Kenya’s commercial banks have overcome a difficult environment characterised by rising loan defaults and decreased borrowing demand to record an impressive 11.58% increase in pre-tax profits, totalling $1.22 billion for the first eight months of 2024.
The banking industry’s resilience is demonstrated by data from the Central Bank of Kenya (CBK), which indicates that profits have increased from $1.09 billion during the same period last year.
CBK Governor Kamau Thugge claims that March was the banks’ best-performing month, with pre-tax profits hitting $184 million.
On the other hand, August saw the lowest profits of $119 million, the only month since January when profits fell below $136 million. Despite this minor decline, the banking industry has continued to grow while other economic sectors have experienced severe disruptions.
Kenya had a difficult year, marked by challenges such as severe flooding and rain from March to June, political turmoil with anti-government demonstrations in June and July, and limited liquidity.
Despite challenges, banks have shown resilience, with the finance and insurance industry expanding by 7% in the first quarter of 2024, according to the Kenya National Bureau of Statistics.
However, in the second quarter, this growth slowed to 5.1%. According to the CBK, the banking industry will expand by 6% for the entire year, which is the slowest growth since the COVID-19 pandemic hit the economy in 2020, when growth was only 5.9%.
The general economic outlook seems more muted. The CBK has revised its prediction for the growth of the national economy from 5.4% to 5.1%. This change follows a slowdown in the second quarter, when growth slowed to 4.6% compared to 5.6% during the same time last year. Lending has decreased, which has also affected Kenyan banks.
The loan book for this sector was $27.2 billion at the end of August, a $1 billion decrease from $28.2 billion at the end of 2023. As the value of the Kenyan shilling increased relative to the United States dollar, this indicates both a decrease in lending and a depreciation of loans denominated in dollars.
The expansion of private sector credit has decreased dramatically; in August, it was only 1.3%, the lowest level in over five years. At the same time, the non-performing loan ratio rose to 16.7%, the highest level in 18 years. High credit costs have coincided with an increase in defaults and a decrease in borrowing. In February 2024, Kenya’s benchmark lending rate reached a 12-year high of 13%.
The CBK implemented consecutive reductions to the benchmark rate, bringing it down to 12%, in an effort to alleviate the burden on borrowers in response to these economic pressures. Reviving economic activity and encouraging borrowing are the goals of this.
In a statement, CBK said, “The Monetary Policy Committee noted the sharp deceleration in private sector credit and the slowdown in economic growth during the second quarter of 2024. It concluded that there was scope for further easing of monetary policy to boost economic activity while ensuring exchange rate stability.”
The performance of the industry will still be strongly correlated with more general economic developments, such as initiatives to control inflation, exchange rate swings, and international financial circumstances.
Strong security over PoS rollout
Network International, a Middle Eastern and African digital commerce enabler, has reaffirmed its commitment to ensuring strong cybersecurity measures as it launches new payment solutions in Kenya.
Judy Waruiru, its Regional Managing Director for East and South Africa, said, “We are introducing our point-of-sale (POS) solutions as part of our strategy to enter the in-person payments market in Kenya, a key hub for East Africa.”
Network International is providing merchants with new point-of-sale solutions at no cost as part of this rollout, enabling companies of all sizes to conveniently accept payments in-store or while on the go.
In order to accommodate a variety of payment preferences, customers will also have the option to pay with cards or mobile wallets. As the number of digital transactions in the area rises, the business is expanding its service portfolio and addressing growing concerns about payment system security.
During an interaction with African Banker, Paul Mutethia, Head of Commercial at Network International Kenya, said, “The risks in cyberspace have increased, especially Denial of Service, malicious codes, botnets, and bugs which hamper operations. We secure our internal systems when they interact with the external environment. Our transactions are encrypted, and all our solutions are secure. We ensure there is no exposure to cyber-attacks because we hold sensitive customer data.”
He revealed that there is a dedicated department within the company that handles threat management and cyberspace monitoring. It would be better to close the business if you don’t make any investments in cybersecurity.
According to data from the Central Bank of Kenya, there are only slightly more than 55,000 point-of-sale machines in the country. This is insignificant when you consider that the Kenya National Bureau of Statistics reports that there are 7.4 million registered micro, small, and medium-sized businesses (MSMEs). This reveals a serious weakness in the infrastructure for digital payments for companies across the nation.
The most recent products from Network International include contactless payment systems, improved mobile payment gateways, and e-commerce solutions designed to increase convenience while upholding strict security regulations.
JPMorgan Chase eyes presence in Nairobi
JPMorgan Chase, the biggest bank in the world by market capitalisation, is expanding in Africa, with plans to open an office in Nairobi, Kenya.
The bank is the largest lender in the United States, with $4 trillion in assets and operations in more than 100 countries.
It received an operating license from the Central Bank of Kenya (CBK) just days before Jamie Dimon, the CEO of the bank, travelled to the country. The action is part of the bank’s strategy for global expansion and demonstrates its increasing interest in making investments in the African market.
The bank has identified Africa, which has the youngest population in the world, as a key growth region due to its fintech innovations and the rise in institutional bankers.
In October 2024, JPMorgan Chairman and CEO Jamie Dimon travelled to Kenya as part of a trip to Africa that also included stops in South Africa and Nigeria.
“We are opening our first branch in Kenya, which we are really happy to do. We want to add a country or two in Africa every couple of years or so. And when you do it, you are basically covering the government, maybe some big government enterprises, and the multinationals that are going in there with traditional banking services,” Jamie Dimon said during an event in Nigeria.
Sailepu Montet, a former executive at CBK, has been appointed as the bank’s new Country Manager for Kenya. He has more than 20 years of banking experience and a solid foundation in financial markets from both the public and private sectors.
According to Dimon, the bank’s primary areas of interest are treasury services, commercial and investment banking, and possibly some lending in Kenya. Nevertheless, it does not currently have any plans to provide asset and wealth management services in the country, which are already offered in Nigeria and South Africa.
“We are not doing asset and wealth management now, but that doesn’t mean it won’t happen in the next few years,” Dimon added.
Nairobi was selected as the site for JPMorgan Chase’s office because of its growing prominence as a technology hub and its status as the gateway to the wider East African market, which makes it a desirable location for companies wishing to grow throughout the region.
Ten international banks, including Bank of China, Access Bank of Nigeria, Bank of Kigali, First Rand Bank and Nedbank of South Africa, Rabobank of Mauritius, and French lender Societe Generale, have representative offices in Nairobi.
The bank must, however, differentiate its offerings in various markets, such as Kenya, where regional and local lenders are well-represented. There are 46 commercial banks in the nation, providing services to 55 million people.
Nigerian banks go big
One of Nigeria’s leading commercial banks, First Bank, is now planning to expand to at least three African countries in its next growth phase, starting in 2025.
According to the Deputy Managing Director of the bank, Ini Ebong, the countries being targeted include Ethiopia, Angola, Cameroon, and Ivory Coast.
He asserted that there are growing opportunities in markets across the African continent, similar to “what we saw in the early 2000s in some of the larger African markets. We believe it is an opportune time to take part in this phase of growth.”
In December 2024, the Ethiopian parliament passed a law that allows foreign banks to open subsidiaries in Ethiopia. Foreign firms will only be allowed to own 49% of shares.
Also, during a panel session at the recently concluded Africa Financial Industry Summit, Ethiopia’s central bank governor, Mamo Mihretu, said the country had been working on the legislation that would finally open the banking sector to foreign competition over the past year.
FirstBank, which has been operating in Nigeria for 130 years, began establishing subsidiaries in other African markets in 2011 when it acquired Banque International de Credit, one of the leading banks in the Democratic Republic of Congo.
In November 2013, it acquired subsidiaries of International Commercial Bank Financial Group Holdings AG (ICBFGH) in The Gambia, Sierra Leone, Ghana, and Guinea. It purchased ICB Senegal the following year, completing its acquisition of West African assets and operations of ICBFGH. FirstBank also has operations in London and Paris, France, as well as a representative office in Beijing, China.
In January 2025, news emerged about Bidvest Bank being sold to Nigerian-based Access Bank, which is set to expand the latter’s operations in South Africa substantially. Johannesburg Stock Exchange-listed Bidvest is now eyeing the disposal of 100% of its holdings to Access Bank.
Bidvest is expected to raise R2.8 billion from the sale, which will then be used to settle its existing debt. Access Bank, on the other hand, plans to implement Broad-Based Black Economic Empowerment (BBBEE) ownership, including an Employee Stock Ownership Plan. The acquisition is expected to close in the second half of 2025, subject to regulatory approvals in South Africa and Nigeria.
The Bidvest Bank book, which mainly consists of leased assets, loans and advances, totalled R6 billion in December, and was funded by deposits of R8 billion. In its most recent financial year, Bidvest Bank generated a trading profit of R371 million and an operating income of R377 million.
Speaking of Access Bank, the largest lender in Nigeria by assets, it has established itself as a full-service bank with over 60 million customers globally across three continents, serving three principal segments: retail, business, commercial, and corporate.
Following the acquisition, Bidvest Bank is set to be merged with Access Bank’s existing South African subsidiary to create an enlarged platform to anchor the regional growth strategy for the SADC region.
Using Bidvest Bank’s local capabilities and its established pan-African presence, Access Bank now hopes to have increased capacity for intra- and inter-Africa trade, connect businesses, and create new opportunities for regional integration.
The Nigerian-based company noted that South Africa’s banking sector is the largest in Africa, with a combined tier-one capital exceeding $42.2 billion in 2022. Despite a tough operating environment, the industry still achieved headline earnings growth of 2.5% year-on-year and maintained strong profitability (ROE of 17%) in the first half of 2024. Access Bank will now leverage the latest acquisition to strengthen its business and SME banking as well as its foreign exchange services, while also introducing new services tailored to the South African market.
Access Bank has already been operating in South Africa since 2021 after it acquired Grobank Limited. Grobank, which was previously known as Bank of Athens, was primarily focused on agriculture before Access Bank transformed it into a retail banking operation. The group currently offers personal, business, and corporate banking in South Africa.
Banks embrace WhatsApp banking
In order to process payments more quickly and interact with customers more effectively, Kenyan banks are increasingly using WhatsApp banking. Conversational banking is encouraged by this model, which also streamlines customer journeys and improves user intuitiveness.
Kenya’s Housing Finance Group, commonly referred to as HF Group, became the first major bank in the country to deploy WhatsApp banking in 2019.
HF Group CEO Robert Kibaara said, “Customers can simply add HF’s WhatsApp phone number to begin a secure banking chat session.”
Since 2019, the KCB Group, Kenya’s biggest bank by assets, has also adopted WhatsApp banking. KCB hopes to improve its communications by utilising widely used messaging platforms as part of a larger plan to offer individualised services.
A subsidiary of South Africa’s Absa Group, Absa Bank Kenya, followed suit in 2021 by launching the “Abby” WhatsApp banking service.
A Mumbai doctor’s loss of $2,000 from his WhatsApp wallet raised cybersecurity concerns, while many Kenyan consumers were ecstatic about the new banking model at the time.
“We have put up stringent measures to make WhatsApp banking secure for everyone. We have several security layers on the platform,” the bank’s head of digital channels, Andrew Mwithiga, told African Banker.
In 2022, Equity Group, which has the largest customer base in Kenya, introduced the Equity Virtual Assistant, a WhatsApp banking platform. With its open banking model, I&M Bank has also entered the WhatsApp banking space, initially providing customer service for non-transactional enquiries.
Through its AI-powered chatbot, Zuri, M-Pesa, the top mobile money platform in the world, has integrated WhatsApp banking since 2020. In Kenya, M-Pesa is used by more than 95% of households.
According to Statista, as of January 2024, 86% of Kenyan internet users were using WhatsApp, making it the most popular messaging app in the country. In Kenya, there were 7.9 million WhatsApp users as of 2023.
Meanwhile, an €8.51 million loan from the African Development Bank has been approved for Senegal’s “Programme to Promote Efficient Lighting Lamps” (PPLEEF), a groundbreaking project aimed at promoting energy efficiency in the nation. This establishes a new standard for sustainable development in Africa and is the bank’s first entirely focused demand-side energy efficiency investment project.