Absa Bank Kenya has more than doubled its interim dividend to Sh0.50 per share despite reporting a 9.8 percent decline in net profit for the half year ended June 2026.

The lender reported a net profit of Sh10.5 billion in the half year to June, down from Sh11.6 billion posted in a similar period last year. The lender's management attributed the profit drop to a lower interest rate regime, one-off costs and a slump in forex earnings.

Absa has paid an interim dividend of Sh0.20 per share over the last four years but increased the payout this year despite the drop in net profit, saying it has adequate capital to support loan book and deposit growth without breaching any regulatory capital requirements.

“We've done what we call stress tests on our business, and we are comfortable with our capital levels. So with that, we say we can distribute more earnings. It is not that we are not ready for business. We are, and actually our book has picked up so much,” Absa Bank Kenya interim CEO, Yusuf Omari, said.

This means that the lender will distribute Sh2.7 billion in dividends from the half-year earnings. The bank has a dividend policy of paying out 55 percent of its net earnings. Last year it paid out 53.1 percent of its earnings.

The bank, whose loan book has been shrinking recently, recorded an 8.1 percent growth in loans and advances to Sh329.8 billion, as the private sector's appetite for credit rebounded due to lower interest rates.

Management disclosed the bank disbursed Sh104 billion in the six months to June, with 64 percent issued in the second quarter between March and June, when private sector credit expansion has touched double digits.

The decline in lending rates follows the Central Bank's aggressive easing of monetary policy, with a reduction of its indicative rate, which has seen the average lending rate drop from 16.6 percent in January last year to 14.7 percent.

Despite the growth in the loan book, the bank’s interest income from loans declined 9.1 percent, capturing the drop in lending rates.

The bank's stance to grow its loan book has seen it divest from government securities, with its portfolio of Treasury bills and bonds shrinking by Sh5.2 billion. The divestiture and lower returns saw interest earnings from government securities drop by 9.2 percent, to Sh6 billion.

Earnings from forex trading took a 39.2 percent drop following stability of the Kenyan shilling, eliminating trading margins.

Absa’s non-performing loans shrunk by Sh8 billion, which, combined with the expansion in the loan book, saw its bad debt ratio drop to 10.1 percent against the industry average of 14.6 percent.

Customer savings with the bank increased by five percent to Sh380.6 billion, but its cost of deposits declined 19.8 percent, signalling a faster pace in the reduction in deposit rates.

Tax-free bonds

Absa Bank’s gross profit declined at a faster pace, recording a 15.7 percent drop, with the lender reducing its tax obligations by Sh1.5 billion. Management attributed the drop to investment in tax-free infrastructure bonds.

The bank disclosed it had incurred a one-off cost of Sh720 million early this year under the voluntary early retirement option granted to its staff. Absa also disclosed it had incurred Sh749 million to increase its digital capabilities as it pushes to launch new products which will see it partner with telecommunications firms.

Contribution from non-banking business, which includes bancassurance and custodial unit, grew 13.2 percent to Sh1.1 billion.

Mr Omari said the decision by its parent group to sell its stake in First Assurance and Absa Life Assurance Kenya will have no impact on the local unit.

Absa Bank is majority owned by South African Absa Group, which recently closed an offer to increase its shareholding in the bank by 16.5 percent to 85 percent.

Management said the results of the offer, in which the group was offering to buy shares in the market at a premium of Sh34.5 per share, will be released soon following its closure on August 11.

gngigi@ke.nationmedia.com