Kenya’s nine tier 1 banks made a total of Sh110.39 billion in interest income from their investment in government securities in six months.
Disclosures from the lenders ’unaudited financial statements show that the interest income they earned from their investment in government securities increased by 17.87 percent to Sh110. 37 billion in the six months to June 30, from Sh93.67 billion in the same period last year.
The greatest beneficiaries included KCB Group which earned Sh25.47 billion returns from government securities during the period under review, followed by Equity group (Sh28.32 billion), Diamond Trust Bank (Sh12.72 billion), Co-operative Bank (Sh12.6 billion) and I&M group (Sh6.92 billion).
On the other hand, NCBA group, Absa Bank Kenya, and Standard Chartered Bank Kenya saw their interest income on government securities decline by Sh250 million, Sh410 million, and Sh550 million respectively.
In FY2023/24, domestic borrowing by the government via Treasury bills and bonds rose by 13.3 percent to Sh5.24 trillion from Sh4.63 trillion with commercial banks holding 43.5 percent of domestic debt.
Treasury bonds constituted 85.5 percent of the government domestic debt followed by Treasury bills at 11.4 percent.
The stock of Treasury bonds rose by 15.3 percent to Sh4.63 trillion in June 2024, from Sh4.01 trillion in June 2023 while bonds rose by a meagre 0.1 percent to Sh632.5 billion.
“This is consistent with government’s objective of managing refinancing risk and lengthening the domestic debt maturity profile by gradually reducing the stock of Treasury bills and issuing medium to long-term Treasury bonds,” Treasury notes in the 2023 Annual Public Debt Report.
Notably, lending to the private sector by commercial banks slowed mainly due to perceived credit risks arising from uncertainty related to economic performance and instead, opted to channel liquidity into risk-free government securities.
In July this year global rating agency Moody’s Investor Service downgraded the credit rating of KCB Bank Kenya, Co-operative Bank Kenya and Equity Bank Kenya, largely due to their increased sovereign exposure in the form of government securities issued by a government with a weakened credit profile.
