KCB Declares Special Dividend as H1 Profit Rises 8% to KSh 32Bn

KCB Group, one of East Africa’s largest and most influential financial services institutions, has posted robust financial results for the first half of 2025. The group announced a profit after tax of KSh 32.33 billion, an impressive 8.05% increase from the KSh 29.92 billion reported in the same period last year. This strong performance, underpinned by a resilient loan book and strategic cost controls, was capped by the declaration of a record mid-year dividend, signaling the bank’s confidence in its financial health and future prospects.

The results, as highlighted by KCB Group Board Chair, Dr. Joseph Kinyua, demonstrate the bank’s ability to navigate a complex macroeconomic environment marked by inflationary pressures and a shifting regional landscape. The announcement of a total dividend of KSh 4.00 per share—a new record for a mid-year payout—is particularly noteworthy. This figure is more than double the KSh 1.50 per share paid in the first half of the previous year, with the increase largely driven by a special dividend following a significant strategic move.

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A Deeper Look into KCB’s Financial Engine

While the headline profit figure is strong, a closer look at the bank’s core income streams reveals the key drivers of this performance. Net Interest Income (NII), the primary source of revenue for a bank, grew by 1.99% to KSh 70.57 billion. This growth was directly linked to the bank’s expanding loan portfolio, which saw a 6.10% increase to KSh 1.095 trillion. This indicates that KCB successfully lent more money to individuals, businesses, and corporates, earning more interest in the process. The growth of the loan book, particularly in an environment of tight liquidity and high interest rates, is a testament to the bank’s aggressive market positioning and its ability to attract quality borrowers despite economic headwinds.

However, not all revenue streams performed equally. The report indicates that Non-Interest Income (NII), which includes fees, commissions, and trading income, experienced an 11.40% decline to KSh 29.53 billion. This was attributed to “softer trading income and reduced transactional fees.” This trend is not unique to KCB and reflects broader market conditions. In a high-inflation environment, consumers and businesses often become more cautious, leading to a reduction in certain types of transactions, particularly those that incur fees. Additionally, volatile financial markets can impact trading income, a key component of NII for large financial institutions. The bank’s challenge moving forward will be to re-energize this income stream through new digital products and fee-based services that resonate with the current market needs.

Despite these mixed revenue results, the bank’s disciplined approach to cost control allowed operating income to outpace expense growth. Operating expenses increased by a moderate 2.35% to KSh 57.84 billion. This increase was driven by rising staff costs, general inflationary pressures, and continued investment in technology and expansion. However, with operating income climbing by a healthier 4.28% to KSh 98.67 billion, KCB was able to maintain a positive “jaws ratio” (where income growth outpaces expense growth), a key indicator of operational efficiency. This discipline helped boost Profit Before Tax (PBT) by a solid 7.14% to KSh 40.83 billion, setting the stage for the final profit after tax figure.

The Landmark Special Dividend and Strategic Maneuvering

The most significant and talked-about aspect of this report is the declaration of the KSh 4.00 per share mid-year dividend, a record-breaking payout that has captured the attention of investors. This dividend is structured into two parts: a standard interim dividend of KSh 2.00 and a special dividend of KSh 2.00.

A special dividend is a payment made by a company to its shareholders that is not part of its regular dividend cycle. It is typically a one-off event, often used to distribute a large, unexpected cash windfall to shareholders. In KCB’s case, the windfall came from a strategic divestment—the sale of the National Bank of Kenya (NBK). The NBK acquisition had been a major part of KCB’s strategy for several years, aimed at consolidating its position in the domestic market. The decision to sell NBK, a move announced earlier this year, allowed KCB to monetize that investment. The gains from this sale provided the capital required to fund the special payout, rewarding shareholders for their patience and trust.

Crucially, the proceeds from the NBK sale were not just used for the dividend. The report highlights a key strategic allocation of capital: strengthening KCB Tanzania. This is a significant move that shows KCB’s commitment to its regional expansion strategy. By injecting capital into the Tanzanian subsidiary, KCB aims to support its growth, meet regulatory capital requirements in that market, and position itself for greater market share. This action underscores the Group’s long-term vision—using a strategic divestment in one market to fortify its presence in another, ensuring sustainable growth across its regional footprint.

Navigating a Shifting Balance Sheet and Risk Landscape

While KCB’s income statement shows robust growth, the balance sheet tells a story of careful navigation through a challenging economic environment. The bank’s total assets saw a marginal decline of 0.40% year-on-year to KSh 1.969 trillion. Similarly, customer deposits dipped slightly by 0.34% to KSh 1.486 trillion. These minor shifts reflect the tight liquidity conditions prevalent in various markets, where both corporates and individual savers are more conservative in their spending and investment habits.

However, one of the most closely watched metrics for a bank’s health is its asset quality. The report showed a 4.24% increase in Gross Non-Performing Loans (NPLs) to KSh 221.07 billion. An NPL is a loan on which the borrower has failed to make the scheduled payments for a period of time. This rise in NPLs points to persistent economic pressures on specific sectors, particularly SMEs and some corporate clients who are facing cash flow challenges due to inflation, higher interest rates, and a slowdown in business activity.

Despite this increase, KCB maintained that its NPL ratio remained “manageable,” supported by its provisioning and recovery initiatives. This means the bank has set aside enough capital to cover potential losses from these bad loans and has a proactive strategy to recover the funds. This is a key indicator of sound risk management—the bank acknowledges the challenges but has put the necessary measures in place to mitigate the impact on its overall financial stability.

On a more positive note, the bank’s total equity surged by an impressive 27.31% to KSh 306.83 billion. This significant increase was driven by a combination of retained earnings (the profits the bank chose not to distribute as dividends) and fair value gains from its investments. This growing equity base provides a stronger buffer against risks, enhancing the bank’s overall stability and its capacity to absorb shocks and pursue future growth opportunities.

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The Power of a Regional Empire

KCB Group’s strategy has long been centered on building a robust regional presence to diversify its income streams and mitigate risks associated with over-reliance on a single market. The H1 2025 results are a powerful testament to the success of this strategy. The report reveals that subsidiaries outside KCB Bank Kenya contributed a substantial 33.4% of the Group’s overall earnings. This is a significant figure that shows the bank is no longer just a Kenyan entity but a truly regional powerhouse.

KCB has a footprint in Uganda, Tanzania, Rwanda, Burundi, and South Sudan. Its subsidiaries in these countries are increasingly becoming vital contributors to the group’s profitability. This regional diversification acts as a natural hedge, protecting the bank from localized economic downturns. For instance, if the Kenyan market faces a slowdown, strong performance in Tanzania or Rwanda can help stabilize the Group’s overall results.

The bank’s non-banking entities—KCB Investment Bank, KCB Asset Management, and KCB Bancassurance Intermediary Limited—also demonstrated solid performance, with their contribution to profit before tax rising from 1.8% to 2.1%. This indicates that KCB is successfully leveraging its brand to grow its fee-based income from wealth management, investment banking, and insurance, creating a more holistic and diversified financial services offering for its customers.

The Road Ahead: Strategic Priorities for Growth

The H1 2025 results provide a clear roadmap of KCB’s strategic priorities for the remainder of the year and beyond. The bank has reaffirmed its commitment to three key pillars:

1. Expanding its Regional Footprint: The strategic use of the NBK sale proceeds to bolster KCB Tanzania is a clear signal of this intent. KCB plans to continue its focus on growing its presence and market share in key East and Central African markets. This strategy is driven by the potential for higher growth rates in these emerging economies.
2. Enhancing Digital Capabilities: In the rapidly evolving financial landscape, digital banking is no longer an option but a necessity. KCB is investing heavily in technology to increase efficiency, improve the customer experience, and grow its fee-based income. The bank is likely to launch new digital products and services to capture the growing segment of customers who prefer to bank on their mobile devices. Digital channels also allow the bank to reach underserved populations at a lower cost, which can significantly expand its customer base.
3. Maintaining Strong Risk Management: As evidenced by the rise in NPLs, the bank is operating in a high-risk environment. Its commitment to “strong risk management practices” is therefore critical. This involves a proactive approach to credit underwriting, loan recovery, and capital provisioning. By managing risk effectively, the bank can continue to grow its loan book and earn interest income without compromising its stability. The bank’s proactive approach and solid equity base suggest it is well-prepared to handle these challenges.

Conclusion: A Foundation for Resilient Growth

KCB Group’s financial results for the first half of 2025 paint a picture of a resilient and profitable institution. Despite facing challenges such as declining non-interest income and a rise in non-performing loans, the bank leveraged a strong loan book and disciplined cost controls to deliver an 8.05% jump in profit.

The highlight of the report is the special dividend, a powerful message to shareholders that the bank is not only profitable but also strategically sound. By using the gains from the NBK sale to reward shareholders and simultaneously strengthen a key regional subsidiary, KCB is demonstrating a shrewd and forward-looking approach to capital management. The bank’s focus on regional expansion, digital innovation, and robust risk management provides a strong foundation for continued growth and stability in the dynamic East African financial sector.

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By: Montel Kamau

Serrari Financial Analyst

14th August, 2025