Kenyan banks see record $2.16bn profit despite rate cuts

…digital transformation, wealth management, regional diversification drive earnings

Kenyan banks delivered record earnings in 2025 despite a rate-cutting cycle, highlighting the sector’s resilience and shifting revenue model.

The combined after-tax profit of 11 listed lenders attributed to shareholders rose by 15.7 percent to KSh280.4 billion ($2.16 billion) from KSh242.3 billion ($1.86 billion) in 2024, according to data compiled by Abojani Investment Limited from the banks’ latest financial statements.

The profit rebound marks a recovery from KSh83 billion ($638 million) in 2020 and KSh143 billion ($1.10 billion) in 2021.

The lenders include Equity Group, KCB Group, Co-operative Bank of Kenya, NCBA Group, Absa Bank Kenya, I&M Group Plc, Stanbic Bank Kenya, Standard Chartered Kenya, BK Group, Diamond Trust Bank Kenya and HF Group.

Shift from interest income

According to Abojani, Kenya’s banking sector remains well-capitalised and resilient, with more than seven banks now holding over KSh100 billion ($769 million) in shareholders’ funds. Nine of the 11 banks recorded profit growth, as revenues outpaced expenses.

“The operating environment last year was shaped by more stable macroeconomic conditions. Inflation aligned with the Central Bank of Kenya’s target, interest rates declined, the currency stabilised, and the Purchasing Managers’ Index improved—factors that collectively supported strong bank earnings,” said Purity Chege, research analyst at Abojani Investment, during an X Space discussion last week.

However, earnings are no longer primarily driven by interest income. Growth is increasingly coming from non-funded income streams, as loan expansion remained modest.

“Banks shifted focus towards efficiency and diversified revenue streams, allocating a significant portion of funds to low-risk instruments, while non-funded income continues to play a central role in business performance,” Chege said.

Looking ahead, she projects that banks appear well-positioned to withstand emerging shocks, despite the ongoing Middle East conflict, supported by strong capital buffers and adequate liquidity.

Wealth management, digital banking drive growth

Banks are also evolving into one-stop financial service providers, with wealth management emerging as a key revenue driver as customers seek higher-yield investment options beyond traditional deposits.

A breakdown of the data shows that Equity led the market with KSh72.0 billion ($554 million) in profit, contributing 25.7 percent of total sector earnings, followed by KCB (17 percent) and Co-operative Bank (11.5 percent).

HF, despite posting the lowest profit at KSh1.42 billion ($10.9 million), recorded the fastest growth, with earnings surging 236.4 percent.

But foreign lenders underperformed. Standard Chartered Kenya saw profit decline by 38 percent to KSh12.44 billion ($95.7 million), weighed down by higher costs, while Stanbic Bank Kenya posted flat earnings of KSh13.72 billion ($105.5 million).

Balance sheet expansion, capital strength

KCB closed the year with total assets of KSh2.1 trillion ($16.15 billion), followed by Equity Bank at KSh1.97 trillion ($15.15 billion) and Co-operative Bank at KSh827 billion ($6.36 billion), according to Abojani.

Equity recorded the fastest growth in shareholder funds, rising 32 percent to KSh309 billion ($2.38 billion). Both Equity and KCB have now crossed the KSh300 billion ($2.31 billion) mark in shareholders’ funds.

Seven banks ended the year with over KSh100 billion ($769 million) in capital, up from five in 2024, with Diamond Trust Bank and Absa Bank Kenya joining the group.

Wealth subsidiaries outperform

Wealth and asset management subsidiaries are becoming major profit centres.

Standard Chartered Kenya grew assets under management from KSh19 billion ($146 million) in 2016 to over KSh300 billion ($2.31 billion) in 2025, with its wealth unit recording an 89 percent rise in pre-tax profit to KSh2 billion ($15.4 million).

NCBA Investment posted a 224 percent surge in profit to KSh994 million ($7.6 million), with assets exceeding KSh100 billion ($769 million), while I&M Capital recorded a 970 percent jump in profit to KSh458.8 million ($3.5 million).

Absa Bank Kenya’s assets under management rose 170 percent to KSh46 billion ($354 million), while Co-operative Bank’s investment arm grew profit by 142 percent to KSh936 million ($7.2 million).

In bancassurance, Absa led the market with KSh1.3 billion ($10 million) in pre-tax profit, followed by Co-operative Bank at KSh1.16 billion ($8.9 million) and KCB at KSh808 million ($6.2 million).

Kenya attracts regional expansion

The strong performance comes as African banking giants increasingly target East Africa’s biggest economy for expansion, positioning it as a gateway to East Africa’s underbanked markets.

Lenders such as Standard Bank Group, FirstRand, Absa Group, Zenith Bank and Nedbank are expanding into the market as growth slows in their home economies. The push coincides with a retreat by global banks such as BNP Paribas and Société Générale, creating room for regional players.

The country’s advanced mobile banking ecosystem, led by M-Pesa, alongside supportive policies, continues to attract investment and accelerate digital banking adoption.

Capital requirements spur consolidation

Stricter capital requirements are also reshaping the sector. Data from Mwango Capital, anEast African based financial research firm show that 14 banks remain below the KSh5 billion ($38.5 million) threshold due by end-2026, including five below KSh3 billion ($23.1 million).

Some lenders are pursuing recapitalisation and mergers. Access Bank Kenya, with KSh1.1 billion ($8.5 million) in core capital, plans to merge with National Bank of Kenya to bridge its KSh1.9 billion ($14.6 million) shortfall, while Consolidated Bank is seeking a KSh1.125 billion ($8.7 million) Treasury injection.

MSME lending surges amid rate cuts

Kenya’s banking sector more than doubled its MSME lending last year, disbursing KSh326.5 billion ($2.51 billion), far exceeding the KSh150 billion ($1.15 billion) target.

The surge comes amid one of Africa’s most sustained easing cycles, with the Central Bank cutting rates by 175 basis points to 9.0 percent in December, and further to 8.75 percent in February 2026.

Equity Bank led MSME lending with KSh90.7 billion ($698 million), followed by KCB at KSh56.2 billion ($432 million) and Co-operative Bank at KSh37.6 billion ($289 million).

Profit boost driven by one-off factors

However, some analysts caution that the profit surge may not be entirely structural.

“The reduction in interest rates lowered banks’ cost of funds, supporting margins,” said Davis Kambale Tayo, a retired banker on Social Media X. “But the profit growth is partly a windfall, driven by write-backs of loan loss provisions and recognition of suspended interest income.”

He added that government settlement of pending bills helped clear non-performing loans, boosting bank earnings, even as loan book growth remained relatively subdued.