NAIROBI, Kenya – Kenyan banks recorded stronger earnings and lending growth in the second quarter of 2026, signalling an acceleration in credit activity as borrowing demand improved.
Profit before tax (PBT) rose 6.5 per cent quarter-on-quarter to Sh88.9 billion, up from Sh83.5 billion in March, while gross loans increased 4.3 per cent to Sh4.65 trillion.
The latest figures represent the first time the banking sector’s gross loan book has crossed the Sh4.5 trillion threshold.
Banks add Sh192.5 billion in loans
Banks added about Sh192.5 billion to their gross loan books between March and June, lifting lending from Sh4.45 trillion at the end of the first quarter.
On a year-on-year basis, gross loans increased from Sh4.15 trillion, highlighting the stronger pace of credit expansion during the quarter.
The growth was concentrated in Trade, Personal and Household, and Transport and Communication, according to data from the Central Bank of Kenya (CBK).
Banks reported stronger demand for credit in Trade and Personal and Household segments, largely driven by increased working-capital requirements.
Lower interest rates also appear to have encouraged borrowing.
About 55 per cent of banks surveyed said reductions in the Central Bank Rate had increased demand for credit.
Loan quality improves
The increase in lending came alongside an improvement in asset quality.
Gross non-performing loans (NPLs) declined by 1.3 per cent during the quarter even as the overall loan book expanded.
The sector’s gross NPL ratio fell to 14.8 per cent in June, from 15.6 per cent in March and 17.6 per cent a year earlier.
June’s ratio was the lowest recorded since the end of 2023, pointing to an improvement in banks’ loan portfolios.
Banking assets and deposits grow
The banking sector’s total assets increased 1.7 per cent quarter-on-quarter to Sh8.88 trillion.
Customer deposits also rose 2.4 per cent to Sh6.67 trillion.
As lending expanded faster than total assets, gross loans accounted for 52.3 per cent of total banking-sector assets, up from 51.0 per cent in March.
The increase suggests banks were deploying a larger share of their available funding towards customer credit.
Profit growth outpaces lending
Bank earnings grew faster than several key cost pressures during the quarter.
Sector PBT increased by Sh5.4 billion, while income rose 3.1 per cent compared with a 1.5 per cent increase in expenses.
The stronger growth in income relative to expenses improved operating leverage.
Return on equity also increased to 24.1 per cent, from 23.0 per cent in March.
KCB, Equity and Co-op drive earnings
The country’s three largest domestic banks accounted for more than half of the sector’s quarterly profit before tax.
KCB Bank Kenya generated about Sh18.0 billion in Q2 PBT, followed by Equity Bank Kenya at Sh17.5 billion and Co-operative Bank of Kenya at Sh10.3 billion.
Combined, the three lenders generated approximately Sh45.8 billion, equivalent to 51.5 per cent of the sector’s total PBT.
Their combined quarterly PBT increased 16.3 per cent, substantially outpacing the overall sector.
Equity Bank recorded the strongest increase, with PBT rising 46.5 per cent quarter-on-quarter. Co-op Bank’s PBT grew 5.1 per cent, while KCB posted a 2.2 per cent increase.
Together, the three banks added about Sh6.4 billion to quarterly PBT—more than the Sh5.4 billion increase recorded across the entire banking sector.
This suggests that the rest of the industry recorded a combined decline of roughly Sh1 billion in quarterly PBT.
Equity leads loan growth
Credit expansion among the three leading banks was more uneven.
Equity Bank Kenya’s net loan book expanded 11.4 per cent quarter-on-quarter to Sh447.3 billion.
Co-op Bank followed with 5.8 per cent growth, taking its net loan book to Sh430.1 billion.
KCB remained the largest lender among the three, with a net loan book of Sh887.3 billion, although its quarterly growth was more modest at 1.2 per cent.
