ABSA Bank Kenya issues profit warning for 2020 financial year
ABSA Bank Kenya has warned that its net profit for the year 2020 will be lower than the earnings reported in the 2019 financial year
Absa Bank Kenya Plc has issued a profit warning saying its net profit for the 2020 full year will be lower than expected. The listed lender cites increased impairment provisions due to the Covid-19 pandemic. The lender has however remained resilient.
“Trends and forecasts show that the rate of impairment is increasing due to the delayed loan repayments and potential additional stress due to COVID-19 after-effects,” Absa notified its investors.
The bank’s asset quality deteriorated, with the NPL ratio increased to 7.6 percent in Q3’2020, from 6.8 percent in Q3’2019, due to the faster 20.8 percent growth in gross NPLs, which outpaced the 7.3 percent growth in gross loans.
“Notably, on a y/y basis, the bank’s asset quality deteriorated, however, on a quarter on quarter basis, the bank recorded an improvement on its asset quality with the NPL ratio improving to 7.6 percent from 8.0 percent recorded in H1’2020,” according to Cytonn Investments.
During the month, Absa Bank Kenya PLC enhanced its vehicle asset financing proposition by extending the repayment period to six years or 72 months, the longest tenor in the vehicle asset financing industry as customers continue to struggle with the impact of Covid-19.
The deal also comes with a 300, 000 shillings vehicle maintenance limit on credit cards for customers who take up the offer to support them maintain their vehicles, including managing their fuel purchases.
This is in addition to the 95 percent funding offer for customers purchasing new vehicles of their choice, both in the commercial and passenger services categories.
Under this deal, the bank has partnered with the four major distributors in East Africa, namely Toyota Kenya, Isuzu East Africa, DT Dobie, and Simba Colt. This means a customer who wants to own either of the cars will only pay 5 percent.