Barclays Kenya posted a 12 percent jump in profits before taxes from Sh2.5 billion in the first three months of 2018 to Sh2.9 billion in the first quarter of this year attributed to a 3 percent growth in total income and a 3 percent drop in costs.
While other lenders have preferred reducing interest expense meaning paying less for deposits held, Barclays actually increased expenses on deposits from Sh1.2 billion to Sh1.7 billion, but it is the sustained strong momentum in 2018 that awarded a 16 percent jump in deposits to Sh223 billion. This is despite transactional accounts constituting 66 percent of the total deposits.
Cost saving initiatives included automation of processing centers, investment in alternative channels and branch rationalization programmes.
Barclays cut on rental charges from Sh279 million to Sh148 million, staff rationalization also saw cost come down from Sh2.7 billion to Sh2.3 billion as it moved digitally cutting off paperwork.
Loans to customers grew in line with loans to the state earning the lender interest income which grew from Sh6.9 billion to Sh7.4 billion while interest expenses declined from Sh5.4 billion to Sh5.3 billion.
Net customer loans and advances grew by 9 percent to close at Sh180 billion while investments in government securities and trading increased by 38 percent to Sh117 billion.
Barclays raised enough profits to meet the additional costs of rebranding in the short run. However, Absa Group will provide capital to mitigate impacts on capital and cash flow from the increase in the separation spend.
Over 2016 and 2017, Barclays Plc reduced its shareholding in Absa Group Limited from 62.3 percent to 14.9 percent which will require the Kenya outfit to go under the red brand of ABSA Kenya limited.
The bank says it incurred costs amounting 243 million under the ongoing transition to Absa.CEO Jeremy Awori says the transition is in progress with over 70 tech-related projects set for this year, and systems upgrades to improve customer experience
The separation from Barclays Plc will have an impact on Barclays Kenya’s financial results over the next 2 years as it spends heavily on technology and visibility.
So crucial is technology to drive robust and efficient lending, especially via mobile that it will involve investments and implementation of over 70 technology-specific projects. This will eliminate service dependency on Barclays Plc and move the bank to superior efficient, robust and customer-centric systems.
“The Separation programme will consolidate and digitize core technology services. This will significantly improve our existing solutions and enhance service delivery to our customers,” Barclays said.
Barclays Bank’s capital and liquidity ratios remained strong with sufficient headroom above the regulatory requirement; total capital adequacy ratio at 16.5 percent and liquidity reserve position at 41.1 percent against the regulatory minimums of 14.5 percent and 20 percent respectively. Read more about Barclays Q1 2019 results