Kenya’s commercial banks recorded a combined pre-tax profit of Sh111.8 billion in the four months to April 2026, reflecting strong growth in lending and improved asset quality that has boosted the sector’s earnings.
Data released by the Central Bank of Kenya (CBK) shows the banks’ pre-tax profit increased by 13.8 percent from Sh98.2 billion recorded during the same period last year. The figures cover the banks’ operations within the Kenyan market.
The banking sector’s loan book expanded by 9.37 percent to Sh4.5 trillion, up from Sh4.1 trillion a year earlier, allowing lenders to generate higher interest income.
The increase represents the fastest credit growth recorded in the sector over the past two years, following measures by the Central Bank of Kenya to encourage commercial banks to reduce lending rates and increase credit to the private sector.
Melodie Ndanu, a research analyst at Standard Investment Bank, said banks continue to benefit from lower funding costs while expanding their balance sheets through increased lending and investments.
“Banks are really making the most of lower funding costs and benefiting from more income sources. They’re growing their balance sheets, too, thanks to growing private-sector credit and investments in government securities,” she said.
Banks have also reduced the interest paid on customer deposits at a faster pace than they have lowered lending rates, helping preserve and expand their profit margins.
Financial results for listed banks during the three months to March showed interest expenses declined by 12.8 percent, while interest income increased by 3 percent, reflecting the widening gap between deposit and lending rates.
The sector also recorded an improvement in loan quality, with non-performing loans falling to Sh693.9 billion, equivalent to 15.4 percent of the total loan book, from Sh724.2 billion or 17.5 percent a year earlier.
The decline in bad loans enabled banks to reduce provisions set aside for potential loan losses, further strengthening profitability.
Industry analysts attribute the improvement in asset quality to aggressive debt recovery efforts, including the sale of collateral, settlement of court disputes involving defaulting borrowers and the write-off of unrecoverable loans.
Customer deposits also continued to grow, increasing by 14 percent, or Sh805.9 billion, to reach Sh6.52 trillion during the review period.
The faster growth in deposits compared to private sector lending indicates that banks continued to channel a significant share of their funds into government securities, including Treasury bills and bonds, which have continued to offer attractive and relatively risk-free returns.
Banks are also benefiting from diversified sources of income, including wealth management services, bancassurance and regional operations for institutions with subsidiaries outside Kenya.
According to Ndanu, growing income from non-interest businesses and increased use of digital banking channels have helped lenders lower operating costs while expanding revenue streams.
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