5% and liquidity reserve position at 37.9 % against the regulatory limits of 14.5% and 20% respectively.
In the times of COVID-19, Absa says that it anticipates that most businesses, more so SMEs will not come out of the crisis smelling of roses, but it has put in place measures to mitigate the negative effects.
These include loan repayment holidays and restructuring as well as training and mentorship programmes for SME customers. The lender also waived all transaction fees on digital channels as it encourages more Kenyans to go cashless.
As the fury of the virus continues to be felt the world over, the banking industry will also feel the impact. CEO Jeremy Awori says that banks have a duty of care to protect not just depositors’ money but shareholders who also expect a return.
“If we don’t deliver returns for them we may have an unhealthy, unsafe financial industry where the whole economy will struggle,” He said.
He was speaking during a webinar session on March 26th 2020.