NCBA cuts costly deposits to sustain profit growth

NCBA Group posted a rise in half-year profit to June 2025, lifted by lower funding costs despite a decline in deposits and loan book.

The regional lender, which operates in Kenya, Rwanda, Uganda and Tanzania, recorded a 12.5 percent growth in net earnings after shedding high-cost deposits to protect margins.

Customer deposits dropped by Sh31.9 billion in the six months to June, falling to Sh496.9 billion from Sh528.8 billion in the same period last year. This cut the bank’s interest expenses sharply, with payments on deposits dropping 39.6 percent to Sh12.2 billion from Sh20.2 billion.

The reduced cost of funds helped offset a decline in total interest income, which fell 10.7 percent to Sh33.9 billion from Sh38 billion.

NCBA’s income from loans to government and private sector clients dropped in the period, driven by lower lending rates and a contraction of its loan book.

The loan portfolio stood at Sh288 billion, down from Sh309.6 billion a year earlier.

“The loan book’s decline, which has been a common factor across the industry, is because of a difficult economic environment resulting in slow credit growth,” said NCBA Group Chief Executive John Gachora.

“On deposits, we were managing the cost of deposit, which came down significantly; in the process, we had to let go of some costly deposits.”

Despite the pressure on lending, banks are expected to see stronger deposit mobilisation going forward.

Analysts note that competition from Treasury securities is easing after the Central Bank of Kenya cut interest rates on short-term government paper to single digits, down from peaks of 16 percent last year.