Earnings Surge on Solid Fundamentals

I&M Group Plc posted a robust set of results for the first half of 2025, with earnings per share rising 38.0% year-on-year to KES 4.68. Net income attributable to shareholders reached KES 7.7 billion, reflecting the Group’s ability to navigate a challenging interest rate environment while capitalizing on strategic asset allocation and cost efficiencies.

Net Interest Income Drives Performance

The standout driver of performance was net interest income (NII), which surged 23.7% year-on-year to KES 20.4 billion. This was largely supported by a sharp 20.3% decline in interest expenses to KES 11.7 billion, even as total interest income remained relatively flat at KES 32.1 billion.

The muted growth in interest income was weighed down by a 4.2% drop in earnings from loans and advances, which fell to KES 21.6 billion. This decline was attributed to the lender’s repricing of its loan book in response to Central Bank Rate (CBR) cuts, with the weighted average yield on loans easing to approximately 15.0% from 16.3% in the prior year.

Strategic Asset Allocation Pays Off

Despite a modest 2.1% expansion in the loan book to KES 290.3 billion, the Group’s strategic pivot toward government securities paid off handsomely. Income from these instruments rose 33.6% year-on-year to KES 9.3 billion, as the Group increased its holdings by 22.9% to nearly KES 178.8 billion.

This shift helped cushion the impact of softer loan yields and declining interbank rates, which saw income from placements with banking institutions fall 26.5% to KES 1.2 billion.

Funding Costs Decline Amid Deposit Strategy

On the funding side, I&M Group benefited from a more favorable deposit mix. Customer deposit expenses declined 17.9% to KES 9.9 billion, even as deposits grew 2.4% to KES 429.4 billion.

The Group’s focus on low-cost deposits part of its broader strategy to expand its branch footprint to 100 locations in Kenya by 2026 has begun to bear fruit.

Interest expenses on placements from banks and other borrowings also tapered significantly, falling 34.4% and 24.6% respectively.

Overall, the Group’s net interest margin (NIM) improved to approximately 8.2%, up from 7.2% in the same period last year.

Non-Interest Revenue Gains on Diversification

Non-interest revenue (NIR) also contributed meaningfully to the topline, rising 12.9% year-on-year to KES 7.0 billion. This growth was anchored by a 64.3% jump in other income to KES 996.8 million, driven by diversification into bancassurance, advisory, and wealth management services.

Fees and commissions income rose 14.8% to KES 4.3 billion, supported by increased short-term lending, digital banking adoption, and a notable expansion in customer base now exceeding 851,000 clients, up 34% year-on-year.

Foreign exchange income, however, declined 8.2% to KES 1.7 billion, reflecting tighter margins and reduced currency volatility in the Kenyan market.

Operating expenses

Operating expenses before impairments rose 11.1% to KES 12.0 billion, with staff costs up 17.6% and other expenses climbing 11.2%, partly due to investments in digital infrastructure and the addition of 13 new branches.

Despite these increases, the Group’s cost-to-income ratio improved to 43.9%, down from 47.7% in 1H24, underscoring its operational efficiency.

Prudent Risk Management and Subsidiary Performance

Loan loss provisions increased 17.4% to KES 4.1 billion, signaling a cautious stance on credit risk. Nonetheless, the Group’s bottom line remained resilient, with attributable income climbing to KES 7.7 billion.

I&M Bank Kenya, the Group’s flagship subsidiary, delivered a commendable 31.1% year-on-year growth in profit before tax to KES 5.8 billion, driven by a 27.1% increase in NII to KES 14.2 billion.

However, its contribution to Group PBT eased slightly to 24%, down from 26% in the prior year, suggesting stronger performance across the Group’s regional subsidiaries.