Over the past few years, the Central Bank of Kenya has been laying plans to have commercial banks raise their minimum capital tenfold to Sh. 10 billion. The increase in capital base is seen as essential for financial sector stability and is normally expected to lead to cost reductions from economies of scale.
The new minimum capital will put Kenya’s banking sector at par with South Africa, Nigeria, and Egypt which have a minimum capital base of more than Sh. 10 billion. South Africa currently has a minimum of Sh. 11.5 billion, Nigeria Sh. 43 billion and Egypt Sh. 13.4 billion.
Local banks have been taking position to consolidate above the threshold. Take Absa Bank Kenya, which recently announced a 28.9 per cent net profit growth to Sh. 10.7 billion.
A spot check on Absa Bank Kenya’s recent financials by Bizna Kenya reveals a strong capital growth trend.
In the first half of 2024, Absa Bank Kenya remained capitalized with a core capital to risk-weighted assets ratio of 14.8 per cent. This was 4.3 per cent points above the statutory requirement of 10.5 per cent. In the previous year 2023, the bank had closed the first six months with a core capital of 13.5 per cent.
In addition, the total capital to risk-weighted assets ratio came in at 18.6 per cent exceeding the statutory requirement of 14.5 per cent by 4.1 percentage points. In the same period the previous year, total capital ratio had stood at 17.7 per cent.
Liquidity ratio came in at 35.2 per cent which was 15.2 percentage points above the regulatory minimum. In the first half of 2023, this stood at 28.7 per cent.
Absa Bank Kenya half year net profit rises 29 per cent to Sh. 10.7 billion
In the same vein, the bank’s shareholder funds are on a consistent march towards the Sh. 100 billion mega milestone.
As at the end of the first half of 2023 ended on June 30, 2023, shareholder funds stood at Sh. 60.4 billion. By the end of the previous financial full year that concluded on December 31, 2023, the shareholder funds had grown by Sh. 5 billion to Sh. 65.4 billion.
By the end of the first half of the current financial year, Absa Bank Kenya’s shareholder funds stood at Sh. 69 billion. This points to an average growth in shareholder funds of about Sh. 5 billion every six months.
Interestingly, these funds have grown in tandem with the rising number of customers that the bank is attracting.
“We have recorded growth in a dynamic environment and we continue to invest in our technology, brand and people to ensure that our performance remains sustainable into the future,” says Absa Bank Kenya Chief Executive Officer and Managing Director Abdi Mohamed.
For instance, as at the end of December 2023, Absa had 1,047,422 customers. In the previous financial year ended December 2022, the number of customers stood at 917,507.
Mr. Mohamed takes note of the bank’s growth in a dynamic and fast-evolving local economy. “We have been able to provide support beyond financials and are committed to becoming a sustainable financial services company that addresses the evolving needs of a modern-day consumer through innovation and strong partnerships,” he adds.
