Majority of Kenya’s commercial banks have slashed interest rates on lending and deposits to a 4-month low, months after the Central Bank of Kenya (CBK) began its ongoing easing policy.
- •The average lending rate by commercial banks eased by 0.3% from 17.22% in November to 16.89% in December.
- •In December, 23 banks reduced their lending rates, 14 hiked their overall lending rate, while Equity bank retained its November rates.
- •Lending to the private sector shrank 1.1% in the 12 months to November while the gross non-performing loans ratio decreased marginally to 16.5% in October from 16.7% in August.
Of the 10 listed banks, Housing Finance had the most expensive interest rate at 20.17% while Standard Chartered offered the cheapest loans at 15.28%. Others had lending rates ranging, with Absa at 18.95%, NCBA at 18.04%, I&M Bank at 17.86%, Co-op bank at 16.90, KCB at 16.84%, DTB at 16.80%, Equity Group at 16.07%, and Stanbic at 15.36%.
Overall, the Middle East Bank Kenya had the most expensive loans at 22.00% followed by Credit Bank at 20.41%, CIB Kenya at 20.20%, HF Group at 20.17% and Sidian Bank at 19.95% while Access Bank Kenya had the cheapest loans at 11.46%.
Among those that hiked rates included KCB Bank, Diamond Trust Bank and Co-operative Bank for listed banks and Family Bank, Sidian, Consolidated, Habib, DIB, Kingdom Bank, Gulf African, Premier bank, Credit Bank, Access Bank and the Middle East Bank.
CBK has nudged commercial banks to lower interest rates in line with the progressive benchmark rate cuts and the evolving risk factors. “When the central bank raised the policy rate, banks were very quick to raise their lending rates,” CBK Governor Kamau Thugge said in the post MPC brief in December. “All we are asking for is for banks to be fair and act in the same way by reducing interest rates as soon as possible.”
In December, The Kenya Bankers Association said that while the lending rates were set to drop, the reductions would be implemented progressively due to the nature of the banking sector which operates by mobilizing deposits and issuing loans from the same deposit pool.
Meanwhile, the average deposit rate edged lower to 10.41% in December from 10.45% in November while savings rate rose to 4.25% in December from 3.54% in November.
The CBK kicked off its easing campaign in August 2024 with a 25 basis points rate cut, and a subsequent 75 basis points, bringing the benchmark rate to 12.00%. In its final policy meeting of 2024, CBK cut rates aggressively by 75 basis points to stand at 11.25%. The next MPC meeting will be held on 8th February 2025.
