NCBA Group closed the first half of 2025 with a 12.6% year-on-year rise in after-tax profit to KES 11.0 billion. The headline growth wasn’t powered by aggressive lending or deposit expansion instead margin discipline did the heavy lifting. A 39.3% drop in interest expenses helped offset a 10.7% decline in interest income, pushing net interest income up 26.7% to KES 20.8 billion. Earnings per share rose to KES 6.71, and the board declared an interim dividend of KES 2.50 per share.

Net Interest Income

The bank’s interest-earning assets yielded less, down 127 basis points to 11.7% but its cost of funds fell even faster, down 292 basis points to 4.9%. That spread expansion lifted net interest margin by 165 basis points to 6.8%.

Non-Funded Income

Non-funded income dipped 2.9% to KES 14.5 billion, dragged down by a 34.0% plunge in forex trading income to KES 2.4 billion. Fees and commissions were flat at KES 9.2 billion, but other operating income surged 43.3% to KES 2.8 billion likely reflecting stronger performance from insurance and cash management. Still, the contribution of non-funded income to total income fell to 41.0%, down from 47.5% last year, signaling a tilt toward interest-based revenue.

NCBA’s Costs and Credit Risk

Operating expenses rose 12.5% to KES 18.6 billion, driven by higher staff costs (+12.8%) and other operating expenses (+11.7%). The cost-to-income ratio held steady at 52.5%, down just 6 basis points. Loan loss provisions climbed 19.1% to KES 3.2 billion, nudging the cost of risk to 2.2%. Interestingly, gross non-performing loans fell 6.8% to KES 38.1 billion, but the NPL ratio still ticked up 2 basis points to 11.7%, a reminder that asset quality remains a balancing act.

Commenting on the results, Group Managing Director, John Gachora remarked, ”Our focus on maintaining high quality assets and enhanced recoveries was evident with the NPL ratio of 11.9 per cent and cost of risk at 1.4 per cent. We maintained a capital adequacy ratio of 22.4 per cent, well above regulatory requirements and sufficient to meet our lending requirements and invest in strategic growth opportunities.”

NCBA’s Balance Sheet

Net customer loans contracted by 7.0% to KES 288.1 billion, while investment securities dipped 1.1% to KES 216.5 billion. Deposits fell 6.0% to KES 497.0 billion, and borrowed funds declined 10.9% to KES 8.5 billion. The quarter-on-quarter movements were marginal, suggesting NCBA is managing its book with precision rather than chasing growth.

Valuation and Returns

NCBA trades at a trailing P/E of 4.7x, above the industry median of 4.1x, and a P/B of 0.9x versus 0.8x. That premium reflects its 19.0% return on equity and 3.4% return on assets, metrics that speak to operational efficiency more than asset expansion.

Looking ahead, Mr. Gachora commented, “The operating environment indicators are positive including global growth outlook of 3.0 per cent, stable KES/USD currency at KES 129, inflation within target at 4.1 per cent and the latest Kenya CBR downward revision to 9.50 per cent. The interventions by the Government are expected to stimulate economic activity and accelerate credit uptake by the private sector whose growth is at 3.3 per cent.”