Oral East AfricaAbsa Bank Kenya profits grew net profits 19.5 percent Kes14.7 billion in the nine months to September on strong loan income and keeping costs low on slower deposit growth
Absa Bank profits rose from Kes12.3 billion in a similar period last year with strong growth in interest income despite a decline in loan book in line with industry trend that has seen private sector credit decline.
Customer loans and advances closed the quarter at Kes311 billion, bringing up interest income from Kes31.6 billion to Kes40.5 billion as the lender sweated assets and found cheaper ways of deploying loans through digital channels.
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“This strong outcome demonstrates the effectiveness of the Bank’s growth strategy and its dedication to providing both financial and non-financial solutions that address the diverse needs of individuals, businesses, and communities. As we look ahead, we are confident that with prudent management, we can leverage these opportunities and continue to support our customers’ and other stakeholders’ ambitions, consequently driving our own growth,” Abdi Mohamed, Managing Director and CEO of Absa Bank Kenya, said.
Diversification
The Absa Bank boss said this growth in revenue highlights both the solidity of legacy revenue streams and the rapid expansion of new income sources, including asset management and brokerage.
Mr Mohamed stated the Bank would continue to diversify its revenue sources by enhancing payment solutions, improving customer experiences, and promoting financial inclusion through digital finance, affordable housing, and SME-oriented products such as Wezesha and Microinsurance.
In the review period, the Bank expanded its service touchpoints, increasing its agency network from 600 to over 3,000 locations. Additionally, Absa remains committed to empowering small enterprises and women-led businesses by offering vital non-financial solutions, positively impacting over 14,000 entrepreneurs in navigating the current economic landscape.
To further enhance customer value, Absa enhanced its La-Riba service to provide innovative Sharia-compliant solutions while reinforcing its Wezesha Stock platform for SMEs. Additionally, the Bank accelerated the ongoing implementation of a Kes3 billion technology upgrade strategy to strengthen its core banking and back-office systems.
Costly deposits
Absa Bank said underpinning the improved performance is the Bank’s focused efforts to providing access to finance, and is on track toward becoming a holistic, modern financial services provider, meeting the evolving needs of our customers through innovation and strategic partnerships.
The lender saw customer deposits decrease marginally to Kes352 billion, which contained the growth in interest expense to Kes13.3 billion.
Kenyan banks have seen a sharp rise in cost of money as lenders, the sovereign and alternative asset classes compete for savings in a high interest rate environment.
Absa Bank cost containment strategies helped reduce the lenders cost to income ratio to 37.8 percent with this improvement resulting in total revenue growth outpacing costs, aided by an improving rate environment.
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