Equity, KCB and Co-op Emerge As Top Banking Stocks As Sector Earnings Rise 17.2%

Kenya’s listed banking sector recorded a 17.2 per cent increase in attributable net earnings in the first half of 2026, supported by lower interest expenses, recovering credit demand and growth in non-interest income, according to a new banking sector valuation report by SIB.

The report identifies Equity Group, KCB Group and Co-operative Bank as the most attractive banking stocks among the lenders covered, citing their returns on average equity and market valuations. The assessment is based on financial results for the six months to June 2026 and share prices as of October 9, 2026.

Banks covered in the report recorded combined profit after tax of KSh153.5 billion, including non-controlling interests, while pre-tax profit from core banking operations across the wider sector reached KSh172.4 billion, representing a 16.4 per cent year-on-year increase.

Net interest income among the banks covered grew by 11.4 per cent, as interest income increased by 5.9 per cent and interest expenses declined by 5.4 per cent. Non-funded income also rose by 17.2 per cent to KSh159.1 billion, supported by a 12.2 per cent recovery in foreign exchange trading income and a 17.3 per cent increase in fees and commissions to KSh103.3 billion.

Equity Group reported the highest attributable net earnings among the banks covered, at KSh43.8 billion, representing a 31.5 per cent increase from the corresponding period last year. Its performance was supported by its Kenyan operations and regional subsidiaries, whose combined profit after tax rose by 27 per cent.

The group’s insurance business also recorded growth, with gross written premiums increasing by 24 per cent to KSh6.4 billion and profit before tax rising by 34 per cent to KSh1.2 billion. SIB estimates Equity Group’s fair value at KSh122.26 per share, compared with a market price of KSh104 as of October 9, and assigns the stock a Buy recommendation.

KCB Group recorded a 14.5 per cent increase in attributable earnings, supported by lower interest expenses, contained operating costs and growth in its loan book. The lender also reported improvements in asset quality, with its gross non-performing loan ratio standing at 15.1 per cent in the first half of the year.

The bank’s board recommended an interim ordinary dividend of KSh3 per share, a 50 per cent increase from the KSh2 ordinary interim dividend paid in 2025. The previous year also included a separate special interim dividend of KSh2 following the sale of National Bank of Kenya.

SIB estimates KCB’s fair value at KSh113.08 per share against a market price of KSh89.75, giving it a Buy recommendation.

Co-operative Bank’s attributable earnings increased by 28 per cent year-on-year, reflecting growth in business volumes and resilient income. The lender also improved its loan-loss coverage, with its IFRS coverage ratio rising to 80.7 per cent from 69.9 per cent in the first half of 2025. Its cost of risk declined to 1.8 per cent from 2.4 per cent.

The bank is targeting total assets of KSh1 trillion and plans to restructure into a holding company to support expansion into diversified financial services and regional markets. SIB estimates its fair value at KSh37.22 per share, compared with a market price of KSh36.95, and recommends holding the stock.

Family Bank recorded the fastest attributable earnings growth among the covered lenders, with profit after tax rising by approximately 61.8 per cent. Its net interest income grew by 40.7 per cent to KSh9.8 billion, supported by a 25.9 per cent increase in interest income to KSh14.3 billion.

Diamond Trust Bank posted a 34.1 per cent increase in attributable earnings, while I&M Group recorded growth of 20.3 per cent. NCBA Group’s earnings rose by 12.2 per cent, supported by lower interest expenses and a recovery in lending activity.

NCBA’s loan volumes increased by 20.1 per cent year-on-year, while its regional subsidiaries in Uganda, Tanzania and Rwanda recorded combined profit before tax of KSh1.6 billion. Its non-banking subsidiaries, including investment banking, insurance, leasing and bancassurance, posted combined pre-tax profit of KSh1.1 billion, up 40 per cent.

NCBA recommended an interim dividend of KSh3.75 per share, a 50 per cent increase from the previous year. SIB nevertheless assigns the stock a Hold recommendation, with a fair value estimate of KSh98.74 per share against a market price of KSh88.75.

The results were weaker at Standard Chartered Bank Kenya and Absa Bank Kenya, whose attributable earnings declined by 16.8 per cent and 9.8 per cent, respectively. Both lenders faced pressure from lower yields on loans and government securities in a falling interest-rate environment. Stanbic Holdings recorded a more stable performance, with earnings increasing by 1 per cent to approximately KSh6.6 billion.

Standard Chartered, however, offered the highest dividend yield among the banks covered at approximately 9.7 per cent, based on financial-year 2025 dividends and the October 9 share price. NCBA, KCB and Stanbic followed with yields of approximately 8 per cent, 7.8 per cent and 8.1 per cent, respectively.

The report puts the average return on average equity for the covered banks at 21.3 per cent in the first half of 2026, while the average price-to-book ratio stood at approximately 1.3 times. SIB notes that Equity, KCB and Co-operative Bank combine above-average returns on equity with valuations at or below the coverage average.