Barclays Posts Flat Quarterly Profit Following Re-branding Costs

Barclays Bank Kenya has posted Sh1.9 billion in earnings for the first quarter ended March 2019 following rebranding costs to ABSA.

Had it not incurred the expense which totaled Sh234.4 million, the bank’s net profit for the period would have risen to about 10 percent; more than Sh2 billion.

Investments in new banking systems and transitional service agreement costs for the provision of several services under the impending separation make up the additional costs.

The lender has disclosed that as part of its separation from Barclays Plc, based in London, it plans to spend billions of shillings for the rebranding of its branches and stationery while also refitting IT systems. This expenditure will affect its earnings for two more years.

“In 2019, the bank’s separation program will involve immense investments and implementation of over 70 technology-specific projects, which will further eliminate service dependency on Barclays Plc and move the bank to superior efficient, robust and customer-centered systems. I am happy to report that all technology changes achieved so far have been implemented with minimal impacts on our customer,” said Barclays Kenya Managing Director Jeremy Awori.

“The separation from Barclays Plc will have an impact on Barclays Kenya’s financial results over the next two years”.

Despite having separation costs eat into its year to date earnings, Barclays’ saw its other performance indicators remain on course for growth. This was shown largely by the increase in both interest and non-interest funded income.

The bank’s total interest income stood at Sh7.4 billion; reflecting a 7.1 percent growth. This is as investment in government bonds and T-bills rose 24 percent to Sh83.1 billion. On the other hand, non-interest income which includes commissions and fees increased by 14 percent to Sh2.5 billion.

Barclays’ interest expenses jumped 38.8 percent to Sh2 billion which is a partial reflection of a 15.8 increase in customer deposits which stood at Sh15.4 billion.

In addition, the bank’s operating costs dropped marginally to Sh4.9 billion, which was a boost to its bottom-line. Loan loss provision was increased by 10.6 percent to Sh636.6 million while gross defaults grew 22 percent to Sh15.4 billion.

ABSA, Barclays’ parent company, will be expected to help absorb part of the separation expenses through either the provision of capital or forfeiture of part of its dividend entitlement.

This arrangement is designed to assist the lender to maintain dividend payouts to minority shareholders over the transition period.