Absa Bank Kenya has posted a 28.9 percent growth in half-year net profit to Sh10.7 billion, up from Sh8.3 billion last year on higher income from lending.

The lender’s total operating income improved by 16.4 percent in the period to Sh31.8 billion, up from Sh27.3 billion supported largely by a 19.7 percent jump in net interest income.

Absa benefited from the high rate environment in the six months to net Sh32.6 billion in total interest income, compared to Sh25.2 billion previously even as its loan book stagnated, slipping marginally by 0.5 percent to Sh316.3 billion.

The repricing benefit, however, hit the bank’s funding base with total interest expenses rising by 60 percent to Sh9.6 billion from Sh6 billion previously as Absa forked out Sh8.8 billion, a sum nearly two times higher than the Sh4.6 billion in customer deposit costs at the same time last year.

The bank’s customer deposits rose 5.9 percent to reach Sh353.3 billion from Sh332.5 billion last year.

Non-interest funded income for the group equally improved in the half-year cycle, albeit at a slower rate of 8.6 percent to touch Sh8.8 billion from Sh8.1 billion. The non-interest revenue was anchored on the lender’s business diversification strategy, which includes bancassurance and asset management.

“We have recorded growth in a dynamic environment and we continue to invest in our technology, brand, and people to ensure that our performance remains sustainable into the future,” Absa Bank Kenya chief executive officer Abdi Mohamed said on Monday.

Despite increasing investments in areas such as new hiring and technology infrastructure, Absa’s total operating expenses grew at a pace below that of revenues at 8.5 percent to Sh16.5 billion from Sh15.2 billion.

The marginal expenses growth was supported in part by a hold in loan-loss provisioning costs at Sh5.1 billion with the lender noting improved recoveries, especially on its wholesale business.

Nevertheless, Absa has seen its gross non-performing loans rise by 22.4 percent to Sh39.3 billion from Sh32.1 billion with its ratio of non-performing loans at 11.2 percent.

The slowdown in the bank’s lending to customers and truncated holdings in government securities has seen Absa’s net assets dip slightly by 4.5 percent to Sh481.4 billion from Sh503.7 billion previously.

The bank said that during the period, borrowers opted for shorter-term facilities to manage loan costs.

“Retail customers are shying away from term loans and if they do, they are looking for variable terms,” Absa Kenya CEO said.

The bank, however, expects the demand for credit to rebound into 2025 amid expectation of further interest cuts by the Central Bank of Kenya (CBK). The CBK cut its benchmark lending for the first time in four years to 12.75 percent this month from a high 13 percent.

Absa Bank Kenya has retained its interim dividend at 20 cents per share, to be paid on or about October 15 to shareholders on its register as at the close of business on September 20.