ABSA Kenya H1 revenue up 17% to Ksh20.9 bn

ABSA Kenya recently released its first-half earnings report, showcasing a remarkable 17% improvement in total revenue. The surge in revenue has been attributed to the bank's high return on equity (ROE) and return on assets (ROA), along with a reduced loan-to-deposit ratio and the successful restructuring of the organization. In an exclusive interview with CNBC Africa's Ridhima Shukla, Jeremy Awori, the CEO of ABSA Kenya, delved into the positive and negative indicators of the report and discussed the introduction of various financial instruments aimed at navigating Kenya's volatile economic environment. Awori emphasized the bank's strategic focus over the past five years on growing its core businesses, particularly retail, corporate, and business banking. Additionally, ABSA Kenya has made significant investments in new ventures such as bank assurance, asset management, brokerage, investment banking, and custody businesses. This diversified approach has started to bear fruit and contribute to the bank's overall growth, with a particular emphasis on scaling up sales and service personnel to drive strategic alignment. One of the key highlights of the earnings report was the robust performance of ABSA Kenya's return on assets, which saw a substantial increase amid the economic volatility. The bank's customer assets experienced a nearly 20% growth, outperforming industry standards across various segments, including wholesale, trade, SME, and retail. With a commendable return on equity of 23% exceeding the cost of equity, ABSA Kenya's financial performance indicates strength and resilience in a challenging economic landscape. While ABSA Kenya has made significant investments in digitization and technology, resulting in a slight increase in operational costs, Awori stressed that the bank's focus on recruiting and deploying staff to support new business initiatives has been a deliberate strategy. The bank's commitment to innovation and enhancing customer experience remains a top priority, reflected in its favorable revenue-to-cost growth ratio. The CEO also highlighted ABSA Kenya's efforts to cater to high-net-worth individuals through specialized financial offerings, including asset management services tailored to diverse customer segments. With a comprehensive suite of investment instruments, ABSA Kenya aims to provide customers with a range of options to mitigate risks and maximize returns, aligning with the evolving needs of the market. In terms of capital position and dividend distribution, Awori assured stakeholders of the bank's strong financial standing, backed by a core capital of 14.1% and a total capital adequacy of 16.5%. Despite the challenges posed by the pandemic, ABSA Kenya has resumed dividend payments, underscoring its confidence in future growth prospects and profitability. Addressing concerns about the impact of rising costs of funds on interest rates, Awori emphasized ABSA Kenya's strategic approach to managing funding costs by prioritizing transactional funds and minimizing reliance on expensive sources of capital. The bank's prudent fund allocation strategies aim to maintain stable margins and sustain growth momentum. Furthermore, the reduced loan-to-deposit ratio at ABSA Kenya has been influenced by strategic lending decisions, particularly in foreign currency facilities to clients with corresponding inflows. The bank's competitive advantage in mobilizing dollar deposits efficiently has enabled it to optimize its lending portfolio and maintain a healthy balance between loans and deposits. Notable contributors to ABSA Kenya's performance include trade loans, overdraft facilities, mortgages, and scheme loans, reflecting a positive trend in economic activity and customer confidence. The bank's focus on retail and personal lending through scheme loans has yielded favorable results, supported by robust growth in mortgage financing and trade-related credit facilities. As the economic landscape in Kenya continues to face challenges, including inflationary pressures and geopolitical uncertainties, Awori acknowledged the need for agility and risk management. ABSA Kenya remains vigilant in monitoring non-performing loans and delinquencies, leveraging its flexible risk appetite to navigate evolving market conditions and sustain healthy asset quality. In conclusion, Awori reiterated ABSA Kenya's commitment to sustainability and responsible banking practices, emphasizing the bank's proactive stance on climate change and environmental stewardship. By integrating sustainability into its core strategy and fostering partnerships for green initiatives, ABSA Kenya aims to drive positive change and support sustainable development in Kenya's financial sector.