Absa Bank Kenya has concluded rebranding with final Sh3.2 billion one-off expense in the 2020 financials that whittled down profit.
The lender’s net profit declined 44 per cent to Sh4.2 billion in 2020 from a Sh7.5 billion in the previous year.
This was after offsetting the rebranding cost from Barclays, which positions Absa strongly for faster growth in 2021.
Despite the pandemic year, the Absa grew its top line and cut most expenses except loan loss provisions that jumped from Sh4.2 billion to Sh9 billion.
Absa bank says it had to take a hit on the cover for bad loans in light of the tough economic environment and a few clients that were adversely affected by the coronavirus pandemic.
The lender said that by taking up an additional Sh5 billion impairment they have cushioned themselves and once the economy picks up they will claw back the profits into the bottom line.
“Most of this impairment is for our performing loans, which means that we have cushioned ourselves for the future. If the economy improves, releases of some of the provisions will benefit our future profits,” Absa Kenya Managing Director Jeremy Awori said.
During this period, the bank offered loan relief and restructures totaling to over Sh62 billion to customers, equivalent to 30 per cent of its loan portfolio.
“The evolving impact of the pandemic has required us to re-visit our strategic priorities and it is clear that greater priority must be given to capital and liquidity preservation. Our focus in the last year has been to help our customers manage through the pandemic and we cushioned them through various interventions such as loan moratoriums and restructures, fee waivers for digital transactions, capacity building for SMEs and other Force for Good initiatives,” Mr Awori said.
Absa Bank Kenya Plc capital and liquidity ratios remain strong with sufficient headroom above the regulatory requirement.
The bank capital adequacy ratio is at 17.5 per cent and liquidity reserve position at 38.7 per cent against the regulatory limits of 14.5 per cent and 20 per cent respectively.
Mr Awori said their capital and liquidity levels are solid to navigate the coming quarters and they are seeing opportunities for growth in their balance sheet with recovery in revenue growth and profits expected in 2021
A stronger balance sheet will allow the lender mobilize quickly and lend when market conditions improve as the country begins batch of Covid-19 inoculation and absorb future shocks.
The economy is still reeling from the effect of Covid-19 and it’s yet to recover fully but Absa anticipating write-backs of provisions we made as the economy recovers.
However, uncertainty relating to the Covid-19 pandemic remains high and unprecedented, and its impact on markets and the global economy is already profound.