Barclays Bank of Kenya, which is in the process of rebranding to Absa, is the best performing banking sector share in the last 3 months of 2019 having gained by about 6%. As per last week’s closing price of KES 10.95, the bank has a dividend yield of 11% against an industry average of 5%. A number of analysts have recommended a strong buy rating on the stock saying the rebranding will enable the bank to adopt a more customer-centric approach to business.
The bank posted a stellar performance in the first half of 2019. It posted a 19% Growth normalized profit before tax in the first six months of 2019 to Kshs 6.3 billion, the highest growth in profitability among the listed Kenyan Banks. This is when we remove the one-off Kshs 561 million expensed in modernization projects as part of its ongoing transition to Absa.
The bank’s assets grew by 12% to KES 354bn. Cost to income ratio improved to 51.5% due to a marginal decrease in operating expenses to KES.10.0Bn.
Customer deposits grew by 6% to Kshs 230 billion while customer Loans and advances edged up by 6% to Kshs187 billion. During the period, total income increased by 4% to Kshs16.3 billion driven by the core business and supported by non-funded income which was up 13% driven by growth in fees and commissions (including Timiza revenue).
Customer number has grown to 4 million, driven by Timiza, the bank’s digital banking product.
Income from Timiza and Bancassurance has in the recent past boosted the bank’s income, a testament to the successful launch of new product lines. Banks with institutional knowledge spanning over 100 years such as Barclay’s benefit from what is known as Mathew Effect of cumulative advantage leading to high success rate of new initiatives.
“We are pleased with our financial performance for the first half of 2019 and are optimistic about the future of our business. With Absa, we see ourselves transforming to an even more locally relevant financial institution focused on bringing possibilities to life for the Kenyan people”,” Barclays Kenya Managing Director, Jeremy Awori, said.
The bank declared an interim dividend of KES 0.20. The mix of great dividend yields, stable and growing share price provides a great investment thesis for investors. This is further backed by the bank’s dual transformation strategy that has seen it grow its traditional business lines resulting into resilience while at the same time exploring the future with new product lines successful.