Absa Bank posts 13pc profit rise on loan earnings

Absa Bank’s half-year net profit grew 12.9 per cent to Sh6.3 billion on higher yields from loans and advances as the bank adjusted to prevailing lending rates and increased lending to the private sector.

The lender’s profit grew from Sh5.6 billion in a similar period last year as its loan book expanded by Sh44 billion to Sh262 billion.

The lender said its average yield has risen to 10.4 per cent from 9.5 per cent last year after the Central Bank of Kenya (CBK) raised its key lending rate by 50 basis points to 7.5 per cent.

The higher rates and increase in lending pushed up the banks’ interest income by 21 per cent to Sh14 billion.

“The average yield has gone up by about a 100-basis points, which means revenue has picked up in line with the yields. We have also seen quite a vibrant business environment and our balance sheet has continued to pick up on loans to the private sector,” said Barclays chief finance officer Yusuf Omari.

Loan portfolio

Banks are turning to private sector lending with government borrowing losing lustre with the increase in Central Bank Rates that devalues bond portfolios.

Absa said its diversified loan portfolio has allowed it to increase lending while balancing risk.

The lender has also seen a 10 per cent increase in non-funded income to Sh6.4 billion on higher returns in the foreign currency market which saw a surge in volumes and margins.

Non-interest income also came from the lender’s Bancassurance arm, service, and account maintenance fees as deposits rose seven per cent to Sh281.6 billion.

Absa chief executive Jeremy Awori said the bank plans to diversify revenues by increasing investment in areas it has limited presence including asset management, consumer payments, custody business and investment banking.