When all commercial banks in Kenya that are listed on the Nairobi Securities Exchange released their half year financial results, Absa Bank Kenya emerged with one of the strongest performances in the industry.
Within just six months, the bank had managed to achieve nearly a 30 per cent increase in half year net profitability. This was no ordinary fete, especially given that a majority of the listed banks had a net profitability performance of between 2.3 per cent and 17 per cent.
How did this performance by Absa come about? Bizna Kenya took a detailed look at the bank’s financials for this period. To begin with, the bank recorded a 28.9 per cent increase in half year net profit to Sh. 10.7 billion. This came in as profit before tax increased 27 per cent to Sh. 15.3 billion.
Interestingly, the bank had also recorded a stellar performance in the same period the previous year when half year net profit came in at Sh. 8.3 billion. This had been equivalent to a surge of 32 per cent from the Sh. 6.9 billion that the bank had recorded in the first half of the 2022 financial year.
In the first half of the current financial year, higher income from lending was a major contributor to the bank’s performance, with net interest income surging by 19.7 per cent. Total interest income in the six months increased from Sh. 25.2 billion to Sh. 32.6 billion. Loans and advances closed at Sh. 316.3 billion while total revenues rose 16 per cent to stand at Sh. 31.8 billion.
“This commendable outcome was realized amidst a challenging macro-economic environment. It underscores the efficacy of the Absa Bank Kenya’s growth strategy and our unwavering dedication to providing relevant financial solutions that address the diverse needs of individuals, enterprises and communities,” says Absa Bank Kenya chief executive officer Abdi Mohamed.
“We want to continue being a critical enabler of growth stories in the country even as we support local economy. We must play our role in ensuring that the Kenyan economy continues to grow.”
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Mr. Mohamed’s sentiments are echoed in the bank’s integrated annual sustainability report, in which the bank states that it adopted the strategy of pursuing scale as opposed to serving a niche customer base.
“Over the years, we have built a strong franchise that was focused on niche customers with specialized products and services that were tailored to their needs. But now our new focus will cascade our capabilities to pursue a wider breadth of customers than usual,” Absa Bank Kenya stated.
With this approach, Absa Bank Kenya saw customer deposits increase by 6.2 per cent in the first half of 2024 to Sh. 353.3 billion from the Sh. 332.5 billion that was recorded in the same period the previous year.
According to Absa Bank Kenya chief financial officer Yusuf Omari, the growth is expected to accelerate over the second half of this year. “For the second half of 2024, our main focus will continue to be short term facilities. We are extending for the retail customers short term lending of up to one-year tenors to better support their businesses and investments,” says Mr. Omari.
“We are also looking at non-funded income including subsidiaries, fees and commissions, and our custody business. We are looking at continuing on double digit revenue growth for the full year.”
Omari further notes that the bank has embraced customer primacy where the bank serves as the one stop-shop for all customers’ financial needs. “With this approach, we are aiming to guarantee that a customer who banks with us can access all types of financial services and transactions with us. This is improving our new-to-bank customer numbers every financial quarter,” he says.
This means that customers who bank at Absa will be able to access digital banking services, insurance, and savings and investments under one roof. A spot check shows that Absa currently operates more than 85 branches, 198 ATMs countrywide, up to 60 cash deposit machines, and digital banking platforms.