Absa Zambia Plc reported first quarter earnings (1Q20) of K44.9million, a 38.8% decline year on year weighed by credit impairements and widening non interest expenses. Published prudential financial statements reflect a 35.6% widening of credit impairments to K51.6million weighing its after tax earnings. Compared to fourth quarter of last year Absa after tax earnings were flat.
Rising credit risks. As expected in a tumultous macroeconomic environment characterised by disease pandemic amplifying fiscal risks, application of forward looking models and accounting standards could lead to build up of impairement stock. Other possible explanations could link to counterparty or sector downgrades in this period.
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Rebranding expenses could have weighed. Absa’s non – interest expenses widened 20.5% to K221.6million which could correlate and coincide with the massive rebranding exercise earlier in the quarter following the metarmorphosis of legal persona from Barclays to Absa. This saw its entire branch network rebrand with a newer Africanaicity look. This could be a potential driver of the banks higher than usual expense base.
Interest expense line in 1Q20 was 9.6% higher year on year at K117.6million driven by interest paid on fixed depoists reflecting the banks cost of funding in an environment with an elevated Kwacha demand curve.
Read more: Barclays Zambia credit book surges 40% underwriting future earnings as bank vies to be largest bank by asset size
Total revenue grew by an 8.0% margin to K317.8million (year on year) supported by interest income growth of 5.42% and a 25.7% expansion in non – interest revnenue lines as trading income and fee inome.
Absas credit book growth has been the most aggressive in the Zambian market with a 52.2% annual expansion to K6.9billion, a 19.4% rally from 4Q19.
The Kwacha Arbitrageur