Absa profit jumps 15 percent on lending

Absa Bank Kenya reported a 14.8 percent growth in net profit in the nine months to September, driven by a growth in interest income from loans.

The lender’s earnings in the period under review stood at Sh12.3 billion from Sh10.7 billion a year earlier.

Absa’s total interest income rose 33.4 percent to Sh39.1 billion from Sh29.3 billion, largely due to income from loans and advances to customers.

The Nairobi Securities Exchange-listed lender’s loan book grew to Sh330.9 billion from Sh289.4 billion.

Lenders are benefiting from rising interest rates, a move that has seen them set higher base lending rates compared to last year. “The bank reported a 14.8 percent year-on-year growth in profit after tax to Sh12.3 billion, improving our return on equity to 25.2 percent,” said Absa in a statement.

The lender’s non-interest income grew marginally to Sh10.8 billion from Sh10.1 billion, contributing to the profit jump. Total operating income increased 20 percent to Sh40.1 billion from Sh33.4 billion.

“The bank’s transformation and diversification agenda has resulted in the resilience of operations and created a diversified revenue pool,” said the bank.

Read: Absa unveils unsecured working capital loan for SMEs

“New business lines such as asset management, digital finance, bancassurance and stock brokerage delivered double-digit growth, positively contributing to the strong performance. As such, non-interest income grew by six percent year-on-year to Sh10.8 billion.”

Absa’s operating expenses grew 21.8 percent from Sh18.3 billion to Sh22.3 billion during the period.

This was attributed to higher loan loss provision from Sh5.03 billion to Sh6.76 billion and staff costs, which rose to Sh8.6 billion from Sh7.4 billion.

The listed lender significantly cut its holdings of government debt instruments, joining others like Standard Chartered Bank Kenya that have made similar moves in search of higher returns in lending to ordinary customers.

Absa reduced its holdings of government securities held for trading to Sh28.9 billion from Sh47.6 billion.

It also cut its portfolio of securities held to maturity from Sh92.1 billion to Sh76.6 billion.

Read: Absa first-quarter profit rises 51 percent to Sh4.5 billion

The bank announced a Sh100 billion financing for micro, small and medium-sized enterprises (MSMEs).

“We have reaffirmed our commitment to the MSMEs through a Sh100 billion funding commitment to spur the sectors’ development across various value chains over the next three years…we have introduced the Wezesha Stock digital platform to avail financing for retailers and distributors as we continue to provide our SME customers access to both financial and non-financial services,” said Absa in the statement.

Wezesha Stock is an app-based solution by the lender that merges e-commerce and digital financing for SME clients to order new supplies via the platform as Absa pays the respective manufacturers and suppliers directly.

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