KCB Group and Equity Group Holdings delivered strong first-quarter 2026 results, reinforcing their positions as East Africa’s dominant banking institutions despite operating within a challenging economic environment marked by shifting interest rates and evolving credit conditions. KCB recorded a 15.3% rise in pre-tax profit to KSh 24.43 billion, while Equity reported a 24% increase in profit after tax to KSh 19.1 billion.

Both lenders benefited from stronger customer deposits, expanding loan books, improved operational efficiency and growing regional businesses. While falling interest rates created pressure on margins, the institutions offset these challenges through higher lending volumes, lower funding costs and increased non-interest income streams.

The latest results also highlight a growing regional banking transformation in East Africa, where cross-border operations are increasingly becoming major contributors to profitability.

Key Overview

KCB and Equity delivered robust Q1 2026 earnings growth, with expanding balance sheets exceeding KSh 2 trillion each and stronger regional performance driving profits.

KCB and Equity Deliver Strong Q1 Results as Regional Expansion Drives Growth

Kenya’s two largest banking groups, KCB Group and Equity Group Holdings, delivered impressive financial performances during the first quarter of 2026, posting strong profit growth despite a complex operating environment shaped by changing interest rates, margin pressures and evolving lending conditions.

The results reinforce the growing influence of the two lenders within East Africa’s financial sector while illustrating how scale, regional diversification and operational efficiency are becoming increasingly important competitive advantages in banking.

Both institutions crossed major milestones during the quarter, with balance sheets now exceeding KSh 2 trillion, strengthening their position among the region’s largest financial institutions.

KCB Posts Double-Digit Profit Growth

KCB Group reported a 15.3% increase in pre-tax profit, reaching KSh 24.43 billion for the quarter ended March 2026 compared with KSh 21.18 billion during the same period a year earlier.

Profit after tax also expanded significantly, rising 10% to KSh 18.20 billion, while earnings per share increased to KSh 22.18 from KSh 20.03.

The quarter represented another important milestone for the lender as total operating income crossed KSh 50 billion for the first time in the group’s history, reaching KSh 53.64 billion, an increase of 8.5% year-on-year.

The performance was largely supported by growth in interest-earning assets and a decline in funding costs.

KCB’s balance sheet expanded by 10.8% to KSh 2.25 trillion, reflecting continued growth in both lending activity and customer deposits.

Customer deposits climbed 15.7% to KSh 1.65 trillion, demonstrating strong confidence among retail and corporate customers despite a changing interest rate environment.

The scale of the deposit expansion provides KCB with substantial liquidity and strengthens its ability to support future lending growth.

Lower Funding Costs Drive Net Interest Income Growth

One of the most important drivers behind KCB’s quarterly performance was a sharp reduction in funding costs.

Net interest income increased 8.6% to KSh 36.61 billion, although the growth was driven primarily by falling funding expenses rather than expanding asset yields.

Interest expenses fell 11.1% to KSh 14.64 billion, extending a broader trend that has developed over the past two years.

The reduction becomes particularly notable when compared with the KSh 18.02 billion peak recorded in Q1 2024, when the Central Bank of Kenya benchmark rate had climbed to 13%, causing customer deposits to be repriced at significantly higher levels.

Since then, ten consecutive CBK rate cuts together with changes in deposit structures have contributed to an 18.9% decline in funding costs.

While lower funding expenses supported earnings growth, KCB indicated that pressure remains on margins.

Net interest margin declined to 7.1% from 7.8%, reflecting a situation where falling asset yields are declining faster than lending volumes can compensate.

Management highlighted this as a potential risk if the Central Bank of Kenya maintains its April 2026 pause on rate adjustments throughout the remainder of the year.

Non-Funded Income Strengthens Diversification

Beyond lending income, KCB also recorded growth in alternative revenue streams.

Non-funded income rose 8.3% to KSh 17.03 billion, supported by stronger transaction activity and foreign exchange operations.

Lending fees increased 27%, while foreign exchange income grew 14% during the quarter.

Although performance improved, non-funded income remains below the KSh 17.42 billion peak recorded during Q1 2024.

The figures nevertheless illustrate KCB’s continuing efforts to diversify earnings away from traditional interest-based income.

Diversification has become increasingly important as banks operate in environments where interest rates and lending margins fluctuate considerably.

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Asset Quality Continues Improving

KCB also recorded progress in loan quality metrics.

The bank’s non-performing loan ratio improved to 16.6% from 19.3%, marking the fifth consecutive quarterly improvement.

Gross non-performing loans declined 6.7% to KSh 217.79 billion compared with KSh 233.3 billion previously.

The improvements were largely attributed to stronger loan recovery efforts and continued expansion of the lending portfolio.

Loan loss provisions also declined 12.3% to KSh 4.91 billion, reducing pressure on profitability.

Meanwhile, gross loans increased 18.7% to KSh 1.315 trillion, up from KSh 1.21 trillion a year earlier.

Mobile lending activity remained particularly strong, with digital loan disbursements increasing 25% to KSh 151 billion.

However, challenges remain within specific operating units.

KCB Bank Kenya recorded a deterioration in non-performing loans, with the ratio increasing to 22% from 19.8%, while Trust Merchant Bank in the Democratic Republic of Congo reported an increase to 15.3% from 11.8%.

These segments remain areas of elevated risk despite broader improvements across the group.

Equity Delivers Stronger Bottom-Line Growth

While KCB delivered robust results, Equity Group Holdings posted even faster earnings growth.

The lender reported a 24% year-on-year increase in profit after tax, reaching KSh 19.1 billion.

The group’s balance sheet expanded to KSh 2.04 trillion, supported by a 13% increase in customer deposits.

The results highlight Equity’s continued ability to scale operations while maintaining growth momentum across multiple markets.

Regional operations increasingly contributed significantly to overall profitability.

Regional Businesses Become Major Growth Engines

Perhaps the most striking aspect of Equity’s performance was the strength of its regional subsidiaries.

Tanzania delivered an extraordinary 150% increase in profit after tax, representing the fastest growth across the group.

Rwanda also reported strong performance, recording a 36% rise in profitability to KSh 1.5 billion.

Meanwhile, EquityBCDC in the Democratic Republic of Congo generated a 32% increase in profit, reaching KSh 5 billion.

The numbers demonstrate how Equity’s long-term regional expansion strategy is increasingly paying off.

Historically, Kenyan banking institutions relied heavily on domestic operations for earnings growth.

However, recent results suggest regional diversification is becoming an increasingly important earnings driver.

Cross-border operations also reduce dependence on a single economy and provide banks with greater resilience during localized economic disruptions.

MSME Lending Remains a Core Strategy

Equity also maintained its dominance in lending to Kenya’s micro, small and medium enterprise sector.

The institution reportedly disbursed more than 36% of all MSME loans issued in Kenya.

The segment remains strategically important because SMEs continue playing a major role within Kenya’s economy, contributing significantly to employment creation and economic activity.

By maintaining a strong position within the sector, Equity continues strengthening long-term customer relationships while supporting loan growth.

Banking Sector Transformation Continues

The performances of KCB and Equity highlight broader changes occurring across East Africa’s banking sector.

Traditional banking models increasingly rely not only on interest income but also on digital services, cross-border expansion and diversified revenue streams.

Both institutions have also invested heavily in technology and operational efficiency.

KCB’s operating expenses rose 7.3% to KSh 24.33 billion, partly reflecting investments in technology systems and branch expansion.

Despite these expenditures, the cost-to-income ratio improved slightly to 45.3% from 45.8%, suggesting operational efficiency gains are beginning to offset rising costs.

Looking Ahead

The strong first-quarter results position both institutions well for the remainder of 2026, although challenges remain.

Margin pressure, changing monetary conditions and pockets of credit risk continue creating uncertainty.

However, expanding customer deposits, stronger loan books and improving regional profitability suggest both KCB and Equity possess substantial resilience.

As East Africa’s financial sector continues evolving, the growing importance of technology, regional integration and diversified revenue sources could increasingly determine which institutions emerge as long-term market leaders.

For now, the latest earnings suggest KCB and Equity remain firmly positioned at the center of the region’s banking landscape.

Sources: Streamline Feed, Standard Media, Kenya Wallstreet, Capital Business

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