kiko

Daily Briefings on 🇰🇪 : CBK | NSE | Banking | Insurance.

[kiko @gmaheri]

Kenya’s Banks are winning big From falling interest rates.

Kenya’s commercial banks posted a combined Sh83.5 billion pre-tax profit in Q1 2026, up 13.6% from Sh73.5 billion a year earlier.

What’s driving the surge?

Banks moved quickly to reduce what they pay savers after the Central Bank cut its benchmark rate from 10.75% to 8.75%. But lending rates to borrowers have fallen much more slowly.

The result: wider net interest margins and stronger profits.

Other notable trends:

1. Credit growth accelerated by 8% to Sh4.45 trillion, the fastest pace in two years.

2. Non-performing loans improved to 15.6%, down from 17.4% a year ago.

Major lenders such as KCB Group and Equity Group Holdings continued to drive sector profitability.

Why it matters:

The numbers point to a healthier banking sector and renewed lending activity, both positive signs for economic growth.

However, there is a trade-off.

While banks are enjoying higher profits, depositors are earning less on their savings. And with inflation rising again, households could face increased pressure servicing loans, potentially slowing the recent improvement in bad debts.

The key question for the coming quarters: Will banks begin passing more of the lower interest rates to borrowers, or will profit growth continue to outpace customer benefits?

[kiko @gmaheri]

Cash Is Still King? Sh1,000 Notes in Circulation Surge

The Central Bank of Kenya has reported a significant rise in the number of Sh1,000 notes circulating in the economy.

At a time when mobile money and digital payments continue to grow, the increase suggests that cash remains an important medium of exchange for many businesses and consumers.

What could be driving the trend?

• Higher economic activity, leading to increased demand for cash transactions.

• Growth in sectors where cash usage remains prevalent.

• Increased cash holdings by businesses and households for liquidity purposes.

The development is worth monitoring because currency in circulation is one of the indicators central banks watch when assessing liquidity conditions, inflationary pressures, and overall economic activity.

While a rise in cash circulation does not automatically signal inflation, persistent growth alongside strong consumer demand could influence future monetary policy decisions.

The key question ; Is the increase a sign of a stronger economy, or does it reflect a shift back toward cash despite Kenya’s digital payment success?

[kiko @gmaheri]

CBK UPDATE

[kiko @gmaheri]

Kenya’s inflation has climbed to 6.7% in May 2026, the highest level since January 2024, largely driven by higher fuel and transport costs following geopolitical tensions in the Middle East.

Key drivers:
• Transport costs jumped 16.5% as fuel prices surged.
• Food prices rose 9.4%, adding pressure on household budgets.
• Workers’ real incomes continue to shrink, with average real wages falling from Sh62,256 in 2020 to Sh56,566 in 2025—a decline of about 9%, alongside higher taxes and statutory deductions.

Why it matters.

The inflation spike puts the Central Bank of Kenya in a difficult position ahead of its June 9 Monetary Policy Committee meeting. While lower interest rates would support economic growth and borrowing, rising inflation may force CBK to pause its rate-cutting cycle or even consider tightening policy.

For businesses;
Higher borrowing costs could persist, making expansion and working capital financing more expensive.

For consumers;
Reduced purchasing power means households have less disposable income, which could weaken spending and slow economic activity.

The bigger picture;
Kenya’s economic recovery now faces a dual challenge—rising inflation driven by external shocks and declining real incomes at home. If fuel prices remain elevated, inflationary pressures could persist for several months, complicating efforts to stimulate growth through lower interest rates.

[kiko @gmaheri]

Uganda is moving fast on the Standard Gauge Railway while Kenya is still stuck in planning mode.

Uganda has raised Sh62 billion through a 10-year Sukuk bond to finance its SGR section from the border inward, increasing pressure on Kenya to complete the stalled Naivasha–Malaba extension.

The bond offers a 13% return and will also be cross-listed on the Nairobi Securities Exchange, meaning Kenyan investors could partly fund Uganda’s railway progress while Kenya’s own project remains delayed.

Kenya has been pursuing a much larger Sh390 billion securitised bond for its 350km extension, but the project has stalled for six years despite a Sh30.5 billion budget allocation this financial year.

Why this matters:

If Uganda completes its section faster than Kenya, it could weaken Kenya’s long-held position as East Africa’s logistics hub.

The full cross-border SGR link is expected to:
-Cut freight costs by about 40%
-Reduce transit times by roughly 30%
-Improve regional trade efficiency across East Africa

The longer Kenya delays, the bigger the economic and competitive risk.

[kiko @gmaheri]

Kenyan investors are moving back into Treasury bills and bonds as inflation fears rise and global tensions increase.

Yields on the 91-day T-bill have jumped to 8.39% from 7.43% at the end of March, according to Business Daily Africa. Demand is also surging, with bids more than doubling to Sh15.8 billion.

What’s driving this?

Investors are avoiding long-term bets and choosing short-duration government paper to protect themselves from rising inflation and uncertainty linked to the US-Iran conflict.

At the same time, the NSE is feeling the pressure.

The market has declined 1.3% over the past month, with about 75% of listed stocks posting losses as capital rotates from equities into fixed income assets.

This shift matters because higher yields increase the government’s borrowing costs at a time when Treasury is targeting nearly Sh1 trillion in domestic borrowing.

If rates keep rising:
• Government debt servicing becomes more expensive
• Pressure on the fiscal deficit increases
• Equity market activity could remain weak
• Corporates may face a tougher investment environment

For investors, the current market is showing a clear preference for safety, liquidity, and predictable returns over risk assets.

[Premier League @premierleague]

37 Matchweeks down, 1 to go.

🔜 The Final Day

[kiko @gmaheri]

NCBA Group is set to reward employees with 21.8 million shares worth about Sh1.9 billion once Nedbank completes its acquisition of a 66% stake in the lender.

The shares have been sitting in an employee trust for more than seven years, dating back to the old CBA before the 2019 merger that formed NCBA.

The bank says the allocation will happen after the Nedbank deal gets all regulatory approvals and won’t dilute existing shareholders’ earnings per share.

A major payday could now be on the horizon for qualifying staff.

[kiko @gmaheri]

Kenya’s stock market is losing steam.

More than 75% of NSE-listed stocks fell over the past month as investors reacted to rising geopolitical tensions from the Iran war and growing fears of higher interest rates.

Big names were hit:
• KCB: -4.3%
• Equity: -0.9%
• EABL: -2.3%

Safaricom was one of the few bright spots, gaining 2.35%.

The shift marks a sharp reversal for the NSE, which had been one of Kenya’s best performing asset classes in 2024 and 2025.

Now, investors are moving money into:
• Bonds
• Fixed deposits
• Money market funds

Why?

Higher inflation and possible CBK rate hikes are making safer assets more attractive than equities.

Foreign investors are also pulling back, recording net outflows for the fifth straight month, while market turnover continues to weaken.

If inflation keeps rising and the CBK tightens further, the pressure on stocks could deepen as bond yields become even more attractive.

[kiko @gmaheri]

Kenya could be heading for its first interest rate hike since February 2024.

The Kenya Bankers Association now expects the CBK to raise the Central Bank Rate (CBR) at the June 9 MPC meeting after inflation jumped to 5.6% in April — the fastest pace in seven years.

What’s driving it?

Global oil price shocks linked to the Iran war are pushing fuel and transport costs higher, with more pressure expected after May fuel price increases.

If CBK hikes rates:

Loans could become more expensive for households and businesses Credit growth may slow after recent recovery
Banks could face more pressure from rising non-performing loans
Consumers may feel an even tighter squeeze on spending power

The current NPL ratio is already at 15.6%, highlighting the balancing act CBK now faces between controlling inflation and supporting economic growth.

Markets will now be watching the June 9 MPC meeting closely.

[kiko @gmaheri]

NCBA Group posted a Q1 2026 net profit of Sh5.96B, up 8.8% YoY from Sh5.48B, driven by a 22% jump in net interest income to Sh12.16B as funding costs eased. Non-interest income rose 6.3% to Sh7.83B, pushing total operating income to Sh19.99B.

The lender, however, raised loan-loss provisions 56.3% to Sh2.54B, citing a prudent stance on credit risk amid a volatile operating environment.

The results reinforce the resilience of Kenya’s banking sector, with digital lending products such as Fuliza and M-Shwari continuing to support earnings. Attention now shifts to Nedbank’s planned majority stake acquisition, a move that could strengthen NCBA’s regional expansion and capital position.

[kiko @gmaheri]

Proposed Finance Bill 2026 amendments would empower the Kenya Revenue Authority to impose withholding tax on at least 60% of unexplained retained earnings not distributed as dividends.

The proposal targets tax avoidance through profit retention, with deemed dividend withholding tax set at:
• 10% for local shareholders
• 15% for foreign shareholders

Tax experts at KPMG and Ernst & Young warn the measure could pressure companies to declare dividends even where retained earnings are needed for expansion and capital investment.

[kiko @gmaheri]

KCB Group posted a net profit of Sh17.81 billion in Q1 2026, up 10.7% from Sh16.09 billion in Q1 2025.

The growth was driven by higher interest income (+8.6% to Sh36.61bn) and non-interest income (+8.3% to Sh17.03bn).

The bank’s loan book grew to Sh1.208 trillion from Sh1.018 trillion, while operating expenses rose just 3.3% to Sh29.21bn.

Asset quality also improved, with the NPL ratio dropping to 16.6% from 19.3%.

KCB, however, cautioned that the ongoing Middle East conflict could still pose risks to business performance.

[kiko @gmaheri]

The future of tax collection may not be higher tax rates.

It may simply be better data.

KRA says it has collected Sh7.8 billion from nearly 97,000 previously non compliant taxpayers through digital systems and real time data tracking.

That matters because governments everywhere are under pressure to raise revenue without overburdening already compliant taxpayers.

The bigger shift is happening quietly.

Tax authorities are increasingly using technology, third party data, and automation to widen the tax base instead of relying only on new taxes.

For businesses and individuals, the message is becoming clearer.

In the digital economy, financial visibility is growing faster than ever.

[Arsenal @Arsenal]

This belongs to all of us.

[kiko @gmaheri]

Strong bank profits do not always mean strong borrowing activity.

Equity Group posted a 23.8% rise in Q1 profit to Sh18.3 billion, supported by lower interest costs, digital banking growth, and strong regional performance.

But despite growing deposits, borrowing remained subdued as the loan to deposit ratio declined.

It is a sign that many businesses and consumers are still cautious about taking on debt even with lower interest rates.

The banking sector remains resilient.

[Market Cap Trainers @NSE_Investors]

DIVIDEND BOOK CLOSURE AND PAYMENT CALENDER

[Mwango Capital @MwangoCapital]

The government’s proposed sale of its 15% stake in Safaricom PLC to Vodacom Group has hit a legal hurdle after a three-judge High Court bench issued conservatory orders pending determination of a constitutional petition challenging the transaction.

[Market Cap Trainers @NSE_Investors]

TOP TEN NAIROBI SECURITIES EXCHANGE COMPANIES BY MARKET CAPITALIZATION

[Cyprian, Is Nyakundi @C_NyaKundiH]

High Court temporarily blocks the government’s planned sale of its 15% stake in Safaricom to Vodacom.