Absa Bank Kenya Profits Soar 14.9% on Low Cost of Financing
Absa Bank Kenya posted KES 24.21Bn profits before tax (PBT) for the first three quarter of 2025 (Q3-2025), representing a 14.9% growth from that of KES 21.06Bn reported same period in 2024. The stellar results were supported by a low cost of financing, improved non-funded income (NFI) and a prudent cost management, which offset faster the decline in interest income. The low cost of financing benefited the easing monetary policy rates while the rise NFIs were aided by the bank’s revamped digital lending and payment channels. Declines in loan loss provisions contained the overall operating costs at a 13.0% decline year on year (y- y) to KES 22.35Bn.
Profits after tax (PAT) jumped 14.7% up y-y to KES 16.92Bn in Q3-2025 up from KES 14.75Bn in Q3-2024.
Quarter on quarter, pre-tax profits were down 7.7% to KES 7.41Bn in relation to KES 8.02Bn on Q2-2025 occasioned by low disbursements and low lending rates. This is even as quarterly performance saw Q1-2025 stand out with KES 8.78Bn in PBT, followed by Q2-2025 with KES 8.02Bn and Q3-2025 with KES 7.41Bn. The slow-down in quarterly profits were impacted by the thinning official base lending rates which dropped from 12.75% by end of September 2024 to 9.75% by end of September 2025.
The Bank’s performance saw its earnings per share (EPS) up 14.8% from 2.71 to 3.11 while pushing its price to book ratio 1.4x with a book value per share of KES 17.40. We retain a HOLD recommendation with a revised price of KES 26.09 per share, a 5.2% upside from the current pricing of KES 25.00 per share.
The Board of Directors did not issue any additional interim dividend. The Bank however, had issued an interim dividend of KES 0.20 in August 2025 (paid out on 15th October 2025) and is projected to pay a final dividend of between KES 1.75 and KES 2.00 per share for a dividend yield of between 8% & 9% from the current price.
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Income Statement
Overall net interest income (NII) contracted 4.6% year on years (y-y) from KES 34.53Bn in Q3-2024 to KES 32.95Bn in Q3-2025 eroded by what the lender attributed to squeezed interest margins as the base lending rates narrowed down. Q-Q, the NII rate of decline slowed down.
Interest income from loans land advances sunk 19.7% y-y from KES 40.59Bn to KES 32.60Bn impacted by above rate cuts and a marginal decline in the bank’s loan book from KES 311.46Bn to KES 309.72Bn. Consequently, the yield on loans and advances decelerated from 16.7% in Q3-2024 to 14.0% in Q3-2025.
Interest from government securities however, climbed 53.6% y-y from KES 6.59Bn to KES 10.12Bn supported by the bank going aggressive in securities investing. Unlike loans, the securities book expanded 69.5% y-y from KES 72.45Bn by end of Q3-2024 to KES 122.78Bn at the end of Q3-2025. The shift to government securities saw the yield on securities enlarges from 11.9% in Q3-2024 to 12.3% in Q3-2025 despite a faster drop in the yields on these papers.
Interest expense dwindled 21.9% from KES 14.11Bn as at Q3-2024 to KES 11.02Bn in Q3-2025, occasioned by low cost of deposits and other financing from banking institutions. During the period, the cost of deposits plunged from 5.1% as of Q3- 2024 to 3.8% by end of Q3-2025, impacted by the above rate cuts.
Non-funded income (NFI) advanced up 11.2% y-y from KES 12.23Bn to KES 13.61Bn mainly rallied by other fees and commissions which we view to be the digital loans. Estimations point to a disbursement of above KES 18.00Bn short-term loans on Timiza alone.
Stability in the forex market however, saw foreign exchange trading income dip 4.8% y-y to KES 4.53Bn.
Operating expenses fell 13.0% from KES 25.70Bn to KES 22.35Bn to gain from low loan loss provisions and a contained staff cost. Loan loss provisions dropped by almost half from KES 8.03Bn to KES 4.85Bn largely on low disbursements and some bad loan recoveries.
Excluding loan loss provisions, operating expenses were contained at 1.0% decline from KES 17.68Bn to KES 17.50Bn.
Staff costs were down 1.9% y-y from KES 9.81Bn to KES 9.63Bn despite the annual wage adjustments for inflations which signals to an adoption of digital solutions.
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Balance Sheet
Total assets expanded 14.4% from KES 484.35Bn in Q3-2025 to KES 554.32Bn mainly benefitting from increased asset allocation to government securities. Assets held in Kenya Government and other securities for trading accelerated up 75.8% from KES 25.09Bn to KES 44.11Bn.
Focus on government papers saw total investment held to maturity and that available for sale surge 69.5% from KES 72.45Bn to KES 122.78Bn. This was as the bank went aggressive to optimize returns from these securities before the rates stabilize further down.
Shareholders’ funds ballooned 22.0% y-y up from KES 77.32Bn to 94.36Bn propelled by better profits which in turn pushed the retained earnings 17.5% up to KES 94.36Bn.
Customer deposits improved 9.2% from KES 351.80 to KES 384.32Bn to support the loan book and other investments. This is despite their cost easing quite faster.
Loans and advances however, declined marginally at 0.6% from KES 311.46BN to KES 309.782Bn.
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Key Ratios
In spite of the above decline in the cost of funds, the overall net interest margins edged down from 10.9% to 9.9% in the quarter. This was largely occasioned by low asset yields constrained by the declining interest rates.
Declines in loan loss provisions saw the overall cost of risk decline from 3.3% in Q3- 3034 to 2.1% in Q3-2025. The Bank’s non-performing loans (NPLs) declined from12.5% to 13.0% but remained below the industry average of 17.1% recorded September 2025.
Return on average assets (ROaA) improved from 3.9% in Q3-3034 to 4.3% in Q3- 2025, supported by a faster rise in profits in relation to total assets. Return on average equity (ROaE) however, dropped from 26.8% in Q3-2024 to 25.1% in Q3- 2025 strained by a faster rise in shareholders’ funds compared to profits.
