Barclays Kenya upbeat on 2011 prospects
Barclays Kenya expects economic growth, investments in technology and a pre-emptive strike on costs to boost performance this year, its head said yesterday after posting expectation-beating 2010 results.
Majority owned by Britain’s Barclays Plc, the bank returned a 51% rise in its pre-tax profit for the year to 13,6 billion shillings in 2010, helped by the one-off sale of its custody business.
Its regional managing director Adan Mohamed said underlying profit, excluding the income from the sale of the custody business, jumped 20%.
“Whenever GDP grows by 5%, the financial sector has proved it can always grow by double that amount,” Mohamed told reporters after an investor briefing.
Officials in Kenya, which is east Africa’s largest economy, expect the economy to expand by around 6% this year from an estimated 5% growth in 2010.
“We are poised and prepared both in terms of people, in terms of technology and in terms of distribution channels to take advantage of the growth that this economy is going to present,” Mohamed said.
Barclays Kenya said last month it is laying off around 5% of its workforce in an effort to rein costs and support profit growth.
“Because we can’t predict very much what will happen to interest rates and revenue, we need to take some charge on what is going to happen to our costs going forward,” Mohamed said.
“By letting go of 200 people in January, we will save a big amount. It cost us about 800 million shillings to do that, we will recover that in about a year and a half and that is going to be coming into our bottom line.”
Its shares surged 12% to 70 shillings soon after opening of trade at the Nairobi bourse as analysts said the results strongly exceeded their expectations.
Stocks analysts said they had been expecting pre-tax profit growth of around 30%, including the one-off item.
“I can’t fault these results. The 70,00 shillings a share level is a two and a half year resistance and I expect a move through there,” said Aly Khan Satchu, an independent analyst.
Barclays Kenya more than doubled its dividend per share for the year under review and said it would split the shares into four for each held in order to improve trading of the shares.
Johnson Nderi, an analyst at Suntra Investment Bank, agreed with Mohamed’s assessment of the bank’s outlook.
“There is reason for optimism because they have also invested in their information technology systems,” Nderi said. The bank installed a new IT platform in July last year to enhance service.
Mohamed said the bank’s outlook also depended on the stability of interest rates, after sharp falls pressured their margins last year.
Loans and advances slid to 87 billion shillings in 2010 from 93,5 billion in the previous year while total deposits fell to 123,8 billion shillings from 125,9 billion in 2009.
Mohamed rejected claims that the fall in the loan book was a sign that the bank’s growth was flattening out, saying it reflected a cautious stance, which saw new lending slide.
“We are not in the game of wanting to replace shilling for shilling what you lost (as loans are repaid),” he said.
Loan loss provision more than doubled during the year to 1.199 billion shillings.
Its regional managing director Adan Mohamed said underlying profit, excluding the income from the sale of the custody business, jumped 20%.
“Whenever GDP grows by 5%, the financial sector has proved it can always grow by double that amount,” Mohamed told reporters after an investor briefing.
Officials in Kenya, which is east Africa’s largest economy, expect the economy to expand by around 6% this year from an estimated 5% growth in 2010.
“We are poised and prepared both in terms of people, in terms of technology and in terms of distribution channels to take advantage of the growth that this economy is going to present,” Mohamed said.
Barclays Kenya said last month it is laying off around 5% of its workforce in an effort to rein costs and support profit growth.
“Because we can’t predict very much what will happen to interest rates and revenue, we need to take some charge on what is going to happen to our costs going forward,” Mohamed said.
“By letting go of 200 people in January, we will save a big amount. It cost us about 800 million shillings to do that, we will recover that in about a year and a half and that is going to be coming into our bottom line.”
Its shares surged 12% to 70 shillings soon after opening of trade at the Nairobi bourse as analysts said the results strongly exceeded their expectations.
Stocks analysts said they had been expecting pre-tax profit growth of around 30%, including the one-off item.
“I can’t fault these results. The 70,00 shillings a share level is a two and a half year resistance and I expect a move through there,” said Aly Khan Satchu, an independent analyst.
Barclays Kenya more than doubled its dividend per share for the year under review and said it would split the shares into four for each held in order to improve trading of the shares.
Johnson Nderi, an analyst at Suntra Investment Bank, agreed with Mohamed’s assessment of the bank’s outlook.
“There is reason for optimism because they have also invested in their information technology systems,” Nderi said. The bank installed a new IT platform in July last year to enhance service.
Mohamed said the bank’s outlook also depended on the stability of interest rates, after sharp falls pressured their margins last year.
Loans and advances slid to 87 billion shillings in 2010 from 93,5 billion in the previous year while total deposits fell to 123,8 billion shillings from 125,9 billion in 2009.
Mohamed rejected claims that the fall in the loan book was a sign that the bank’s growth was flattening out, saying it reflected a cautious stance, which saw new lending slide.
“We are not in the game of wanting to replace shilling for shilling what you lost (as loans are repaid),” he said.
Loan loss provision more than doubled during the year to 1.199 billion shillings.
