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Housing Finance posts the highest lending margins
Rate cuts by CBK have boosted banks, allowing them to aggressively push for cheaper deposits, while savers have felt the pinch as lenders apply the squeeze.
Lender Housing Finance enjoyed the largest lending margins at the end of last year, marking the highest profit potential from lending among all 38 licensed commercial banks.
Data from the Central Bank of Kenya (CBK) shows HF had lending margins of 12.27 percent in December 2025.
Lending margins are calculated by subtracting the rate paid to term depositors from the loan interest rate and inform the size of profits a bank can generate from issuing credit to borrowers.
HF’s overall interest rate stood at 17.94 percent in December 2025, while its deposit rate was 5.67 percent.
Other banks with double-digit lending margins in December 2025 were Access Bank (Kenya) Plc (11.77 percent), Bank of Africa Kenya (10.35 percent), and NCBA Bank Kenya (10.18 percent).
Falling domestic interest rates have handed banks the opportunity to raise their lending margins by cutting the cost of deposits faster than loan rates, preserving or even increasing profits from the credit business.
Kingdom Bank Kenya raised its lending margins by the fastest rate in 2025 or 6.72 percentage points, ahead of DIB Bank Kenya Limited (6.28 percentage points) and UBA Kenya Bank (4.6 percentage points).
The banks largely achieved wider lending margins by cutting their deposit rate faster than loan rates.
Standard Chartered Bank Kenya, on the other hand, marked the fastest reduction in lending margins by 2.71 percentage points from 12.28 percent in December 2024 to 9.57 percent in December 2025.
Others to post lower lending margins included Citibank N.A., Stanbic Bank Kenya, Absa Bank Kenya, and Diamond Trust Bank (DTB) Kenya.
Rate cuts by CBK have boosted banks, allowing them to aggressively push for cheaper deposits, while savers have felt the pinch as lenders apply the squeeze.
At the end of September 2025, banks’ interest expenses on deposits from Kenyan operations fell by 10.8 percent or Sh3.52 billion.
Data from Kenyan operations of the top nine banks- KCB Group, Equity Group, Co-operative Bank of Kenya, NCBA Group, DTB Group, Stanbic Bank Kenya, Absa Bank Kenya, I&M Group, and Standard Chartered Bank Kenya- showed the lenders’ interest expenses on deposits had reduced by a quarter in nine months to September 2025 to Sh129.41 billion.
Overall lending margins for the industry climbed 1.24 percentage points to 7.69 percent in December 2025 from 6.45 percent in December 2024.
The average lending rate stood at 14.82 percent in December 2025, while the average deposit rate was 7.13 percent. In contrast, the average lending rate was 16.9 percent in December 2024, while the mean deposit rate was 10.45 percent
In a September 2025 interview with this publication, Prime Bank CEO Rajeev Pant described lending margins as a double-edged sword where each lender must balance between a suitable profit margin while keeping the cost of deposits adequate to attract customer funds.
“It is always a double-edged sword -if I make one happy, the other side complains. It requires a balancing act somewhere because we can’t do without either of the parties,” he said.
“If you are a businessman and you are borrowing, you obviously want to have the lowest cost of capital. If you are a retired pensioner, you obviously want the highest rate of interest on your deposit.”
The decline in deposit rates will likely incentivise savers to seek alternative asset classes.
Falling interest rates on loans are seen as having the opposite effect, revitalizing borrowers’ credit demand.
Private sector credit growth accelerated in November last year to a 19-month high of 6.3 percent, rising from a contraction of 2.9 percent in January 2025.
The renewed credit flows have been channelled mainly to the sectors of manufacturing, building and construction, trade, and consumer durables.
