FD Yusuf Omari explains investing in automation, client-facing talent

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Yusuf Omari, the finance director of Absa Bank Kenya, boasts an illustrious 20-year career in the banking sector, clearly demonstrating his deep-rooted expertise in financial management and strategic leadership. He recently unpacked the bank's full financial year results.

Yusuf Omari, the finance director of Absa Bank Kenya, boasts an illustrious 20-year career in the banking sector, clearly demonstrating his deep-rooted expertise in financial management and strategic leadership.

Before joining Absa, Yusuf honed his skills as a senior auditor at KPMG, where he gained invaluable insights into auditing practices and financial analysis. With a solid foundation in auditing and finance, he is a seasoned professional with a wealth of knowledge in banking operations, financial governance and executive management.

Yusuf holds a bachelor’s degree in economics and an MBA in strategy. He served as interim managing director at Absa Bank Kenya for 6 months, from November 2022, when the then MD Jeremy Awori resigned to take up the CEO position at Togolese lender Ecobank.

Yusuf resumed his position as finance director when the MD of Absa Bank Tanzania Abdi Mohamed took on the CEO position at Absa Bank Kenya.

Growth in loans, advances

Speaking on the release of the full financial year results for Absa Bank Kenya, Yusuf celebrated the growth in loans and advances by 18 percent to Ksh336 billion.

“In absolute figures, loans increased by Ksh56bn in 2023. We have seen double digit growth rates in all key major segments namely mortgages, secured lending and trade loans in corporate and business banking. Because two-thirds of our lending is denominated in local currency, we have been insulated somewhat from currency fluctuations,” he said.

“We have changed from three to four years ago where the consumer business took the lion’s share, to corporate lending which now includes a significant portion being lent to SMEs. Customer deposits grew by 19 percent to Ksh363 billion which is funding the asset growth. For the first time, deposits are split fifty-fifty between consumers and the wholesale business,” he added.

Yusuf noted that the proportion of deposits had shifted from 80 percent local and 20 percent foreign to a 70:30 local-foreign split. On the income statement side, revenue grew by 19 percent “with new business contributing materially to the topline growth”. The increase in interest revenue was partly a consequence of rate increases by the Central Bank of Kenya.

“[The] Service fee has increased by 10 percent which tells us that our customers are not only keeping money with us, but they are also transacting with us on a regular basis through our different channels. Card fees increased by over 50 percent meaning the economy has picked up after Covid and customers are now using their cards for transactions with increased frequency,” Yusuf explained.

Looking at costs, he stated that the bank has invested a lot in automation with 98 percent of transactions now occurring outside traditional branches, as opposed to 92 percent in the year ended 31 December 2022. This has resulted in efficiency in service delivery and consequently the bank continues to invest heavily in back-end automation and software licences.

Foreign exchange and taxes

“We are also investing in people and consequently our staff costs increased by 12 percent. We hired over 500 people during the year with a focus on customer-facing talent in order to improve our services and grow our revenue. Overall, our cost to income ratio has continued to decline over the past three years; it has come down to 39 percent in 2023 from 48 percent in 2020,’ Yusuf said.

There was a significant increase in impairment expense relating to loans advanced to customers. Yusuf explained that this was as a consequence of the increase in lending which results in higher expected credit losses. The macro-economic environment was also unfavourable in 2023 with foreign exchange fluctuations and fiscal increases in taxes which impacted some borrowers particularly in the manufacturing sector.

Whereas the non-performing loans ratio went up from 7.3 percent to 9.6 percent, Yusuf expressed confidence that Absa Bank is still among the best in the industry given that the industry average is 14.8 percent. Profit after tax grew by 12 percent to Ksh16.4 billion.

“For the first time our balance sheet has crossed the half a trillion mark to Ksh520 billion total assets up 9 percent from Ksh477 billion in the prior year. We have managed double digit growth in the last three years and we aim to make this our mantra. We believe we have delivered a good set of results and have a very good base for 2024. This traction should become clear when we release our first quarter results,” Yusuf concluded.

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