Top lenders smile to the bank with Sh141 billion profits

A mobile phone with loan application App. [Getty Images] 

While Kenya’s broader economy grapples with headwinds, the banking sector has emerged as a remarkable outlier, seemingly ‘smiling to the bank’ with a combined post-tax profit of Sh141 billion in the last financial year alone for some top lenders. 

This stark contrast to the prevailing corporate gloom across other sectors has prompted analysts to dissect the factors driving this unexpected prosperity. 

How did Kenyan banks manage to thrive in a tough economy, delivering substantial returns to their shareholders as others struggled?

The impressive Sh141 billion figure, derived from the published end-year financial results of Co-operative Bank, Standard Chartered Bank Kenya (StanChart), KCB Group, Stanbic Holdings, and Absa Bank Kenya, paints a picture of a sector defying the odds. 

Notably, Equity Group, Kenya’s largest lender by customer base, and other mid-tier banks are yet to release their financials, suggesting the overall sector performance could be even more robust.

The narrative is one of significant dividend payouts, a welcome ‘bountiful season’ for income-hungry shareholders. StanChart, for instance, announced a record Sh17 billion dividend payout, exceeding half of its previous year’s distribution. 

This came on the heels of a 45 per cent surge in net earnings, reaching Sh20 billion.  KCB Group shareholders are poised to receive Sh9.6 billion, a reward for the bank’s 64.9 per cent profit surge to Sh61.8 billion. 

Co-operative Bank is set for a Sh8.8 billion dividend payout, distributing Sh1.50 per share to its investors. This followed a 9.8 per cent increase in net earnings, reaching Sh25.5 billion, driven by rising interest and non-interest income.

Stanbic Holdings set the pace with Sh8.19 billion in dividends, reflecting its strong performance. Absa Bank Kenya has also proposed a final dividend payout of Sh8.4 billion, translating to Sh1.55 per ordinary share.

These substantial payouts signal a high level of optimism within the banking sector, a stark contrast to the cautious outlook prevailing in other industries.

Shareholders, for whom dividends are a vital source of income, are reaping the benefits of the banks’ strong performance.

Several factors contributed to the banks’ remarkable performance. Co-op Bank, for example, attributed its growth to increased interest and non-interest income, coupled with effective cost control.

“The strong performance has led to a sustained increase in shareholder value as reflected in the competitive return on equity of 19.7 per cent,” said Co-op Bank Group Managing Director Gideon Muriuki while releasing the financial results.

The strong performance of its subsidiaries, Kingdom Bank and Co-op Bancassurance Intermediary, which both hit the Sh1 billion mark in pre-tax earnings, also played a crucial role.

KCB’s diversification strategy proved successful, with subsidiaries contributing significantly to the group’s overall profitability. The bank’s total income surged by 24 per cent, driven by increases in net interest income and non-funded income.

StanChart’s focus on operational efficiency, with only a marginal increase in operating expenses, allowed it to maximise its bottom line.

“We delivered a record performance in 2024 with profit before tax up 43 per cent driven by strong topline growth, good business momentum, and excellent execution of our strategy of combining differentiated cross-border capabilities for corporate and institutional clients with leading wealth management solutions for affluent clients,” said Standard Chartered Bank Kenya chief executive Kariuki Ngari.

Stanbic Holdings, leveraging its parent company’s vast resources and expertise, capitalised on higher interest and non-funded income.

Absa Bank Kenya’s strong and resilient performance, with revenues increasing by 14 per cent to Sh62.3 billion in a challenging operating environment, allowed them to achieve their robust returns.

Co-op Bank’s unique strategy of expanding its physical footprint, in contrast to the industry trend of branch closures, also contributed to its success.

The bank opened eight new branches in 2024, creating hundreds of job opportunities and reaching underserved communities. This strategy, coupled with a robust digital presence, has allowed the bank to cater to a wider customer base.

The banks’ ability to navigate a challenging economic climate is a testament to their resilience. Despite concerns about a slowing economy, weakened credit markets, and rising non-performing loans, the lenders have managed to maintain profitability and deliver strong returns.

Analysts attribute this resilience to several factors, including prudent risk management, diversified revenue streams, and a focus on operational efficiency.

The banks’ ability to adapt to changing market conditions and capitalize on emerging opportunities has also played a crucial role.

As other tier-one lenders prepare to release their financial results, analysts anticipate the payout boom to continue. This trend signals increased optimism about the economy’s future within the banking sector, even as broader economic uncertainties persist.

Global credit ratings firm Fitch Ratings projects more growth for Kenyan lenders.

“Fitch Ratings expects the Kenyan banking sector’s profitability to continue providing a large buffer to absorb the impairment charges stemming from very high non-performing loans while supporting loan growth,” the firm said in its report dubbed, Kenyan Banks – Peer Review 2025.

“The revised minimum core capital requirement will improve the resilience of the most vulnerable part of the banking sector, as small banks will need to raise capital or merge to comply.”

The banks’ strong performance offers a glimmer of hope in a challenging economic landscape, providing a much-needed boost to investor confidence.

However, the stark contrast between the banks’ prosperity and the struggles of other sectors raises questions about the long-term sustainability of this divergence.