Absa Group is preparing to dilute its heavy strategic reliance on Kenya, aiming to spread its earnings risk across a wider African footprint. In a candid address to investors this week, Group Chief Executive Kenny Fihla flagged the lender's deep concentration in just three markets—South Africa, Ghana, and Kenya—as a structural vulnerability that must be fixed.

The announcement presents a complex paradox for the Nairobi unit. While Absa Bank Kenya remains a crown jewel in the group’s portfolio, posting a robust 15 percent profit jump to KES 16.9 billion in the nine months to September, the Group leadership in Johannesburg now views this dominance as a double-edged sword. If Kenya sneezes, the entire Group risks catching a cold.

The Concentration Trap

Fihla’s strategy is not about shrinking Kenya, but about growing everything else to match it. Currently, South Africa accounts for roughly two-thirds of the Group's revenue, with the remainder of its African earnings heavily skewed toward Accra and Nairobi. This lack of balance leaves the lender exposed to localized economic shocks.

"Within African regions, we are overly dependent on Ghana and Kenya and want to increase the contribution from the other countries," Fihla noted during a pre-close strategy update. He pointed to Ghana’s recent sovereign default as a cautionary tale of what happens when a key market stumbles.

For the Kenyan observer, the message is clear: The Group loves the returns from Nairobi but fears the exposure. With Kenya grappling with its own fiscal tightrope—marked by recent social tensions and tax revenue shortfalls—Johannesburg is keen to hedge its bets.

Looking Next Door: The New Frontier

To rebalance the scales, Absa is turning its gaze to Kenya’s neighbors. The lender has earmarked Tanzania, Uganda, and Mozambique as the next engines of growth, citing massive infrastructure investments and untapped banking potential in these markets.

The diversification plan rests on three pillars:

• Bolt-on Acquisitions: Buying smaller banks or fintechs to rapidly scale up market share in under-penetrated regions.
• Infrastructure Financing: Capitalizing on state-led projects in Tanzania and Uganda, sectors where Absa has traditionally lagged behind rivals like Standard Bank.
• Organic Growth: Pushing digital banking solutions to capture the unbanked populations in Mozambique and beyond.

"We see massive opportunities in Tanzania and Uganda given significant infrastructure investment," Fihla emphasized, signaling that the era of Kenya carrying the regional burden is coming to an end.

Nairobi's Resilience Amidst the Shift

Despite the strategic pivot at the Group level, the Kenyan subsidiary continues to fire on all cylinders. Under Managing Director Abdi Mohamed, Absa Kenya has navigated a high-interest rate environment and a volatile shilling to deliver double-digit growth.

Mohamed attributed the unit's performance to "disciplined cost control and a sharp fall in loan impairments," proving that the bank can thrive even when the macro-economic winds are blowing against it. However, Group Financial Director Deon Raju cautioned that monetary shifts are coming, noting that rate reductions in Kenya could squeeze margins in the short term.

"We’ve seen rate reductions in Kenya... so that will be more of the theme," Raju said, hinting that the record-breaking profitability seen in 2024 might face headwinds in the coming year.

As Absa Group chases a return on equity (RoE) of 16 percent by 2026, the mandate for Nairobi is to maintain stability while the rest of the continent plays catch-up. For now, Kenya remains the favorite child—but the family is definitely looking to adopt.