Kenya’s banking sector, which has experienced consistent growth over the past two decades, faced a rare setback in 2024 as listed banks recorded their first decline in asset value. The combined asset base of ten listed banks, excluding Bank of Kigali, dropped from KSh 8.08 trillion in 2023 to KSh 7.75 trillion in 2024, reflecting a 4.15 percent decrease.
Since 2004, the sector has expanded significantly, driven by financial inclusion, digital transformation, and regional expansion. Some key milestones include:
- 2008: The industry recorded a 39.28 percent growth, supported by economic expansion and increased banking penetration.
- 2010s Boom: The adoption of mobile banking, fintech innovations, and agency banking fueled further growth.
- 2023 Peak: The asset base surged 27.82 percent, marking a strong post-pandemic recovery driven by high credit demand.
However, in 2024, this uninterrupted growth came to an end as the sector recorded its first annual decline in two decades.
KCB Group registered the most significant decline, with its asset base shrinking by KSh 208.6 billion. The key contributors to this contraction included:
- A KSh 105.5 billion reduction in net customer loans.
- A KSh 131 billion drop in deposits held with foreign banks.
This decline accounted for nearly half of the total contraction in the banking sector.
The Central Bank of Kenya (CBK) maintained a tight monetary policy, raising the Central Bank Rate (CBR) to 13 percent in February 2024—its highest level in a decade. This led to:
- Higher lending rates, discouraging borrowing.
- Increased loan default risks, pushing non-performing loans (NPLs) to 16.5 percent by September 2024.
Several other banks also recorded asset contractions:
- NCBA Group: Declined by KSh 68.7 billion (-9.35%) to KSh 665.94 billion, attributed to lower net loans and reduced interbank placements.
- Diamond Trust Bank (DTB): Dropped by KSh 61.9 billion (-9.63%) to KSh 573.88 billion, due to lower customer deposits and slowed asset growth.
- Standard Chartered Bank Kenya: Reduced by KSh 44.4 billion (-10.35%) to KSh 384.57 billion, linked to declining lending activity and foreign currency deposit adjustments.
Banks That Experienced Growth
Despite the general downturn, some institutions recorded positive growth:
- Co-operative Bank led the expansion, increasing its asset base by KSh 72.1 billion (+10.74%) to KSh 743.2 billion, surpassing NCBA to become the third-largest bank by assets.
- HF Group expanded by KSh 8.6 billion (+13.97%) to KSh 70.15 billion.
- I&M Group recorded a modest rise of KSh 1.6 billion (+0.27%) to KSh 581.28 billion.
While the sector faced its first contraction in decades, analysts suggest that ongoing economic recovery, policy adjustments, and innovation in digital banking could help stabilize and restore growth in the coming years.
