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Understanding Absa Bank Kenya H1 2026 Results · The Mwango Capital Podcast

• 0:00
  SPEAKER_00: Welcome to this edition of Mwango Spaces.
• 0:02
  SPEAKER_00: On this Tuesday, we want to dissect the Absa Bank Kenya H126 results.
• 0:07
  SPEAKER_00: It's the earnings season, mostly for banks.
• 0:09
  SPEAKER_00: Those who are not familiar with it,
• 0:11
  SPEAKER_00: usually in August,
• 0:11
  SPEAKER_00: the banks released their first half results,
• 0:13
  SPEAKER_00: which cover the period of January I want to introduce you to the audience.
• 0:17
  SPEAKER_00: You're new to Spaces and new to the audience.
• 0:18
  SPEAKER_00: You can take a minute and
• 0:30
  SPEAKER_00: I've been in the industry for quite some time.
• 0:32
  SPEAKER_00: I started off in the Big Four, specifically
• 0:33
  SPEAKER_01: Anthony Young.
• 0:34
  SPEAKER_01: I was there for seven years.
• 0:45
  SPEAKER_01: And then from there, I left and joined the financial services industry.
• 0:49
  SPEAKER_01: I moved to my first Taiwan bank.
• 0:51
  SPEAKER_01: I was there for another seven years and then later joined Absa.
• 0:54
  SPEAKER_01: I've been in Absa for three years.
• 0:56
  SPEAKER_01: I'm very happy to be here to walk you through our half-one results.
• 1:00
  SPEAKER_00: You could give us a bird's eye view of the results before we dig into the bits
• 1:04
  SPEAKER_00: and pieces a bit.
• 1:05
  SPEAKER_00: And then you can tell us as you start how it is to step up to becoming interim CFO.
• 1:09
  SPEAKER_01: It's quite a feeling and I can say it's a challenging task after being one
• 1:14
  SPEAKER_01: of those very big institutions.
• 1:15
  SPEAKER_01: Thank you so much for joining us today.
• 1:30
  SPEAKER_01: We are seeing resilient balance sheet despite an easing rate cycle.
• 1:41
  SPEAKER_01: On the P&L side,
• 1:42
  SPEAKER_01: what we saw is that on a total income perspective,
• 1:45
  SPEAKER_01: that was In terms of where inflation is, costs are trending lower.
• 2:12
  SPEAKER_01: Overall, from a PAT perspective, that's a 10% drop.
• 2:16
  SPEAKER_01: However, when you're looking at PAT, then you should look at it together with ROE.
• 2:20
  SPEAKER_01: ROE grew to 21%.
• 2:23
  SPEAKER_01: In Q1, we were at about 19%.
• 2:26
  SPEAKER_01: Where we are currently is about 21%.
• 2:28
  SPEAKER_01: In terms of productivity and how we are turning that profit,
• 2:31
  SPEAKER_01: we are efficient and better than market because the market for Q1,
• 2:34
  SPEAKER_01: we were drawn above 18%.
• 2:36
  SPEAKER_00: Really, that's the overall shape in
• 2:38
  SPEAKER_01: terms of our numbers.
• 2:39
  SPEAKER_01: And we're very proud of the results that we have posted for half one.
• 2:42
  SPEAKER_00: Let me start from the beginning,
• 2:43
  SPEAKER_00: which is the balance sheet that we can set the context of what is happening from
• 2:46
  SPEAKER_00: a P&L perspective.
• 3:03
  SPEAKER_01: If you look at the balance sheet in terms of where we are currently,
• 3:06
  SPEAKER_01: our balance sheet total assets, it grew by 5%.
• 3:10
  SPEAKER_01: That number, we are currently at over half a trillion in terms of what those total assets are.
• 3:15
  SPEAKER_01: But the biggest story is in terms...
• 3:18
  SPEAKER_01: In terms of how much of that have we deployed to customer assets,
• 3:22
  SPEAKER_01: 64% of our balance sheet had been deployed to customer assets,
• 3:26
  SPEAKER_01: and we are saying this asset grew by 8%.
• 3:29
  SPEAKER_01: If you look at it in terms of where that is coming from,
• 3:32
  SPEAKER_01: we dispersed in half one about $104 billion,
• 3:35
  SPEAKER_01: and 64% of that was dispersed in Q2,
• 3:38
  SPEAKER_01: meaning that we are seeing that trajectory coming in in Q2,
• 3:42
  SPEAKER_01: leading to the 8% growth.
• 3:44
  SPEAKER_01: So from a volumes perspective, we are seeing that the assets are growing.
• 3:48
  SPEAKER_00: I just wanted to highlight that bit about customer loans growth, which has been pretty lagging.
• 3:53
  SPEAKER_00: In the past, you've seen that it's up around 8%.
• 3:54
  SPEAKER_00: If you look at Q2 2026 versus Q2 2025,
• 3:58
  SPEAKER_00: it seems like there's a bit of appetite coming into the market.
• 4:01
  SPEAKER_00: Customers want to take up more loans, right?
• 4:03
  SPEAKER_01: Correct, yes.
• 4:04
  SPEAKER_01: And that's the thing.
• 4:04
  SPEAKER_01: When the rates are easing, then you will see that there's a lot of demand that comes in.
• 4:08
  SPEAKER_01: And because these loans are affordable, then your customers are coming to take up more loans.
• 4:13
  SPEAKER_01: We have seen a bit of demand coming through from a market perspective
• 4:16
  SPEAKER_01: and we are able to satisfy that demand and 8% growth from that perspective.
• 4:20
  SPEAKER_01: That's the customer asset join.
• 4:23
  SPEAKER_01: If you look at it from a deposit perspective or our deposit base in terms of
• 4:27
  SPEAKER_01: where it is currently,
• 4:28
  SPEAKER_01: we have grown 5%, but really the story is in terms of the blend.
• 4:32
  SPEAKER_01: If you look at our blend for customer deposit, where we are growing faster is on the casser.
• 4:37
  SPEAKER_01: We are trying to optimize our cost of fine.
• 4:39
  SPEAKER_01: Where we were last day, it was about 3.7.
• 4:42
  SPEAKER_01: We are currently at 2.8%.
• 4:44
  SPEAKER_01: We are optimizing that blend.
• 4:46
  SPEAKER_01: On the asset side, the yields have come off by around about 150.
• 4:50
  SPEAKER_01: On the deposit side, we are seeing that the cost of funds is improving.
• 4:53
  SPEAKER_01: That net,
• 4:54
  SPEAKER_01: whereas the yields have dropped by about 160,
• 4:57
  SPEAKER_01: we have tried to protect that margin and the net impact in terms of margin is around
• 5:00
  SPEAKER_01: about 50 bids.
• 5:02
  SPEAKER_01: 50 bips is what you're seeing on the revenue side where you're seeing that soft performance.
• 5:07
  SPEAKER_01: But what we're trying to do about it is to increase that momentum on the balance sheet side.
• 5:11
  SPEAKER_01: Largely, that is what is causing that soft performance really on the net interest income side.
• 5:17
  SPEAKER_01: On the NFI, this is where largely the Forex income sits.
• 5:21
  SPEAKER_01: Overall, from an FX perspective, we have seen the rate table.
• 5:24
  SPEAKER_01: And it's not necessarily a bad thing in the market because that makes it cheaper
• 5:28
  SPEAKER_01: for our traders, traders being our customers.
• 5:32
  SPEAKER_01: What are we doing about it?
• 5:33
  SPEAKER_01: We have subsidiaries, which are fairly new in the market.
• 5:37
  SPEAKER_01: We have bank assurance business.
• 5:39
  SPEAKER_01: We have AML business.
• 5:40
  SPEAKER_01: And we also have our custody bills, which is less than three years.
• 5:43
  SPEAKER_01: Those businesses are mitigating the impact of that effects.
• 5:47
  SPEAKER_01: In terms of revenue growth, we've seen a 24% growth.
• 5:50
  SPEAKER_01: For net-net, our diversification agenda in terms of strategy is coming together nicely.
• 5:56
  SPEAKER_01: That is our revenue story, but if you look at it in terms of what is the cost story,
• 6:02
  SPEAKER_01: rather cost story, the fairly solid story.
• 6:04
  SPEAKER_01: If you look at it, 5.7% growth.
• 6:07
  SPEAKER_01: Well, this 5.7% who have an inflation,
• 6:11
  SPEAKER_01: we are optimizing our costs in terms of how we are looking at our contracting.
• 6:16
  SPEAKER_01: In terms of how we are looking at best practices in the market,
• 6:19
  SPEAKER_01: so far we have fully mitigated or we have fully optimized that cost.
• 6:23
  SPEAKER_01: And if you do it together with our CTI, our CTI is about 41%, still best in class in the market.
• 6:29
  SPEAKER_01: For every shilling of revenue,
• 6:32
  SPEAKER_01: then you're able to see how we're able to generate it from a cost perspective.
• 6:36
  SPEAKER_01: Interments as well, solid story there.
• 6:38
  SPEAKER_01: If you look at it for percent, broad P or near.
• 6:41
  SPEAKER_01: And really the better story is in terms of our LLR.
• 6:44
  SPEAKER_01: LLR has improved over time.
• 6:46
  SPEAKER_01: We moved from 2.1% to 1.9%.
• 6:48
  SPEAKER_01: Better quality of our bookware.
• 6:51
  SPEAKER_01: And if you look at it in terms of our gross NPLs ratio, where we were in 2025, it was about 13%.
• 6:58
  SPEAKER_01: Where we are currently is about 10%.
• 7:01
  SPEAKER_01: And remember the industry is at 14.5%.
• 7:03
  SPEAKER_01: We are very proud of the asset quality and very proud of the quality of our book.
• 7:08
  SPEAKER_00: And then the AUM, I wanted to highlight that 30% growth, that's pretty significant.
• 7:12
  SPEAKER_00: Are customers interested more in making sure that their money is put to work somewhere?
• 7:18
  SPEAKER_01: Correct.
• 7:18
  SPEAKER_01: We have seen a lot of customer interest in terms of how much more can you earn from
• 7:23
  SPEAKER_01: the money that you have in the bank and possibly say, okay,
• 7:27
  SPEAKER_01: what is your FIC deposit rate,
• 7:29
  SPEAKER_01: ETA view,
• 7:30
  SPEAKER_01: and then also ask what other additional instruments can you provide and what is
• 7:34
  SPEAKER_01: the return?
• 7:35
  SPEAKER_01: We have seen,
• 7:36
  SPEAKER_01: particularly if you look at it from an AML perspective,
• 7:38
  SPEAKER_01: they are able to do MNF, they are able to do offshore kind of transactions.
• 7:43
  SPEAKER_01: And they're also able to do special funds.
• 7:45
  SPEAKER_01: So they send that those returns are slightly better.
• 7:48
  SPEAKER_01: Then you will see the flow of money moving from the bank to the AUN.
• 7:52
  SPEAKER_01: That we've been able to tap and we are getting revenue out of it.
• 7:56
  SPEAKER_00: Let's move a little bit to the total cost side.
• 7:59
  SPEAKER_00: I think it was up around 6%,
• 8:00
  SPEAKER_00: but then you said underlying all that,
• 8:02
  SPEAKER_00: there were some things that moved below that people need to pay attention
• 8:06
  SPEAKER_00: to something to do with the operating model of design,
• 8:08
  SPEAKER_00: some digital capabilities, investments.
• 8:10
  SPEAKER_00: Could you give context to that in the broader context of costs being up around 6%?
• 8:15
  SPEAKER_01: A very good question there, Makaya.
• 8:16
  SPEAKER_01: We did do an operating model change.
• 8:19
  SPEAKER_01: What that means is that we had a voluntary exit program,
• 8:23
  SPEAKER_01: and it's really not the first time that we're disclosing this.
• 8:25
  SPEAKER_01: This came out in our financial statements for 2020.
• 8:28
  SPEAKER_01: We've been pretty transparent with that organizational change.
• 8:32
  SPEAKER_01: We did book the cost in quarter one.
• 8:34
  SPEAKER_01: It was about $720 million.
• 8:36
  SPEAKER_01: And if you look at that cost, if you adjust for that cost, then your cost is largely muted.
• 8:42
  SPEAKER_01: It's actually a decline of 1%.
• 8:44
  SPEAKER_01: And if you're just for that cost as well, then your CTI moves from 41 to 39.
• 8:50
  SPEAKER_01: On the second view,
• 8:51
  SPEAKER_01: in terms of the investments that we've made,
• 8:54
  SPEAKER_01: we have looked at it in terms of our customers and how do we serve them better?
• 8:59
  SPEAKER_01: And also how do we widen our customer base?
• 9:02
  SPEAKER_01: In terms of those investments that are there where you're seeing the 749 billion,
• 9:06
  SPEAKER_01: What are we building or what are we deploying?
• 9:09
  SPEAKER_01: We are building systems that give us a view in terms of how we can cross-sell.
• 9:13
  SPEAKER_01: And to that extent, we anticipate that we are going to generate more revenues from data.
• 9:19
  SPEAKER_01: I would say data-led health.
• 9:21
  SPEAKER_01: The other thing that we are also looking at is we do have a product,
• 9:25
  SPEAKER_01: it's a Lariba product, which has received quite the attention from the market.
• 9:29
  SPEAKER_01: We are looking at how we can distribute our Lariba product in an efficient manner digitally.
• 9:34
  SPEAKER_01: To that extent,
• 9:35
  SPEAKER_01: then we are also building on the back end in terms of systems and how
• 9:38
  SPEAKER_01: to serve our customers faster.
• 9:40
  SPEAKER_01: Those are some of the main capabilities we are building.
• 9:43
  SPEAKER_01: We know about our T-Misa platform, so how to strengthen that platform as well.
• 9:48
  SPEAKER_01: We are building with the anticipation that the revenues are going to fill back into
• 9:52
  SPEAKER_01: the ABSA franchise.
• 9:54
  SPEAKER_00: A bit about the staff costs.
• 9:55
  SPEAKER_00: Is that something that is ongoing also in terms of reducing costs,
• 9:58
  SPEAKER_00: the program that you have there?
• 9:59
  SPEAKER_00: And should you expect a bit of that in the second half of the year?
• 10:02
  SPEAKER_01: So it was one-off course that happened in Q1.
• 10:05
  SPEAKER_01: We don't anticipate it to happen again in Q2.
• 10:08
  SPEAKER_00: But if you look at
• 10:09
  SPEAKER_01: it from a staff course perspective,
• 10:11
  SPEAKER_01: then you are going to see that outside what we call the salary mandates
• 10:15
  SPEAKER_01: and what we consider to be training costs.
• 10:18
  SPEAKER_01: Outside that, nothing else.
• 10:20
  SPEAKER_01: That wealth program, we did it in Q1 and that has completed.
• 10:24
  SPEAKER_00: That's the one and done.
• 10:25
  SPEAKER_01: One and done.
• 10:26
  SPEAKER_00: Now let's move a little bit to portfolio quality.
• 10:29
  SPEAKER_00: Tell us a bit about how that moved portfolios in an environment
• 10:32
  SPEAKER_00: where I think we still have NPLs around 15% plus.
• 10:36
  SPEAKER_00: How are you handling NPLs?
• 10:37
  SPEAKER_00: What's different between you?
• 10:39
  SPEAKER_00: How did they move during the first half of the year?
• 10:41
  SPEAKER_00: What are some of the trends that you're observing there in terms of recoveries and
• 10:44
  SPEAKER_00: in terms of portfolio policy generally?
• 10:46
  SPEAKER_00: One of the benefits of a low-rate environment is that loans become affordable.
• 10:50
  SPEAKER_01: As they become affordable, then customers are able to repay their loans and in good time.
• 10:56
  SPEAKER_01: We are seeing that benefit coming through where
• 10:58
  SPEAKER_01: the customers are honoring their repayments, the loans are becoming affordable.
• 11:03
  SPEAKER_01: In terms of that benefit, it feeds through and you see it from the portfolio quality.
• 11:08
  SPEAKER_01: That is one of the benefits that we are getting from the low-rate environment.
• 11:12
  SPEAKER_01: The other one is in terms of we did have one name in the corporate segment, which was result.
• 11:18
  SPEAKER_01: And to that extent,
• 11:19
  SPEAKER_01: then you will see that in terms of gross NPLs, there has been a reduction there.
• 11:24
  SPEAKER_01: And the third one really is on the loan momentum.
• 11:26
  SPEAKER_01: It's a function of actually three items.
• 11:28
  SPEAKER_01: Our loan momentum to the extent that the loan momentum is peaking,
• 11:31
  SPEAKER_01: to the extent that we had some resolutions.
• 11:34
  SPEAKER_01: And to the extent that the portfolio quality has improved because
• 11:37
  SPEAKER_01: of lower interest rates, that affects the overall loan book.
• 11:40
  SPEAKER_01: To that extent, then you will see that our NPL ratio has reduced to the 10%.
• 11:47
  SPEAKER_01: You will see our gross NPLs have all from $44 billion to $36 billion.
• 11:51
  SPEAKER_01: And you also see that our loan loss ratio has moved from 2.1 to 1.9.
• 11:57
  SPEAKER_00: And any trends that you're observing,
• 11:59
  SPEAKER_00: maybe going into half two in terms of it's a bit two months in,
• 12:02
  SPEAKER_00: is there anything that you've picked up so far?
• 12:04
  SPEAKER_01: In terms of half two,
• 12:06
  SPEAKER_01: some of the trends that we are seeing,
• 12:08
  SPEAKER_01: I would say it's mainly on accelerated growth.
• 12:12
  SPEAKER_01: What we've seen in the market and in the last 10pc,
• 12:14
  SPEAKER_01: we did publish that the loans or private sector credit growth has grown by 10%.
• 12:19
  SPEAKER_01: You will see there's a lot of opportunity there.
• 12:21
  SPEAKER_01: We are dissipating to capture that opportunity into half two.
• 12:25
  SPEAKER_01: In terms of our areas of main effort,
• 12:27
  SPEAKER_01: that is the one area that we are looking to execute and execute well in half two.
• 12:32
  SPEAKER_00: And the one interesting thing,
• 12:34
  SPEAKER_00: by the way,
• 12:34
  SPEAKER_00: your government securities investments were only slightly up 2%,
• 12:38
  SPEAKER_00: meaning that you seem to be lending more to people.
• 12:41
  SPEAKER_00: The loans were up in the first half of the year.
• 12:43
  SPEAKER_00: Is that something that you're deliberately doing in terms
• 12:46
  SPEAKER_00: of just making sure you're deploying capital to make sure
• 12:48
  SPEAKER_00: that customers are actually using them for businesses and not just lending
• 12:51
  SPEAKER_00: to government?
• 12:52
  SPEAKER_01: That is a very correct assumption,
• 12:53
  SPEAKER_01: Mokaya, because priority for us is to deploy our liquidity into customer assets.
• 12:58
  SPEAKER_00: That is what we are doing and we look to continue to move into the future.
• 13:03
  SPEAKER_01: As and when we get excess liquidity, then we are packing it on the short end.
• 13:07
  SPEAKER_01: And as it matures, then we deploy into customer assets.
• 13:11
  SPEAKER_01: That's a very fair assumption in terms of that insight that you have given.
• 13:15
  SPEAKER_00: Capital allocation,
• 13:16
  SPEAKER_00: really nice at the end of the day,
• 13:18
  SPEAKER_00: internet dividends and dividends generally matter to investors,
• 13:20
  SPEAKER_00: especially at the NSE.
• 13:21
  SPEAKER_00: And you decided to reward them pretty significantly after four years of 0.2,
• 13:25
  SPEAKER_00: you went to 0.5 per share.
• 13:27
  SPEAKER_00: What's driving that?
• 13:28
  SPEAKER_00: And I think someone would specifically ask you whether that's driving a bit of
• 13:31
  SPEAKER_00: a change in dividend policy or that raise expectations for the full year.
• 13:35
  SPEAKER_00: What are you thinking around that?
• 13:37
  SPEAKER_01: It's really a function of two items.
• 13:39
  SPEAKER_01: And I'm very happy that our investors are happy with that interim dividend.
• 13:43
  SPEAKER_01: As we were doing the investor call in the morning,
• 13:47
  SPEAKER_01: at the point that this was announced, then our investors were very happy.
• 13:51
  SPEAKER_01: We're really giving back to our investors.
• 13:53
  SPEAKER_01: But what is driving this?
• 13:54
  SPEAKER_01: We look at it in two ways.
• 13:56
  SPEAKER_01: We look at our balance sheet for the next three years and look at it from
• 14:00
  SPEAKER_01: a supply perspective and from a capital demand perspective.
• 14:03
  SPEAKER_01: And to say that if you look at the two, what head role do you have?
• 14:08
  SPEAKER_01: What can you accommodate?
• 14:10
  SPEAKER_01: What can you give to shareholders and still remain with enough organic growth
• 14:14
  SPEAKER_01: through the cycle?
• 14:15
  SPEAKER_01: We looked at that,
• 14:16
  SPEAKER_01: let's test our balance sheet,
• 14:17
  SPEAKER_01: and we are comfortable that the 0.5 then is a number
• 14:21
  SPEAKER_00: that we can absorb and into
• 14:22
  SPEAKER_00: the future.
• 14:23
  SPEAKER_01: Last year towards the end,
• 14:24
  SPEAKER_01: we did come out also give a view that in terms of our payout ratio,
• 14:28
  SPEAKER_01: we anticipate that in the next two years, we're going to move to 55.
• 14:32
  SPEAKER_01: You will see us slowly transitioning from 50 to 55, but within the next two years.
• 14:39
  SPEAKER_01: Those are some of the benefits.
• 14:40
  SPEAKER_01: That is why this benefit is coming through.
• 14:43
  SPEAKER_01: It's looking at it in terms of what is our outlook for the next three years
• 14:47
  SPEAKER_01: and also looking at it in terms of deed and policy.
• 14:49
  SPEAKER_00: In short, you're telling investors to expect something good, right?
• 14:52
  SPEAKER_01: Yeah, it's indicative of what is that return that you can get out of ABSA.
• 14:57
  SPEAKER_01: And we are saying that given where we are, then it's something that we can comfortably afford.
• 15:02
  SPEAKER_00: Appset Group really considers Kenya as a very integral part of their business.
• 15:05
  SPEAKER_00: In terms of framing the business as a part of the whole, how do you think about it?
• 15:09
  SPEAKER_00: Like in terms of contributing to growth in the group level,
• 15:12
  SPEAKER_00: in terms of strategy around the business itself,
• 15:14
  SPEAKER_00: what's your strategy,
• 15:15
  SPEAKER_00: especially going into the second half of the year to make sure you capitalize and
• 15:18
  SPEAKER_00: that you know the balance sheet growth that you wanted to do and at
• 15:21
  SPEAKER_00: the same time deploy to customers as much as possible?
• 15:24
  SPEAKER_01: You're absolutely right.
• 15:25
  SPEAKER_01: ABSA Group does really consider Kenya to be the next frontier.
• 15:29
  SPEAKER_01: And that confidence is also demonstrated in what you've seen in terms of increase
• 15:33
  SPEAKER_01: in shareholding for ABSA Kenya.
• 15:35
  SPEAKER_01: It signals confidence into the Kenyan market over the long term.
• 15:39
  SPEAKER_01: That's correct and it's a correct assumption.
• 15:41
  SPEAKER_01: So what are we doing?
• 15:42
  SPEAKER_01: As we're going to have to,
• 15:43
  SPEAKER_01: as I say,
• 15:44
  SPEAKER_01: one of the areas that we are really looking at is in terms
• 15:47
  SPEAKER_01: of how we can increase our customer assets or how we can book our customer assets.
• 15:53
  SPEAKER_01: How do we serve our customers better?
• 15:55
  SPEAKER_01: What are some of those propositions that we can introduce to the market?
• 15:59
  SPEAKER_01: Really studying our customer behavior to be able to serve them from
• 16:03
  SPEAKER_01: a loan perspective, but also from an NFI perspective, which is capital-like for us.
• 16:09
  SPEAKER_01: Areas that we would want to continue to play into, which we are looking at.
• 16:13
  SPEAKER_01: One is trade.
• 16:14
  SPEAKER_01: Trade continues to be one of the areas that we feel has potential to have too.
• 16:19
  SPEAKER_01: If you look at personal and household, that also continues to be an area that we are looking to.
• 16:27
  SPEAKER_01: We have seen a lot of demand coming from our customers in terms of them trying
• 16:32
  SPEAKER_01: to get mortgages.
• 16:33
  SPEAKER_01: And the thing about mortgages,
• 16:35
  SPEAKER_01: if you look at it, it's a capital light because you'll
• 16:37
  SPEAKER_00: only carry
• 16:38
  SPEAKER_01: about 35% of it.
• 16:39
  SPEAKER_01: It benefits also the investor more because you are getting on the income side,
• 16:45
  SPEAKER_01: but in terms of also the capital,
• 16:47
  SPEAKER_01: it's reduced to 35% as opposed to 100%
• 16:50
  SPEAKER_00: for other products.
• 16:51
  SPEAKER_01: And also in terms of asset finance, we have seen also demand coming in for that product.
• 16:56
  SPEAKER_01: That's how we have positioned ourselves into have to and be looking forward to a good outcome.
• 17:01
  SPEAKER_00: And then something significant happened in terms of grouping relations to
• 17:05
  SPEAKER_00: the bank itself in Kenya.
• 17:06
  SPEAKER_00: This year has been very clear that they want a piece of the pie in the Kenyan ecosystem.
• 17:10
  SPEAKER_00: They want to raise a stake from 69% to around 85%, which is pretty significant.
• 17:14
  SPEAKER_00: What's driving that?
• 17:16
  SPEAKER_00: Would that affect the Kenyan subsidiary in terms of maybe plans
• 17:19
  SPEAKER_00: of full capital tech products and access to Pan-African opportunities?
• 17:22
  SPEAKER_00: Does that impact the business in any way?
• 17:24
  SPEAKER_00: You gave an update this morning on where the status of that is.
• 17:27
  SPEAKER_00: You can also give that update to our investors today.
• 17:30
  SPEAKER_01: Yes, ABSA Group is looking to increase shareholding to 85%.
• 17:35
  SPEAKER_01: It's work in progress, pending regulatory approval.
• 17:37
  SPEAKER_01: As and when that is received, then we should be able to communicate back to the markets.
• 17:41
  SPEAKER_00: Why are they doing it?
• 17:42
  SPEAKER_01: It's because they feel Kenya is a good growth prospect.
• 17:46
  SPEAKER_01: A lot of confidence really in the Kenyan economy.
• 17:49
  SPEAKER_00: In terms of changes that we anticipate,
• 17:52
  SPEAKER_00: if you look at it in
• 17:52
  SPEAKER_01: terms of technology and products,
• 17:55
  SPEAKER_01: they are led by our customers.
• 17:57
  SPEAKER_01: In terms of the products that we deploy into the market and in terms of the tech
• 18:01
  SPEAKER_01: to We anticipate that in terms of upskilling,
• 18:02
  SPEAKER_01: in terms of training,
• 18:03
  SPEAKER_01: in terms of getting African knowledge,
• 18:05
  SPEAKER_01: we anticipate that that is going to happen and therefore have an EVP really from
• 18:10
  SPEAKER_01: a staff perspective.
• 18:30
  SPEAKER_01: In terms of capital,
• 18:31
  SPEAKER_01: it makes it easier for us,
• 18:33
  SPEAKER_01: for Kenya, than to get capital from across the group, particularly in terms of FCY.
• 18:38
  SPEAKER_01: That's how I see it.
• 18:39
  SPEAKER_01: It depends on form and shape.
• 18:41
  SPEAKER_01: But in terms of products,
• 18:44
  SPEAKER_01: the products that we would have,
• 18:46
  SPEAKER_01: the customers will not be impacted because the products
• 18:48
  SPEAKER_01: that we would normally have are aligned to the Kenyan customer behavior.
• 18:53
  SPEAKER_00: And then also the syndicate,
• 18:54
  SPEAKER_00: I think there is potential change in law,
• 18:55
  SPEAKER_00: but they've been pushing up capital limits with some of their banks around.
• 18:59
  SPEAKER_00: Is part of the deploying capitals,
• 19:01
  SPEAKER_00: perhaps a group also seeking that the Kenyan subsidiary will look around
• 19:04
  SPEAKER_00: for opportunities ultimately mainly.
• 19:05
  SPEAKER_00: Is that something that you're acting in the markets?
• 19:08
  SPEAKER_01: Okay, in terms of growth, you can really achieve it in three ways.
• 19:11
  SPEAKER_01: You can have your organic growth,
• 19:13
  SPEAKER_01: which is what we've been talking about, how we grow our balance sheet.
• 19:16
  SPEAKER_01: We think about our payment capabilities.
• 19:19
  SPEAKER_01: That would be one of the areas in terms of how you can grow.
• 19:22
  SPEAKER_01: Number three, you can grow in terms of partnership.
• 19:24
  SPEAKER_01: How do you get the partnerships to the APSA franchise?
• 19:27
  SPEAKER_01: And number three would be now the inorganic.
• 19:30
  SPEAKER_01: We have appetite in terms of all the three drivers of growth.
• 19:34
  SPEAKER_01: As and when the opportunities arise, then we should be able to capitalize on them.
• 19:39
  SPEAKER_00: And then in terms of exiting entries in the recent two weeks,
• 19:42
  SPEAKER_00: there was the sale of the stake,
• 19:44
  SPEAKER_00: especially in ABSA Life Assurance and Fast Assurance in Kenya.
• 19:46
  SPEAKER_00: Give us a bit of context in terms of why that happened in the broader context
• 19:50
  SPEAKER_00: of what's happening across the group.
• 19:52
  SPEAKER_01: First of all,
• 19:52
  SPEAKER_01: to clarify,
• 19:54
  SPEAKER_01: Fast Assurance and ALAC businesses are not part of the ABSA Kenya bank numbers.
• 19:59
  SPEAKER_01: These subsidiaries are owned directly by the group and not per se subsidiaries of ABSA Kenya.
• 20:05
  SPEAKER_01: As with all strategies, then you do find that over time rules evolve.
• 20:09
  SPEAKER_01: It's a strategic view from a good perspective that these manufacturing entities,
• 20:13
  SPEAKER_01: particularly from an insurance perspective, are not part of the absolute strategy.
• 20:18
  SPEAKER_01: We have seen that happening across other African countries,
• 20:22
  SPEAKER_01: but it's purely an absolute kind of view.
• 20:24
  SPEAKER_01: That has no impact in terms of our numbers.
• 20:27
  SPEAKER_01: What we have is the bank assurance that it's fully owned.
• 20:30
  SPEAKER_01: We don't underwrite any risk.
• 20:32
  SPEAKER_01: It's more of a commission-led defense.
• 20:35
  SPEAKER_00: Curious case there in terms of how come it's not owned by the Kenyan subsidiary
• 20:39
  SPEAKER_00: or it's just group strategy?
• 20:40
  SPEAKER_01: It's group strategy and group structure in terms of where they want the manufacturing.
• 20:46
  SPEAKER_01: We call them the manufacturing entity to be held, part of a group structure.
• 20:50
  SPEAKER_00: And in terms of returns, the ROE declines slightly from 27% to around 21%.
• 20:56
  SPEAKER_00: What drove that generally?
• 20:57
  SPEAKER_00: And then could you give us context in terms of,
• 21:00
  SPEAKER_00: are you expecting a bit of a changing strategy to be able to recover that?
• 21:04
  SPEAKER_01: We are anticipating an improvement in two afters.
• 21:07
  SPEAKER_01: So if you remember in Q1, we were at about 19% from an ROE perspective.
• 21:14
  SPEAKER_01: We are currently at 21% a group in ROE.
• 21:17
  SPEAKER_01: And we anticipate that that momentum is going to continue over time.
• 21:21
  SPEAKER_01: It's really also a functional demand and supply.
• 21:24
  SPEAKER_01: And that shift has come from the softened performance over time.
• 21:28
  SPEAKER_01: But we see that correctly as we close the year.
• 21:32
  SPEAKER_00: One more question that I had for you is about deals and investments.
• 21:35
  SPEAKER_00: Are there any investments in terms of group capex that you're intending to make in
• 21:38
  SPEAKER_00: the second half of the year going into the next year in terms
• 21:41
  SPEAKER_00: of longer-term investment or the opex that the listeners should be aware of?
• 21:45
  SPEAKER_00: Then you did highlight a bit of public sector debt and advisory deals
• 21:48
  SPEAKER_00: that you were part of also in the first half of the year.
• 21:50
  SPEAKER_00: Maybe you can take the time maybe to explain to the audience some of the deals
• 21:53
  SPEAKER_00: that you were involved in the first half of the year and how you're planning for
• 21:57
  SPEAKER_00: the second half of the year to be met.
• 21:58
  SPEAKER_01: In terms of CAPEC and our outlook for CAPEC into half two,
• 22:02
  SPEAKER_01: we do have some builds that we are doing from a systems perspective.
• 22:06
  SPEAKER_01: The biggest of those would be our Tineza platform so that we continue to build
• 22:11
  SPEAKER_01: and anticipate to complete into half two.
• 22:14
  SPEAKER_01: In terms of the deals, we do have a significant pipeline that we are looking to convert.
• 22:20
  SPEAKER_01: And the areas that we are seeing some of these deals coming through from,
• 22:24
  SPEAKER_01: some of it is in trade.
• 22:26
  SPEAKER_01: That is a big one that we are looking to back into half-tall.
• 22:29
  SPEAKER_01: The other area really is in terms of asset finance.
• 22:33
  SPEAKER_01: We have seen asset finance coming through in Q1,
• 22:36
  SPEAKER_01: and we anticipate the trajectory to continue into half two.
• 22:40
  SPEAKER_01: And number three is on S&E,
• 22:41
  SPEAKER_01: but Q1 ecosystem model, where we're looking at the distributors and the retailers.
• 22:47
  SPEAKER_01: So we anticipate,
• 22:48
  SPEAKER_01: we have seen a bit of that momentum coming into Q2,
• 22:51
  SPEAKER_01: but the Hockey Sequel in terms of that growth, we anticipate it to come in Q4.
• 22:56
  SPEAKER_01: That is relief in terms of products or sectors.
• 22:59
  SPEAKER_01: That is where we anticipate our growth to be into Hafton.
• 23:03
  SPEAKER_00: A couple of questions are coming here for the listeners.
• 23:05
  SPEAKER_00: One is about additional branch openings.
• 23:07
  SPEAKER_00: Someone is asking,
• 23:07
  SPEAKER_00: there are some high potential areas like Silkemao,
• 23:09
  SPEAKER_00: Tawala, where ABSA has no presence.
• 23:11
  SPEAKER_00: Is there a strategy to perhaps actualize in that, fast-growing areas, but high potential?
• 23:16
  SPEAKER_01: It's a very important question.
• 23:18
  SPEAKER_01: And yes, we are looking to grow in those areas where we have a lot of footfall.
• 23:22
  SPEAKER_01: And really the models for the branches are going to change.
• 23:25
  SPEAKER_01: If you look at some of the branches that we have,
• 23:27
  SPEAKER_01: we are now calling them service centers where you have a fairly optimized space,
• 23:32
  SPEAKER_01: but you're still able to meet your customers at that point.
• 23:35
  SPEAKER_01: As and when we see increased footfall in certain areas like Kamakis,
• 23:41
  SPEAKER_01: then we are able to open branches and have an outlook in terms of
• 23:44
  SPEAKER_01: where those branches are going to be opened in the future.
• 23:46
  SPEAKER_00: There's another question on deposit growth.
• 23:49
  SPEAKER_00: Someone thinks that you're lagging behind the peers and whether there are strategies
• 23:52
  SPEAKER_00: to catch up in that regard, customer deposit and mobilization.
• 23:56
  SPEAKER_01: Still the same?
• 23:58
  SPEAKER_01: No, there has been deliberate action in terms of where we want to grow from
• 24:01
  SPEAKER_01: a customer deposit perspective.
• 24:03
  SPEAKER_01: And the areas that we are looking to grow is mainly custom.
• 24:07
  SPEAKER_01: And really, it's to optimize our blend over time.
• 24:10
  SPEAKER_01: We are looking to get stickier deposit into our book.
• 24:12
  SPEAKER_01: And how we're doing that really is in terms of partnerships that we have,
• 24:16
  SPEAKER_01: in terms of payment capabilities that we are building.
• 24:19
  SPEAKER_01: There is deliberate action to grow a book, but to grow it faster from a custom perspective.
• 24:25
  SPEAKER_00: Now, just to maybe summarize some of the key earnings from that one result
• 24:28
  SPEAKER_00: that you want our listeners to go home and remember in terms of the key aspects,
• 24:31
  SPEAKER_00: of course, the dividend is the most important.
• 24:33
  SPEAKER_00: And then after that,
• 24:34
  SPEAKER_00: you can also give us a bit of your perspective on what they should look out for in
• 24:38
  SPEAKER_00: the second half of the year in terms of the opportunities that you want to maximize
• 24:41
  SPEAKER_00: on and where are the areas of growth that you expect to be at.
• 24:44
  SPEAKER_00: Maybe we can remind the listeners on that.
• 24:46
  SPEAKER_00: And in the end, you can also pitch them why they should bank with Absa Bank Kenya.
• 24:50
  SPEAKER_01: Okay.
• 24:50
  SPEAKER_01: I think the most important, and you said in Mokaya, is the dividend performance.
• 24:54
  SPEAKER_01: If you remember, in 2021, we didn't have an interim dividend.
• 24:57
  SPEAKER_01: And then in 2022, 2023, 2024, 2025, it has largely been at 20 cents.
• 25:02
  SPEAKER_01: But now we are growing that into 50 cents.
• 25:05
  SPEAKER_01: About 150 growth in terms of appreciation to our shareholders.
• 25:08
  SPEAKER_01: But that's not where the story is.
• 25:10
  SPEAKER_01: The story is in terms of our share price performance.
• 25:13
  SPEAKER_01: So in 2023, our share price was at about 11.45.
• 25:16
  SPEAKER_01: We are currently Number two is in terms of asset growth.
• 25:32
  SPEAKER_01: We have seen,
• 25:33
  SPEAKER_01: and the balance sheet really is more of a leading indicator in terms of
• 25:36
  SPEAKER_01: where we're going to be in the future.
• 25:38
  SPEAKER_01: If we look at our customer assets,
• 25:40
  SPEAKER_01: that growth,
• 25:41
  SPEAKER_01: and in terms of how we are ramping up from a balance sheet perspective,
• 25:44
  SPEAKER_01: we expect that to continue all the way to fully expand.
• 25:47
  SPEAKER_01: And in terms of our diversified structure of our business,
• 25:51
  SPEAKER_01: and really when we look at it is in terms of how do we absorb shocks in the market.
• 25:55
  SPEAKER_01: If you look at our diversification agenda,
• 25:57
  SPEAKER_01: in terms of capital light businesses,
• 26:00
  SPEAKER_01: ones that don't require too much capital, they give you a very good return.
• 26:03
  SPEAKER_01: And most of these businesses,
• 26:05
  SPEAKER_01: in capital light and in terms of CTI,
• 26:08
  SPEAKER_01: they give you very good returns from an efficiency perspective.
• 26:11
  SPEAKER_01: If I give you a view in terms of how that agenda has been like,
• 26:15
  SPEAKER_01: if you look at our new business income streams, those are grown by 24% year-on-year.
• 26:19
  SPEAKER_01: We have like our custody business, yes, of a small base that is growing by faster than 100%.
• 26:25
  SPEAKER_01: We have our AML and bank assurance businesses that are growing by double-digit year-on-year.
• 26:30
  SPEAKER_01: If you're looking for financial services,
• 26:31
  SPEAKER_01: if you're looking for financial advice,
• 26:32
  SPEAKER_01: if you're looking for insurance,
• 26:34
  SPEAKER_01: if you're looking for a loan, then ABSA is going to serve you at your point of need.
• 26:51
  SPEAKER_00: One question that has just popped in,
• 26:53
  SPEAKER_00: are you thinking about any fintech acquisitions to spruce out that area of business?
• 26:58
  SPEAKER_00: Somebody is asking.
• 26:59
  SPEAKER_01: As we mentioned,
• 26:59
  SPEAKER_01: is that the three areas that we are considering in organic,
• 27:03
  SPEAKER_01: we are considering partnership.
• 27:05
  SPEAKER_01: For most fintechs would be partnerships.
• 27:07
  SPEAKER_01: And we're also considering inorganic growth where you would buy an additional entity.
• 27:12
  SPEAKER_01: As and when these opportunities arise,
• 27:14
  SPEAKER_01: we have the appetite and we'll come back to you when we have one
• 27:17
  SPEAKER_01: that fits our appetite.
• 27:19
  SPEAKER_00: Thank you so much for your inaugural future spaces.
• 27:21
  SPEAKER_00: I thank you for helping us handle the past half results.
• 27:24
  SPEAKER_00: I hope to have you in the full year, that you can break down the full year results.
• 27:27
  SPEAKER_00: And hopefully from the comments that I see a lot is that the holders are really,
• 27:30
  SPEAKER_00: really happy about the 150% increase in interim dividends.
• 27:33
  SPEAKER_00: They're hoping that you retain the same in the full year.
• 27:35
  SPEAKER_00: That should be a takeaway from the key investors that are speaking today.
• 27:39
  SPEAKER_00: It doesn't mean to make sure the message is home.
• 27:41
  SPEAKER_01: The message is well received.
• 27:44
  SPEAKER_00: But generally,
• 27:44
  SPEAKER_00: I think banks have been very generous in terms of the inter-imdiviances,
• 27:48
  SPEAKER_00: except for a few.
• 27:48
  SPEAKER_00: But I think we set a good trend for the rest of the bank earning season to speak.
• 27:52
  SPEAKER_01: The message is well received.
• 27:54
  SPEAKER_01: We have had our shareholders.
• 27:55
  SPEAKER_01: Yeah, we can talk at end of year.
• 27:57
  SPEAKER_00: Thank you so much for our listeners who joined us for Spaces.
• 28:00
  SPEAKER_00: Thank you, Absa Bank Kenya.
• 28:01
  SPEAKER_00: We hope to see you again in the full year.