Absa Bank Kenya has recorded a 15 percent growth in net profit to Sh16.9 billion for the nine months ending September, as reduced loan loss provisions and lower funding costs helped protect earnings.
This is up from Sh14.7 billion reported during the same period last year, reflecting the bank’s resilience despite weaker interest income.
The lender benefited from a 39.6 percent fall in provisions for bad debts and a 28.5 percent reduction in interest paid to depositors. “Profit after tax grew by 15 percent year-on-year to Sh16.9 billion, supporting a strong return on equity of 24 percent,” said Absa’s managing director Abdi Mohamed.
“Revenue closed the quarter at Sh46.6 billion, a marginal decline compared to last year attributable to lower interest rates margins, which saw our net interest income drop by 5 percent. This was, however, offset by prudent management of the cost of funds,” he added.
Operating expenses dropped 13 percent as the bank’s lower loan provisions cushioned the impact of falling interest earnings. The decrease in provisions came even as the total stock of non-performing loans rose 3.8 percent to Sh44.3 billion, amid a tough economic environment where borrowers, both individuals and companies, face repayment challenges.
Absa said debt recovery efforts, particularly with corporate clients, and improved repayments from small and medium enterprises contributed to the reduced provisions.
"Gross non performing ratio has slightly increased due to increased non-performing loans, however this does not result in increased provisions due to sufficiency/cover from securities held," the bank stated.
High borrowing costs have made businesses hesitant to take new loans, resulting in a relatively flat industry loan book. Absa’s loan portfolio decreased slightly to Sh309.7 billion from Sh311.4 billion a year earlier.
Meanwhile, interest income from loans fell 19.6 percent to Sh32.5 billion, reflecting the combined effect of a smaller loan book and lower lending rates.
The Central Bank of Kenya has encouraged banks to lower lending rates by reducing the base rate in its last eight monetary policy committee meetings.
