Category Archives: ABSA

Coca-Cola partners for business recovery in Kenya

Coca-Cola has launched a program to assist traders to quickly recover, and safely reopen their businesses, following months of disruption from Covid-19.

The company will avail Kshs 125 million as part of a Coca-Cola system small business recovery campaign to assist 18,000 businesses, along with its partners including Absa Bank Kenya, Amref Health Africa and the Women Enterprise Fund. This will be through initiatives such as loans, personal protective equipment, sanitation facilities, soda cases, gardening furniture (for outdoor dining) and training to help them reopen safely between October 2020 and March 2021.

Coca-Cola has 300,000 traders in the country, and through its data, has noted the disruptions on these small businesses, 40% of which are at risk of closure even after the government relaxed lockdown restrictions in September 2020. This is partly from expired stocks and slow sales pick up in places like downtown Nairobi.

Absa will provide unsecured business loans of up to Kshs 10 million, for working capital, and up to Kshs 50 million for Local Purchase order (LPO) and inventory discounting. As the financing business partner in this campaign, the bank, through trade data, is quickly able to score the business creditworthiness, and extend financing, to suppliers and retailers in the Coca-Cola ecosystem, without having to scour their financial statements.

Coca-Cola has also extended a grant of $175,000 (~Kshs 20 million) to Amref to support 4,000 micro-outlets, such as eateries and leisure places, in Laikipia, Nairobi and Mombasa counties, to carry out occupational safety changes & training and reopen safely in their communities. Also, for participating businesses in Laikipia, the County Government has offered further support to traders there through credits to offset some business loans as part of a Kshs 123 million Laikipia economic stimulus package.

Absa Kenya absorbs Covid hit

Absa Kenya reported their June financial results, continuing the thread of banks taking being impacted by the reduced business activity and increased credit risks occasioned by COVID-19.

Kenya’s fifth-largest bank with Kshs 392 billion ($3.62 billion) in assets saw its deposits and loans higher than 8% last June and a pre-provision profit of Kshs 8.6 billion for the half-year.

However, the bank increased its provisions for bad loans threefold due to COVID-19 impacts and IFRS9 guidelines from Kshs 1.6 billion to 5.3 billion. This resulted in a net profit before tax and exceptional items of Kshs 3 billion, down from Kshs 6 billion last June, with a further one-time charge of Kshs 1.7 billion as the cost of completing the transformation from Barclays to Absa in the first half of the year.

During COVID, the bank had focused on helping its customers manage their livelihoods and has restructured 56,000 loan accounts, worth Kshs 57 billion, 28% of the loan book. COVID-19 has hit across the sector and commercial banks in Kenya have restructured a combined Kshs 844 billion of loans, 29% of the industry’s total. Absa’s bad loans are now at 8% compared to 13.1% average for the banking sector in June 2020.

Kenya’s Top 10 Banks in 2020

Factoring in the absorption of their new NBK subsidiary, KCB’s numbers increased their lead at the top of Kenya’s bank table, with assets of Kshs 786 billion (~$7.86 billion). They are followed by Equity (Kshs 507 billion assets), which also increased its capital by almost Kshs 30 billion – probably muscle for its regional deals.

The only major change is with NCBA entering the top 3, after the assets and liabilities of NIC were transferred into CBA in October 2019. NCBA had bank assets of Kshs 465 billion and a pre-tax profit of Kshs 9.2 billion that was further reduced by exceptional merger costs of Kshs 1.1 billion.

The financial statements published today are a continuation of CBA’s and they show that timing of the transfer resulted in a “bargain purchase gain” of Kshs 4.1 billion.

Cooperative Bank is fourth (Kshs 449 billion assets), but may overhaul NCBA by the end the year, while fifth is Absa Kenya whose 2019 results were announced yesterday.

An interesting race mix is next with Standard Chartered, Stanbic Bank and Diamond Trust all closely bunched at about Kshs 300 billion of assets, and rounding out the top ten are I&M and Baroda Bank.

The year 2020 has started with a lot of economic uncertainty economic caused by the Corona virus pandemic with the possibility of strain at some banks. At their results briefing yesterday, Absa Kenya CEO Jeremy Awori said that such times also create opportunities for new partnerships as Absa’s growth plans include targeted acquisitions and disposals. Already Jamii Bora and Cooperative banks are in discussions about a buyout, while there are other small banks that were already in need of a boost.

Comparative Rankings (to last year):
1 (1 + 12) KCB. (+NBK)
2 (2) Equity.
3 (8 + 10) NCBA.
4 (3) Co-operative.
5 (4) Absa (Barclays) Kenya.
6 (5) Standard Chartered Kenya
7 (7) Stanbic Kenya.
8 (6) Diamond Trust.
9 (9) I & M.
10 (11) Baroda.

Absa Kenya 2019 Financial Results

Absa Kenya released its financial results for the year 2019 a year in which it completed the transition from Barclays to Absa, the third-largest financial services group in Africa.

Financial Performance: In 2019 assets grew by Kshs 50 billion to Kshs 374 billion (~$3.74 billion) which saw Absa Kenya ranked as the country’s fifth-largest bank. Deposits went up by 15% to Kshs 238 billion and loans by 10% to Kshs 194 billion. Income was up 6% over a year ago, and expenses were up 2%. Profit for the year was Kshs 12.2 billion before the exceptional item of the transitions, which continue to have an impact on their financial results, leaving a normalized after-tax profit of Kshs 8.5 billion (~$85 M).

Exceptional costs of Transition: Absa Kenya incurred an exceptional item cost of Kshs 1.5 billion, relating to the transitional services agreement with Barclays for the transition to Absa and which was completed in February 2020, ahead of schedule. During the year the bank completed the migration of over 300 technology systems including its core banking system, financial crimes altering, and card acquisition switch, that were previously housed at Barclays in the UK.

There were also the costs to rebrand 85 branches, over 200 ATM’s and 78 applications used across different platforms of the bank. The “Timiza” banking app now has 3.8 million customers and had lent over 20 billion by the end of 2019.

Investor Gains: For shareholders, the dividend for 2019 will be unchanged at Kshs 1.1 per share, comprising a final dividend of Kshs 0.9 that follows an earlier interim one of Kshs 0.2 per share. This represents a generous dividend payout of 80% of profits and currently, it is the best performing bank stock at the Nairobi Securities Exchange with a return of 39% since 2018.

Corona Virus cushion in 2020: As the world grapples with the impact of the Corona Virus outbreak, the bank has been one of the early champions of the industry reaction to enable Kenyan to continue their daily lives by encouraging customers to take up cashless transactions. Absa Kenya waived all money transfer charges between customer bank accounts and mobile wallets, including on Timiza and Pesalink while also increasing daily transition limits and also will also offer cash back of 0.3% for each use of Absa debit cards.

It also committed to ensuring that all its suppliers are paid within 14 days, with small and medium enterprise (SME) suppliers, invoicing amounts that are less than Kshs 1 million (~$10,000), to be paid within 7 days.

And in line with other banks in the country, under the Kenya Bankers Association, and guided by the Central Bank of Kenya, Absa Kenya has welcomed its customers experiencing financial strains as a result of the pandemic, to initiate discussions on restructuring of their personal and business loans, including the option of a repayment holiday of up to one year, and committed to render such decisions within seven days.

Barclays Kenya changes to Absa at the NSE

Barclays Bank of Kenya completed its transition journey to Absa this week with a confirmation of approval from the Central Bank of Kenya and the change over of its share ticker at the Nairobi Securities Exchange from BBK to Absa. 

This was the conclusion of a three-year journey that has seen Absa rebrand all Barclays operations across Africa under one name after Barclays had reduced its shareholding to under 15% and seen Barclays Africa renamed as the Absa Group.

Geoffrey Odundo the CEO of the Nairobi Securities Exchange (NSE) said that Barclays was one of their key listed banking stocks and its shareholders had seen good returns with Barclays being the best performing bank share last year. The bank had also been a key partner that has helped the NSE with product development and  market development. 

James Ndegwa, Chairman of Kenya’s Capital Markets Authority, said Barclays, which traced its history in the Country to 1916 when the National Bank of South Africa opened a branch in Mombasa, had become the first commercial bank to offer shares to the public in a 1986. He called on the bank to float more shares as he said the NSE had struggled to attract new listings, with daily trading dominated by a few companies.

Jeremy Awori CEO of Absa Bank Kenya said that, as part of one of Africa largest financial groups, they aimed to connect the dreams and aspirations of Kenyans with the financial resources to achieve these. Aside from enhancing financing for SME’s and offering the country’s lowest mortgage rate of 11.75%, he said that Absa which had recently launched the first vertical (debit & credit) cards in Kenya and received a new license for asset management, would soon launch a chatbot, and an online toolkit for small business owners.

Other guests at the event that was held at the Nairobi Securities Exchange included Daniel Mminele, the new CEO of Absa Group, Peter Matlare, the Deputy CEO of Absa Group, and Charles Muchene, the Board Chairman of Absa Bank Kenya PLC.

On it’s debut, Absa Bank Kenya traded 126,800 shares to close at Kshs 13.25.