Cooperative bank. Photo | courtesy.
Kenya’s banking sector registered a mixed performance in the first quarter of 2025, with notable improvements in profitability and capital adequacy, despite a slight dip in deposits and asset quality, according to the latest industry data.
The sector’s total asset base rose marginally by 0.4 percent to Sh7.67 trillion in March 2025, up from Sh7.65 trillion at the end of December 2024.
Gross loans also increased by 0.6 percent during the period, driven by strong lending activity in the personal and household, trade, and building and construction sectors.
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One of the most significant highlights was a sharp rise in pre-tax profits, which jumped by Sh15.1 billion to Sh73.5 billion in the quarter ended March 2025, up from Sh58.5 billion in the previous quarter.
This 25.8 percent increase in profitability was mainly attributed to Sh12.6 billion rise in quarterly income, coupled with a Sh27.6 billion decrease in expenses.
As a result, the sector’s return on equity (ROE) improved to 23.1 percent in March 2025, from 22.0 percent in December 2024. The capital adequacy ratio also saw an uptick, rising from 19.4 percent to 20.1 percent, reinforcing the sector’s financial resilience.
Despite the positive trends, the banking sector faced some headwinds. Total deposits declined slightly by 0.2 percent to Sh5.73 trillion, and asset quality weakened, with the ratio of gross non-performing loans (NPLs) to total loans rising to 17.4 percent, up from 16.4 percent in December 2024.
The deterioration was largely due to a 6.6 percent increase in NPLs outpacing loan growth.
Sector liquidity remained strong, increasing to 58.4 percent in March 2025 from 55.7 percent at the end of 2024 well above the statutory minimum of 20 percent.
