The value of assets under Absa Bank Kenya’s custodial business has hit Sh40 billion five months after the lender returned to the niche segment, marking a payoff from its revenue diversification move.
Absa Kenya re-entered custodial service in February 2025, more than a decade after it sold a subsidiary that was engaged in similar operations to rival Standard Chartered Bank Kenya in 2010 for Sh3.5 billion.
Custodian services involve safeguarding and managing assets for individuals or institutions. These could include cash, stock certificates, bonds, and other financial instruments.
Absa Kenya said it has recorded high interest in custodial services and sees underlying demand from insurance companies, pension funds, and other corporates.
“Whenever our customers wanted custodial services, they were forced to go to other companies. We are now able to tell them they can do their business with us,” said Absa Bank Kenya Chief Finance Officer Yusuf Omari.
“It’s a slow-burn business because it is contract-based. We have so many clients waiting to complete their contractual period and have a very healthy pipeline of deals for custodial services.” Custodial services are one of four non-lending businesses of Absa Bank Kenya, with the others being asset management, bancassurance, and securities trading.
All four non-core businesses recorded a double-digit rate of growth in the six months ending in June 2025, helping the lender cushion itself from a slowing lending business.
Growth for bancassurance was, for instance, anchored on the launch of new products, including endowments and education policies, which deepened the unit, which initially began with just risk premiums on lending.
The asset management unit, meanwhile, nearly doubled the size of pooled funds or assets under management to Sh30.4 billion from Sh15.2 billion in June 2024. Absa Bank Kenya saw its half-year profit rise by nine percent to Sh11.6 billion from Sh10.7 billion previously, anchored largely on lower costs and higher non-interest funded income (NFI).
“Net interest income has come down, and that is expected because we have seen a sharp dip in interest rates. We have cushioned that by dropping our cost of funds, and our structure of deposits has completely changed,” added Mr Omari.
“Our non-funded income has picked up despite a drop in forex trading income. Revenue diversification has enabled us to reduce our reliance on NII by introducing new revenue streams.”
Net interest income for the lender softened by 3.1 percent to Sh22.3 billion from Sh23 billion, while NFI was up by 3.4 percent to Sh9.1 billion from Sh8.8 billion previously.
Lower costs, however, delivered most of the profit growth over the six months and were supported largely by a 37.3 percent reduction in loan-loss provision costs and improved efficiencies from digitisation. Absa Bank Kenya's cost-to-income ratio improved to 36.4 percent from 37.7 percent, mirroring the improved efficiency for the lender.
CIR measures a firm's operating expenses relative to its income and essentially indicates how efficiently a company manages its costs in relation to its revenue generation.
The lender saw its loan book shrink by 3.7 percent from Sh316.3 billion to Sh304.9 billion on reduced borrowing by households and businesses.
Customer deposits meanwhile rose by 2.2 percent from Sh353.3 billion to Sh361.3 billion on higher short-term savings and deposits.
The bank increased its investment in government securities in the six months by 86.4 percent to Sh118.6 billion from Sh63.6 billion.
The board of directors has recommended the payment of a Sh0.20 per share interim dividend, the same as last year, to be issued on or before October 15 to shareholders on its books as of September 19.
