By The Weekly Vision Business Desk
Kenya’s banking sector has demonstrated notable resilience in the first half of 2026, even as successive cuts in the Central Bank Rate squeezed net interest margins. Lenders reported solid balance-sheet expansion and, in several cases, healthy profit growth, while positioning themselves for a more competitive landscape shaped by falling borrowing costs, recovering private-sector credit and significant cross-border merger and acquisition activity.
Stanbic Bank Kenya illustrated the twin dynamics of volume growth and margin pressure. Net profit after tax rose a modest 1.3 per cent to KSh6.48 billion, despite strong underlying expansion. Net loans and advances climbed approximately 24–25 per cent, customer deposits grew by more than 20 per cent, and asset quality improved as non-performing loans declined. Profit before tax advanced more robustly once lower impairment charges were factored in. The bank’s management has signalled confidence in a stronger second half, citing rising demand from small and medium-sized enterprises, retail customers, manufacturing, agriculture and infrastructure-related lending.
The interim dividend was, however, sharply reduced, reflecting the impact of lower yields. NCBA Group delivered a more robust earnings performance. Profit after tax increased 12.2 per cent to KSh12.4 billion, supported by a 15.1 per cent rise in operating income. The Kenyan subsidiary remained the primary profit engine, while regional operations in Uganda, Tanzania and Rwanda also contributed positively.
Customer deposits and the loan book both expanded at double-digit rates, and the group raised its interim dividend by 50 per cent to KSh3.75 per share. Provisions for expected credit losses were increased, underlining continued caution over the operating environment.
Smaller players also posted impressive turnarounds. SBM Bank Kenya recorded a 171 per cent surge in profit before tax to KSh548 million, accompanied by substantial growth in deposits and loans and a sharp improvement in its non-performing loan ratio. These results come against the backdrop of an aggressive monetary-easing cycle. The Central Bank of Kenya reduced its benchmark rate from a peak of 13 per cent in 2024 to 8.75 per cent by early 2026, through a series of successive cuts.
Average commercial lending rates have fallen correspondingly, helping private-sector credit growth recover to around 9.3 per cent by May 2026 after earlier contraction. While the lower rate environment has stimulated loan demand and supported economic activity, it has compressed net interest margins for many institutions that remain heavily reliant on interest income. In response, several banks are accelerating efforts to diversify revenue streams.
Absa Group has publicly emphasised the need for its Kenyan subsidiary to boost non-lending income after rate cuts weighed on earnings. Across the sector, digital banking, transaction fees, wealth management, trade finance and fintech-related services are receiving greater strategic focus. The most significant structural development is Nedbank Group’s acquisition of a 66 per cent controlling stake in NCBA. The South African lender has secured acceptances covering the targeted shareholding and most key regulatory approvals, with completion expected towards the end of the third quarter or early in the fourth quarter of 2026.
Nedbank’s chief executive has highlighted the opportunity to expand corporate and investment banking, infrastructure finance and wealth management capabilities across East Africa, using Kenya as a regional hub. Equally important is access to NCBA’s Loop fintech platform, which Nedbank views as scalable and potentially transferable to other markets, including South Africa.
NCBA is expected to retain its brand, management team and Nairobi listing after the transaction closes. Taken together, the half-year results, the ongoing transmission of lower policy rates and the Nedbank–NCBA deal point to a banking sector that is adapting rather than merely enduring.
Private-sector credit recovery, improved asset quality at several institutions and stronger foreign-exchange reserves provide a supportive backdrop. Yet the squeeze on traditional interest margins is unlikely to reverse quickly.
