Absa Zambia Plc continues to exude ‘Africanacity‘ with greater momentum; an autopsy of a lucrative divorce from the Barclays Group. This has been evidenced through a top tier earnings performance as the Bank manifests better than estimate cost efficiencies. The red bank is making money fast and spending less as revealed by another market exceptional cost to income ratio at 47.5% in 3Q21 (YTD) versus 65.2% a year ago from 52% at 1H21. According to financial statements shared in the local press, Absa’s revenue growth velocity was 61.9% to K1.6 billion, while its non interest expenses slowed 178.9% to K776.5 million resulting in a strong positive jaws position that quintupled its after tax earnings year on year to K581 million on a YTD basis at the end of third quarter. Absa forms part of top 3 earners in a 19 commercial bank industry accounting for 53% of industry PAT’s.
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In our previous commentaries on Absa, it was cited that Mizinga Melu aggressively expanded her balance sheet a very strategic move to book incomes for future periods which is paying off for the bank. Absa in the 3Q21 financials exhibits a steady earnings growth across the various lines supported mainly by a 29.2% growth in interest incomes from credit extension and mark to market effects on duration risk as the government security curve sagged on post election bond bump effects. Absa retained its market share of foreign exchange income in the top 3 earners tier which in addition to fee and commission income scaled the non interest revenues for the bank 29.0%.
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With a more positive outlook on the Zambian economy following subsiding political risks, Absa should take a more bullish view on risk appetite which should allow for bigger growth in its credit book in the period. Absa very committed to driving Zambia’s growth especially in sectors that have traditionally been underfunded such as the SME. Recently the bank undertook to fund a Democratic Republic of Congo – DRC trip in conjunction with the Zambia Development Agency – ZDA intended to exploit Non Traditional Export (NTE) opportunities aligned to the Memorandum of Understanding (MOU) signed with ZDA.
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As risk appetite claws back into the Zambian market, Absa is ahead of the curve booking balance sheet, the most recent being a K200 million term loan facility with Zambeef Plc as part of the central banks Medium Term Refinance Facility – MTRF. The facility is set to enable the agribusiness giant extinguish most of its dollar denominated debt as its manages foreign exchange risk.
L-R Absa Chief Executive Officer Mizinga Melu, Fisheries Minister Makozo Chikote, Agriculture Minister Mutolo Phiri and Zambeef Chief Executive Officer Walter Roodt.
Other areas that Absa continues to leave a footprint include the rollout of digital products that continue to give its a competitive edge in the market.
The Kwacha Arbitrageur