Kenya’s top nine tier I banks earned Sh61 billion more from lending in 2024, boosted by high interest rates that widened their margins despite rising deposit costs.
A Business Daily analysis showed their net interest income rose by 19.3 percent to Sh376.4 billion from Sh315.4 billion in 2023. Total interest income surged to Sh656.3 billion from Sh532.8 billion, driven by returns from customer loans and government securities.
Equity, KCB, Co-op, NCBA, Absa, Stanbic, DTB, I&M, and Standard Chartered were part of the review.
Despite the gains, banks faced a 49.3 percent jump in interest expenses, paying Sh234.6 billion to retain deposits amid stiff competition, including from Treasury bills and bonds.
“Despite the substantial rise in deposit costs, banks still achieved double-digit growth in interest income,” said Melody Ndanu of Standard Investment Bank.
KCB led in interest income with Sh145.65 billion, followed by Equity at Sh107.43 billion. Co-op and NCBA posted Sh80.72 billion and Sh75.69 billion, respectively.
The banks recorded a 21.9 percent rise in post-tax profit to Sh184 billion in 2024, despite only a 3.5 percent increase in non-interest income.
Average lending rates rose to 17.22 percent in November, up from 14.63 percent in December 2023, while average deposit rates hit 11.48 percent in June.
I&M’s regional CEO Kihara Maina noted that banks had to “focus on margin management” as rates rose on both loans and deposits.
Looking ahead, net interest margins are expected to be a major industry focus in 2025, with the Central Bank cutting its benchmark rate to 10 percent in efforts to boost private sector lending.
However, many banks have yet to adjust their lending rates, citing challenges with the current risk-based pricing model.
“It’s pretty difficult to cut interest rates when deposit rates are sticky,” said Maina.
The Kenya Bankers Association is now proposing a new loan pricing benchmark using a two-month average of interbank rates, as CBK prepares to roll out a new framework by June.
