In the first half of 2025, Kenyan-owned banks reported strong year-on-year profit increases, with I&M Group’s profits up 36%, Equity Bank’s up 17% and NCBA’s up 12.6%. By contrast, foreign-owned banks Standard Chartered and Stanbic saw profit declines of 21% and 9% respectively. Foreign-owned banks struggled with weaker non-interest income, higher costs and slower loan growth, while local banks’ strong earnings growth reflected robust net interest income in Kenya and other markets.
Credit rating agency Moody’s gave Kenya’s big three banks, KCB, Equity Bank and Co-operative Bank, a vote of confidence in February by maintaining a stable outlook for all three despite rising non-performing loan (NPL) levels, as strong capital buffers allowed them to absorb potential shocks.
The sector-wide NPL ratio has fallen slightly from around 17-18% in 2025 to 16.5% in early 2026 but this is still above the historic Kenyan average and is also high by global standards. The NPL trend has followed that of interest rates – rising for a time before falling slightly more recently, although borrowing costs remain relatively high. Credit risk is still high, requiring banks to employ careful risk management and involving continued monitoring by the Central Bank of Kenya (CBK).
Defaults were especially notable in trade, real estate, manufacturing, and household loans – sectors that are more sensitive to cost pressures and slower revenue cycles. If NPLs remain high, this can result in slower private sector growth, as banks become more risk-averse and businesses face tighter access to finance. Sustained improvement in economic activity and further falls in interest rates should see the proportion of NPLs continue to fall.
Cross-border expansion
Kenyan banks have been among the most ambitious on the continent when it comes to expanding into other African markets, mainly in Eastern and Central Africa, but with a few forays into Southern and West African countries.
This expansion has taken the form of setting up subsidiaries, acquiring existing banks and taking strategic stakes in foreign financial institutions. As a result of this expansion across multiple African countries, Kenyan financial institutions are some of the most regionally diversified on the continent.
Most Kenyan banks focus on East African Community (EAC) countries because of shared language and business links, growing regional trade and harmonised financial regulations. Banks like KCB and Equity have made the Democratic Republic of Congo (DR Congo) a key strategic priority because of its size and growth opportunities. Further afield, some Kenyan banks, particularly I&M and Prime Bank, have leveraged minority stakes and partnerships to enter non-EAC markets such as Mauritius, Malawi, Botswana, and Zambia to diversify risk.
Kenyan banks’ regional expansion reflects a strategic response to market saturation at home and the search for growth opportunities abroad. As the table illustrates, 586 bank branches were managed by Kenyan banks outside Kenya in 2024.
KCB Group is particularly active in DR Congo and Rwanda, while Equity Bank is the best represented Kenyan bank in Uganda. Indeed, an incredible eight Kenyan banks operate branch networks in Uganda.
KCB Group has a longstanding subsidiary in Uganda and a significant branch network in Tanzania but expanded into Rwanda via the acquisition of Banque Populaire du Rwanda and operates in DR Congo through its Trust Merchant Bank subsidiary. It has historically operated branches in South Sudan, although the size of its network has fluctuated in line with the security situation in that country.
Equity Group is the other Kenyan bank to have invested heavily in cross-border expansion. It has subsidiaries in Tanzania, Uganda and Rwanda, while the group bought majority stakes in two banks in DR Congo to become one of the biggest banks in that country: taking over ProCredit Bank DRC in 2015 and Banque Commerciale du Congo five years later, merging the two to create Equity Banque Commerciale du Congo (Equity BCDC) after securing regulatory approval in late 2020.
Equity held talks with the Ethiopian Investment Commission in 2025 over how it can enter the Ethiopian market and is also planning to open a representative office in the United Arab Emirates in early 2026.
If Kenyan banks continue to outpace their Tanzanian and Ugandan rivals, it could threaten the willingness of the Ugandan and Tanzanian governments to further deepen economic and financial integration in the region.
However, much may depend on the level of competition in other sectors and how fast the other EAC economies grow. If the region as a whole continues to benefit from wider economic integration, the other governments may be more easily able to accept Kenyan dominance in the banking industry.
Increased competition
Kenyan banks are not the only ones expanding into new markets. In January, South Africa’s Nedbank Group announced that it had offered to buy a 66% stake in Kenya’s NCBA Group for R13.9bn ($855.5m), as South African banks continue their own march northwards through the continent. If completed, NCBA would become a subsidiary of Nedbank, although the remaining 34% stake would continue to be publicly traded on the Nairobi Securities Exchange.
NCBA was created in 2019 as a result of the merger of Commercial Bank of Africa and NIC Group. Apart from Kenya, its 122 branch network also extends into Rwanda, Tanzania and Uganda. “By combining NCBA’s substantial local presence and Nedbank’s capital base, expertise and enduring commitment to Africa, we see a compelling platform for sustainable growth in the region,” said Nedbank Group’s CEO, Jason Quinn.
There is already considerable competition in the domestic banking sector but last July the Central Bank of Kenya decided to lift its nine-year ban on new banks entering the market. The moratorium was introduced to shore up confidence in the sector, with 37 banks recorded as failing between independence and 1998, with another spate in 2003 and then Dubai Bank and Imperial Bank in 2015, finally triggering the shutdown. The policy aimed to rein in the number of banks to concentrate capital in a smaller number of operators, to create a stronger banking sector overall.
Although there are a large number of banks for the size of the Kenyan economy, the market has become dominated by a handful of the biggest players, so the CBK is keen to allow other big banks to enter the market to intensify competition for the benefit of the wider economy. The move could also help Kenya retain its reputation for financial services innovation.
New financial services companies are now able to seek licences but the CBK is maintaining its focus on security by increasing the minimum core capital requirement for commercial banks in stages, from KSh1bn ($7.8m) in 2025 to KSh5bn ($38m) this year and then KSh10bn ($77m) by 2029.
The country’s nine biggest banks, which accounted for about 90% of total bank profits in 2024, already meet the new threshold but the smallest operators will have to recapitalise or merge, although the CBK has allowed them to use retained profits to build up their capital.
A total of 17 of the country’s 39 licensed banks are mainly owned by foreign interests, with three majority-owned by the Kenyan government and the remainder largely Kenyan-owned.
According to credit rating agency Fitch, 17 banks – not the same as the 17 foreign-owned banks – jointly account for just 7% of national sector assets, although many of these are offshoots of regional banking groups and so could receive capital injections from their wider banking organisations.
It is possible that higher core capital requirements might deter new entrants from moving into the market but the CBK may be relying on the new regulations to only attract those foreign banks with substantial financial muscle. However, it seems likely that a combination of new players and some consolidation could see the number of banks operating in the country remain roughly the same.
Interest in Kenyan banking stocks has increased since the Nairobi Securities Exchange launched the NSE Banking Sector Index in October to track the share price of the country’s listed institutions, which include its biggest commercial banks. By tracking all 11 listed banking stocks, the index gives both retail and institutional investors a consolidated view of how the financial industry is performing relative to the broader market.
As the index is only a few months old, it is too soon to say whether it will have a big impact. Its long-term success will depend on how it supports investor engagement, diversification and the launch of related financial products over the next few years.
However, the banking sector’s prominence in Kenyan capitalisation rankings – with several banks among the top 10 listed firms – reinforces the relevance of a dedicated index. In particular, the NSE has highlighted the potential for Exchange Traded Funds (ETFs) and other index-linked products tied to the index, which would broaden investment options.