Kenya’s banking industry delivered its strongest first-quarter performance on record, shrugging off a lower interest rate environment to register a combined pre-tax profit of Sh83.5 billion.
According to the African Wall Street Q1 2026 Kenya Banking Sector Report, the sector’s pre-tax earnings increased by 13.6 percent compared with the same period last year, highlighting the resilience of lenders even after the Central Bank of Kenya (CBK) embarked on an aggressive monetary easing cycle to spur private sector lending.
Since 2024, the CBK has lowered its benchmark lending rate by a cumulative 400 basis points, bringing the policy rate to 8.75 percent by the end of March 2026.
The report attributes the strong earnings to banks’ ability to offset narrower lending margins by cutting funding costs, improving operational efficiency and generating more income from non-interest sources.
Reduced interest expenses more than compensated for lower lending rates, allowing lenders to preserve healthy margins while expanding credit. Seven of the eight listed banks increased their loan books during the quarter, with lending growth among the largest institutions ranging between 13 percent and 20 percent.
The industry’s balance sheet also reached a new milestone, with total assets rising to Sh8.73 trillion, supported by continued growth in deposits, loans and investment portfolios.
Among the country’s biggest lenders, Equity Group, KCB Group and Co-operative Bank remained the market leaders.
Equity Group posted the fastest earnings growth among the top-tier banks, reporting a record net profit of Sh19.05 billion, a 24.1 percent increase from a year earlier. Its total assets grew to Sh2.04 trillion, cementing its position among the region’s largest financial institutions.
The bank’s digital strategy continued to drive performance, with nearly 90 percent of customer transactions conducted through digital platforms, helping keep operating costs among the lowest in the sector.
KCB Group reported a net profit of Sh18.2 billion, up 10 percent from the first quarter of 2025, while its balance sheet expanded to Sh2.25 trillion on the back of stronger customer deposits and a growing loan portfolio.
The lender also benefited from lower funding costs, as loan loss provisions eased alongside gradual improvements in asset quality across most of its subsidiaries.
Co-operative Bank maintained its upward momentum, recording a record quarterly net profit of Sh8.41 billion, representing a 21.3 percent year-on-year increase.
Its asset base expanded to Sh884.57 billion, while customer deposits surpassed Sh600 billion for the first time. The bank also improved its cost-to-income ratio to 53 percent, marking its most efficient first-quarter performance in more than a decade.
The improved financial performance translated into stronger shareholder returns.
Equity Group led listed lenders in earnings per share (EPS) at Sh5.05, followed by KCB at Sh2.18 and Co-operative Bank at Sh1.12.
The report credits the three banks’ sustained earnings growth to prudent cost management, improving asset quality and continued investment in digital banking.
Equity’s digital ecosystem significantly lowered transaction costs, while Co-operative Bank’s improved efficiency ratio reflected the success of its cost optimisation efforts.
Analysts note that the January to March period was the first full quarter to reflect the effects of the CBK’s monetary easing cycle, making the sector’s performance particularly notable.
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They say Kenyan banks are increasingly relying on diversified income streams and technology investments to cushion profitability against fluctuations in interest rates.
The report adds that lower deposit costs, coupled with stronger borrowing activity, have created favourable conditions for earnings growth despite moderating lending yields. Similar trends are emerging across African banking markets as lenders embrace digital banking and diversify revenue sources.
Even so, the report identifies asset quality as the sector’s biggest risk.
Although several lenders reported lower non-performing loans and reduced provisioning, the industry’s overall bad loan ratio remains elevated following the challenging credit cycle of 2023 and 2024.
It warns that an aggressive expansion in lending before asset quality fully recovers could expose banks to fresh provisioning pressures if economic conditions weaken.
