Barclays Bank of Kenya is undergoing a major transformation that will see the bank acquire a new identity as Absa Bank. Besides the rebranding, Barclays will also adopt a more customer-centric approach to business. Analysts rate the rebranding exercise as a historic event for the lender which began operating in Kenya in 1916.
In 2018, Barclays Bank posted a 7.1 per cent increase in net profits to KSh7.4 billion even with the prohibitive lending cap law, increased provisions due to the adoption of IFRS 9, and increased rebranding expenses. The bank’s net interest income remained largely unchanged at KSh22 billion while its non-interest income grew by 14.7 per cent to reach KSh9.7 billion.
Researchers at Apex Africa Capital recently released a report on the tier one lender. According to the report, Barclays Bank Kenya offers the highest dividend yield in the banking sector at 10.6 per cent, significantly higher than the one-year Treasury bill yield of 8.6 per cent.
“The high dividend yield has added to the allure of the counter among investors cushioning it against cyclical market shocks…….. We anticipate a strong performance in the bank’s stock at the local bourse with the increasingly attractive dividend yield (9.5% in FY18) to provide bullish momentum on the counter in the short to medium term,” reads the report.
The report also shows that Barclays bank has sufficient capital buffers to withstand market shocks. Currently, the bank’s capital adequacy ratio stands at 16.4 per cent, higher than the regulatory minimum ratio of 14.5 per cent. According to Apex Capital analysts, the bank’s transition will have minimal effect on its capital ratio as most of the rebranding expenses will be absorbed by the parent firm Absa Africa Group.
Barclays is expected to benefit from its heavy investment in digital platforms. Apex Capital analysts note that the lender’s digital platform – Timiza – will improve efficiency in service delivery and increase the volume of transactions. As a result, the bank’s revenues from fees and commissions are expected to grow exponentially in the coming years.
Although the bank’s transition to Absa is expected to put a minor dent on the company’s earnings in the short-term on a normalized basis, analysts project that the bank will maintain strong financial performance in the long term. “The bank is well poised for long-term growth with prospects for further gains in market share ever so alive,” reads the Apex Africa Report.
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