Absa Bank Kenya Plc CEO Jeremy Awori. The bank has announced an extension of its asset financing repayment tenor.

Absa Bank Kenya Plc on Friday reported a reduction in profitability for the half-year ended June 30, 2020, to Ksh588 million down from Ksh3.87 billion reported at the same juncture last year.

The massive decline in profits could be attributed to costs accrued through the bank’s rebranding from Barclays Bank Kenya Plc to its current shade of red. Absa’s reduction in profitability could also be attributed to the current business climate that has pegged back deposit-taking institutions to the drawing board.

Conversely, the lender’s balance sheet increased to Ksh391.11 billion in the first half of 2020 (H1,2020) from the Ksh353.8 billion posted the year before with loans and advances to customers accounting for Ksh201.9 billion of the H1 2020 amount.

The lender has also shown great awareness to forecast a rough road ahead by accounting for a loan loss provision three times more than it did in H1 2019.

Absa has accounted for a loan loss provision of Ksh5.3 billion up from Ksh1.6 billion in the anticipation that customers, in their troves will be unable to service their loans on schedule due to the economic effects of COVID-19.

“The world is facing one of the most difficult challenges of our lifetime, one which governments, industries, businesses and societies around the world were not sufficiently prepared for and whose full impact is yet to be understood. As management, we have taken the decision to increase credit impairment provisions to position ourselves for the uncertain future,” said Absa Bank Kenya Managing Director Jeremy Awori in a statement.

During the period under review, customer deposits shrank to Ksh5.6 billion from Ksh7.3 billion, an indicator of the current business climate that has ravaged all economic sectors in the country.

The group closed H1 2020 with liabilities worth Ksh348.8 billion, an uptick from the Ksh311.4 billion posted in H1 2019.

Interest income raked in during the period under review stood at Ksh15.3 billion up from Ksh15.1 billion. This revenue stream was lifted by interest from loans and advances which brought in Ksh10.8 billion.

By the same token, interest income from government paper stood at Ksh4.3 billion up from Ksh4 billion.

Non-interest income as the opposite revenue stream stood at Ksh5.5 billion up from Ksh5.3 billion.

Earnings Per Share (EPS) declined to Ksh0.11 from Ksh0.71 while no dividend has been declared for the period.

The Chief Executive, however, remains upbeat that the lender will bounce back in H2 2020 after focussing on cushioning its customers between March and June.

“We expect an impact on revenue growth across the industry on the back of reduced business activity. With the proactive actions that we have taken in the first half to improve balance sheet resilience, we expect a more predictable second half,” said Mr. Awori.

“In the first half of the year, the bank offered loan relief and restructures totaling Kshs 57 billion to customers,
equivalent to 28% of net customer loans and advances. As a responsible lender, we passed on the benefits of the
reduction in CBR to our customers to give them the much-needed relief in this period,” added Mr. Awori.

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