Absa re-enters custodial business after the sale of unit to StanChartWednesday March 22 2023
Absa Bank Kenya is set to re-enter the custodial services business nearly 13 years after it sold a subsidiary that was engaged in similar operations to rival Standard Chartered Bank Kenya.
The return is part of the lender’s move to grow and further diversify its revenue streams.
“We got our custody license last year and are now at an advanced stage of launching it. We have recruited the teams, invested in them and are putting processes behind it before launching,” Absa interim managing director Yusuf Omari told the Business Daily.
Absa has been diversifying its operations away from just lending with its business lines increasing by four-fold to cover new avenues including securities brokerage, fixed trading and investment banking advisory as it seeks to become a fully-fledged financial services provider.
“The main revenue line for the custody business is from the fee you are charging, but when you are able to go offshore and bank those clients, that means that you are able to earn foreign exchange as part of the custodial business,” said Mr Omari.
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The custody line involves financial institutions such as banks holding customers’ securities –including stocks and bonds— for safekeeping.
Beyond safekeeping, custodial banks can manage customers’ accounts and transactions, manage the settlement of financial transactions and aid clients in tax compliance.
In 2010, Stanchart acquired the custodial services unit of Absa, which was then trading as Barclays Bank of Kenya. Absa said it booked Sh3.544 billion as net income from the transaction.
The deal was part of a wider acquisition of Barclay’s custody businesses across the continent including units in Botswana, Ghana, Mauritius, Tanzania, Uganda, Zambia and Zimbabwe by units of UK-based multinational Standard Chartered Plc.
The decision to dispose of the custody business was largely seen as a group decision made by its then-parent firm Barclays Plc headquartered in the UK.
Absa, which has completed its separation from the British bank, has over the past three years made new strategic decisions aligned with the growth ambitions of its new South Africa-based parent firm Absa Group.
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This has emboldened Absa to venture into new areas including increased lending to small and medium enterprises and the launch of digital lending products such as Timiza.