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Absa Bank Kenya Posts 10.0% Rise in Half Year Profits
Absa Bank (K) reported KES 16.80Bn profits before tax for the first half of 2025 (H1-2025), representing a 10.0% rise from KES 15.27Bn of H1-2024. The performance was supported by a low cost of financing its asset books, growths in non-funded income (NFI) and a low loan loss provisions. A faster rise in NFIs saw the Bank’s net interest income ratio to total income contribution decline from 72.3% to 71.0% while the NFI to total income expanded from 27.7% to 29.0%. The Lender’s operating expenses shrunk 11.2% to KES 14.66Bn on low loan loss provisions.
Overall profit after tax (PAT) were up 9.1% to KES 11.67Bn in H1-2025 from that of KES 10.71Bn on a higher effective tax rate of 30.5% in H1-2025 compared to 29.9% of H1-2024.
performance saw the bank’s earnings per share (EPS) up 9.1% from KES 1.97 to KES 2.15 (annualized EPS – 4.30). The annualized EPS stands at 4.40 with a P/E ratio of 4.6x and Price to book ratio of 1.2x of 16.4 book value per share (BVPS). The Bank’s Board of Directors declared a KES 0.20 per share interim dividend, whose book closure and payment dates are set for 19th September and 15th October, respectively.
We issue a HOLD recommendation on the Absa’s share price with an implied value of KES 21.50 per share, an 8.8% upside from the current price of KES 19.95 per share.
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Income Statement
Net interest income (NII) dropped 2.9% a decline in the Bank’s interest income. As such, the NII contribution to total income thinned from 72.3% in H1-2024 to 71.0% in H1-2025.
Total interest income shrunk 8.3% from KES 32.62Bn in H1-2024 to KES 29.91Bn held down by a sharp decline in interest income from loans and advances. Necessitated by interest rate cuts and low disbursements, the bank’s interest income from loans and advances dipped 18.2% from KES 27.35Bn to KES 22.38Bn. This is as the overall Bank’s loan book shrunk by 3.6% year on year (y-y).
During the reporting period, the official Central Bank Rate (CBR) dropped from dropped from an average of 13.0% in June 2024 to 10.75% in March 9.75% in June 2025 implying a significant drop in the Bank’s actual lending rate.
Interest from government securities however, went up 53.7% y-y from KES 4.31BN to KES 6.62Bn as the Bank went aggressive in investing in government papers. This was as credit score of many customers and businesses worsened despite the rate cuts which forced the bank to reallocate funds to government securities.
Consequently, government securities book expanded 86.2% y-y from KES 63.75Bn to KES 118.73Bn.
Interest expense plunged 21.3% from KES 9.62Bn to KES 7.57Bn to benefit from the above rate cuts and a rise in cheap customer deposits.
Non-funded income enlarged 3.3% from KES 8.83Bn to KES 9.12Bn elevated by increased activities on its digital loans.
Operating expenses were down 11.5% to KES 14.66Bn largely on low loan loss provisions. The Lender’s loan loss provisions contracted 37.9% y-y to 3.21Bn after its loan book dropped by KES 11.43Bn.
Quarter on quarter however, the Bank’s loan loss provisions jumped 18.7% as elevated its provisions to cushion against losses.
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Balance Sheet
Absa Bank Kenya’s total assets expanded 10.4% from KES 481.20Bn to KES 531.58Bn mainly on increased investments in the government securities witch attracted an additional KES 54.98BN to a total of KES 118.73Bn.
Total loans and advances thinned 3.6% from KES 316.37BN to KES 304.94Bn impacted by low loan disbursements which were offset by repayments.
Borrowed funds escalated 13.3% from 3.77Bn to KES 4.4.37Bn to prop the customer deposits in order to support the above growing government securities book.
Shareholders’ funds advanced up 21.9% y-y from KES 73.03Bn in H1-2024 to KES 85.51Bn pushed up by a rise in retained earnings which benefited from the overall rise in net profits.
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Key Ratios
Return on average assets (ROaA) rose from 4.3% to 4.5% to benefit from the above rise in net profits. The return on average equity (ROaE) however dropped from 30.1% in Q2-2024 to 26.8% in Q2-2025 on a faster rise in the shareholders funds compared to the rise in net profits.
Absa’s net interest margins (NIMs) declined from 11.0% in Q2-2024 to close Q2-2025 at 10.2% on a faster decline in the overall asset yield compared to the cost of funds.
The cost of funds dropped from 5.2% to 4.0% on a general decline in interest expense occasioned by rate cuts. Cost of risk declined from 3.2% in Q2-2024 to 2.1% in Q2-2025 on the decline in loan loss provisions.
The Banks gross non-performing loans (NPLs) rose from 11.4% in June 2024 to 13.1% in June 2025 against the industry average of 17.6% as of June 2025.
