Kenya’s banking industry is showing that falling interest rates do not necessarily mean weaker profits, with Absa Bank Kenya and Family Bank reporting stronger earnings in the first half of 2026 through different approaches to growth and cost management.
Family Bank recorded the biggest increase between the two lenders after its profit after tax climbed 62 per cent to Sh3.7 billion, compared with Sh2.2 billion a year earlier.
The improvement was supported by a strong rise in net interest income, which grew by 41 per cent to Sh9.7 billion during the six months.
The lender also reported growth in both loans and deposits after becoming listed on the Nairobi Securities Exchange in June.
Family Bank increased its operating costs during the period, spending Sh7.4 billion, an 11 per cent rise from the previous year.
The additional expenditure went towards technology, personnel and optimisation of its 97-branch network. The lender said the higher spending was part of its strategic plan and that income was growing faster than expenses.
The strong growth in earnings came despite the increased expenditure, with the bank recording a 62 per cent rise in profit after tax.
Absa Bank Kenya also posted a strong set of results, reporting Sh10.5 billion in profit after tax for the first half of 2026.
Unlike Family Bank, Absa kept a tighter grip on its costs while working to reduce the amount it spent on funding.
Its interest expense fell by 18 per cent to Sh6.2 billion, helped by an increase in lower-cost transactional deposits.
The reduction in funding costs helped the bank withstand the effect of lower interest rates, which also affected its revenue during the period.
Absa’s total revenue declined slightly to Sh29.3 billion. The lender said the fall reflected lower interest rates as well as its decision to share part of the benefit from cheaper funding with customers.
The bank nevertheless maintained a return on equity of 21.7 per cent.
Absa’s balance sheet continued to expand, with total assets reaching Sh558.1 billion during the period, while operating expenses stood at Sh12.1 billion.
The lender said its spending reflected disciplined investment in customer-focused transformation and digital innovation.
Credit-related costs also eased, with impairment charges falling by 4 per cent to Sh3.1 billion.
Absa Bank Kenya Interim managing director and CEO Yusuf Omari said the lender had maintained strong momentum despite the challenging business environment.
“Despite a challenging operating environment, the Bank recorded strong second-quarter momentum, driven by disciplined execution, customer support and continued investment in long-term resilience,” said Omari.
He added: “We are driving diversified growth through sector specialisation, strengthening capabilities in priority sectors, and pursuing operational excellence while unlocking new growth opportunities across our businesses,”
The performance comes as lenders adjust to an environment of lower interest rates, which can reduce the amount banks earn from loans and other interest-bearing assets.
Absa’s results show the benefit of bringing down the cost of deposits and other funding, while Family Bank’s figures point to the impact of expanding income while investing in areas expected to support future growth.
For Absa, the 18 per cent reduction in interest expense provided room to absorb pressure on revenue. Growth in transactional deposits also helped lower the cost of funds as the lender’s assets expanded.
Family Bank, meanwhile, recorded stronger growth in both lending and deposits following its NSE listing, giving the lender additional momentum during the period.
The two sets of results highlight the different ways lenders are responding to the changing interest-rate environment, with profitability being supported by a combination of stronger business activity, cheaper funding and spending decisions.