Headquarters Central Bank of Kenya (CBK) in Nairobi. Photo/ Courtesy.
Kenya’s commercial banks posted a combined pre-tax profit of Sh111.8 billion in the four months to April, reflecting stronger lending, wider interest margins and improving asset quality despite a challenging economic environment.
The latest industry data shows the sector’s earnings increased by 13.8 percent from Sh98.2 billion recorded during the same period last year.
The improved performance was supported by faster growth in lending as banks responded to pressure from the Central Bank of Kenya to lower borrowing costs. Total loans rose by 9.37 percent to Sh4.5 trillion, marking the fastest growth in the sector in two years.
Banks also maintained healthy profitability by reducing deposit rates faster than lending rates. Listed lenders cut interest expenses by 12.8 percent in the three months to March even as interest income increased by 3 percent.
The sector also recorded an improvement in loan quality. Non-performing loans declined to Sh693.9 billion, representing 15.4 percent of total lending, down from Sh724.2 billion or 17.5 percent a year earlier. The decline was driven by stronger loan recoveries, collateral auctions, resolved court cases and debt write-offs.
Customer confidence in the banking sector also remained strong. Deposits grew by 14 percent, increasing by Sh805.9 billion to reach Sh6.52 trillion. Deposit growth outpaced lending, allowing banks to channel more funds into government securities that continue to offer attractive returns.
The latest performance builds on the banking sector’s record pre-tax profit of Sh311.8 billion reported in 2025. Investor confidence has also strengthened, with the combined market value of the country’s 12 listed banks rising by 71 percent over the past year to Sh1.62 trillion.
The strong financial performance has coincided with increased merger and acquisition activity in the banking sector. South Africa’s Nedbank Group is seeking to acquire a 66 percent stake in NCBA Group in a deal valued at about Sh110 billion. The offer period for NCBA shareholders closes today, with the outcome expected on July 21.
Nigeria’s Zenith Bank completed the acquisition of Paramount Bank in April, becoming the fourth Nigerian lender operating in Kenya. South Africa’s Absa Group has also announced plans to increase its shareholding in Absa Bank Kenya to 85 percent from 68.5 percent through a transaction estimated at Sh30.9 billion.
Despite the strong performance, the banking sector faces external risks. Rising geopolitical tensions in the Middle East could push up global fuel prices and inflation, increasing pressure on household loan repayments and slowing private sector borrowing if interest rates rise again.
