Absa Bank Kenya has made a comeback into the custodial business, part of its broader strategy to diversify revenue streams. The bank has hit a milestone, with assets under its custodial business now standing at Sh40 billion in just five months since it re-entered the segment. This is a good payback for the bank’s efforts to tap into new revenue sources.
Re-entering Custodial Services After a Decade
Absa re-entered the custodial services market in February 2025, a decade after it sold a subsidiary in the same line of business to Standard Chartered Bank Kenya in 2010 for Sh3.5 billion. Custodial services, which involve safeguarding and managing assets like shares, bonds, cash and other financial instruments are in high demand.
Since re-entry, Absa has seen strong interest in these services, particularly from insurance companies, pension funds and other corporate entities looking for a reliable manager for their assets. According to Yusuf Omari, Chief Finance Officer at Absa Bank Kenya, customers had to go elsewhere for custodial services before. Now they can do business with Absa, which has positioned itself as a trusted provider in this space.
A Slow Burn Business with Good Prospects
Custodial services may be a slow burn business due to its contractual nature but it’s expected to continue growing for Absa. Omari says the bank has a healthy pipeline of deals and is seeing a lot of demand from clients who are waiting to complete their contractual periods before switching to Absa’s services. This steady growth in custodial contracts puts Absa in good stead for the long haul.
In addition to custodial services, Absa Bank Kenya also has three other non-lending businesses: asset management, bancassurance and securities trading. Together these four business lines have helped the bank to cushion itself from the slowdown in lending business.
Strong Performance in Non-Lending Businesses
Absa’s non-lending business units all grew by double digits in the six months to June 2025 and helped the bank to navigate the lending challenges. For instance the bancassurance unit grew strongly thanks to the introduction of new products including endowment and education policies which expanded its offerings beyond just risk premiums.
Meanwhile the asset management division has almost doubled the size of its pooled funds or assets under management (AUM) from Sh15.2 billion in June 2024 to Sh30.4 billion in June 2025. This growth in AUM is a clear indication that Absa’s diversified strategy is working.
Strong Financials and Profit
Absa Bank Kenya’s half-year profit grew by 9% to Sh11.6 billion from Sh10.7 billion last year. This profit growth was driven by lower operating costs and non-interest funded income (NFI) which offset the decline in net interest income (NII). Omari said net interest income had dropped by 3.1% mainly due to the sharp drop in interest rates.
Despite the drop in NII, Absa managed to improve its cost-to-income ratio (CIR) to 36.4% from 37.7%. This was achieved through digitization and a 37.3% reduction in loan-loss provision costs.
Diversification Amid Reduced Borrowing
The bank’s loan book shrunk by 3.7% to KES 304.9 billion as households and businesses slowed down on borrowing. However, customer deposits grew by 2.2% to KES 361.3 billion driven by growth in short-term savings and deposits.
Absa also increased its investment in government securities by 86.4% to KES 118.6 billion from KES 63.6 billion. This is a strategic shift as the bank focuses on securing stable returns in a tough lending environment.
Interim Dividend for Shareholders
In addition to the good performance, Absa Bank Kenya has declared an interim dividend of KES 0.20 per share same as last year. The dividend will be paid to shareholders on or before 15th October to those listed in the bank’s records as of 19th September.
Conclusion: A Bright Future for Absa’s Diversified Business Model
Absa’s growth in custodial services and non-lending businesses shows the bank’s ability to adapt to changing times. By focusing on revenue diversification, digital innovation and cost management Absa is well positioned to weather the economic storms and grow sustainably going forward.