Absa Bank Kenya posts 29% jump in H1’24 earnings

Absa Bank Kenya Plc has announced a remarkable 29 per cent increase in net profits for the first half of 2024, with earnings reaching Ksh10.7 billion. Yusuf Omari, the Chief Financial Officer of Absa Bank Kenya, attributes this impressive growth to a combination of factors. One key driver behind this surge in earnings is a substantial revenue increase of 16 per cent, coupled with a controlled cost rise of 12 per cent. Despite economic challenges, including inflation and forex depreciation, the bank has managed to maintain a steady performance. The growth in profits has been supported by a rise in the bank's deposits by 6 per cent, as well as a focus on net interest income growth. The bank's strategic emphasis on trade, consumer, and SME sectors has also played a significant role in achieving double-digit growth in these areas. Businesses, particularly SMEs, have sought short-term financing to bolster their working capital during this period, leading to increased demand for such facilities. Looking ahead to the second half of the year, Absa Bank Kenya plans to continue offering short-term lending to retail customers, extending beyond the traditional one to two-month facilities to longer tenors. The bank is also eyeing non-funded income avenues, such as fees and commissions from its subsidiaries in securities, asset management, and bank assurance. Additionally, the bank is focusing on its custody business, aiming to grow its revenue streams further. Despite the positive outlook for the second half, the bank remains cautious about the prevailing economic risks in Kenya. With the introduction of new taxes impacting retail customers, the bank is committed to supporting its clients during these challenging times. Moreover, in response to forex depreciation, the bank has noticed a shift towards local currency loans; however, as the forex market stabilizes, the demand for foreign currency funding is expected to increase. The bank's customer deposits have grown by 6% to reach 353.3 billion Kenyan shillings, thanks to a strategic focus on customer acquisition and primacy. By providing a wide range of financial services under one roof, Absa Bank Kenya aims to promote customer loyalty and core deposits retention. This customer-centric approach has been instrumental in driving the bank's deposit growth and overall profitability. Maintaining a sustainable dividend payout ratio is a key focus area for the bank, with a commitment to a minimum 50% payout ratio. As the bank continues on its growth trajectory, sustaining profitability and rewarding shareholders through dividends remain top priorities for Absa Bank Kenya. In conclusion, Absa Bank Kenya's strong performance in the first half of 2024 reflects its resilience in challenging economic conditions. By focusing on revenue growth, cost efficiency, and customer-centric strategies, the bank has managed to deliver impressive earnings results. With a cautious approach towards economic risks and a strategic outlook for the future, Absa Bank Kenya is poised to sustain its profitability and dividends for the remainder of the year.