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Falling rates, settlement of pending bills lifts Absa's loan book quality
ABSA Bank CEO Abdi Mohamed delivering his speech during the ABSA Bank Kenya 2023 Sustainability report launch at Serena hotel in Nairobi on September 5, 2024.
Falling lending rates and the start of settlement of pending bills by the government have enabled Absa Bank Kenya place a tight leash on its stock of bad debt, with the gross non-performing loans remaining flat at Sh44.3 billion at the close of September.
The bank’s stock of dud loans has been unchanged since the start of 2025, a reversal from the surge witnessed in 2024 when the pile of bad debt grew by 20.5 percent to Sh42.5 billion in the twelve months that ended on December 31, 2025.
The Central Bank of Kenya has slashed its benchmark rate by 325.0 basis points (3.25 percentage points) to 9.25 percent since the start of 2024, a move aimed at signaling banks to lower interest rates and boost credit flow into the economy.
Commercial bank lending rates have fallen from a peak of 17.22 percent in November 2024 to 15.17 percent in August 2025.
The bank says it now banks on the introduction of a new risk-based pricing model effective December 1st, to further bolster credit uptake.
“The stock of non-performing loan is now shifting positively and one can just see the weight of the high interest rates environment that we have come out of. With the rates coming down, we have seen improvement in the ability of borrowers to resume servicing their facilities. What the Central Bank is doing with the introduction of Kesonia, we expect a lot more predictability and stability in the lending rates environment. It also promises to introduce quicker transmission of Central Bank signaling”, Absa Bank Kenya’s Managing Principal for Corporate and Investment Banking, James Agin, says.
The bank also cites the start of settlement of roads sector pending bills as a key factor in the trends being seen in the stock of bad debt.
According to data from the Ministry of Transport, out of 875 verified roads sector contracts that have pending bills, 664 have had their dues cleared following a Sh104.0 billion bridge facility secured by the government. It was secured through securitisation of Sh7.0 out of every Sh18.0 Roads Maintenance Levy collection.
“We have seen consecutive tranches of securitisation transactions taking place and with pending bills beginning to be settled, we are seeing facilities that were stuck for a long time starting to be settled. I think the worst is behind us because for us as a bank, we now have a number of touch points where we can confidently say we are seeing consumer spending picking up because of the settlement of pending bills,” Agin says.
