Consolidated Bank of Kenya's net profit for the half-year to June 2026 grew 14-fold, riding on lower interest expenses following mobilisation of cheap deposits, especially from government institutions.

The state-owned lender recorded a net profit of Sh174.8 million for the six months compared to Sh12 million posted in a similar period a year earlier.

This followed a 26.7 percent drop in interest expenses despite a 12.9 percent expansion of its deposit base to Sh13.5 billion. Banks make money by accepting cash deposits in return for interest payments and then investing that money elsewhere.

The bank's profit is the difference between the interest it pays depositors and the yield it makes through investing.

This is the fastest deposit growth recorded by Consolidated Bank in more than five years, which comes on the back of the National Treasury issuing a circular to state institutions asking them to bank with the lender.

The lender’s management says the deposit growth follows aggressive face-to-face marketing among the existing client base.

“Government business takes long to close. You have to get board approvals and then forward to the parent ministry to give its nod for you to change a banker. That takes four to five months,” Consolidated Bank Acting CEO, Dominic Murage, told The Business Daily.

Consolidated Bank invested the bulk of the new deposits in government securities, growing its earnings from Treasury bills and bonds to Sh497.6 million from Sh359.7 million.

The growth in deposits also helped lower reliance on borrowing from other commercial banks, saving the lender Sh43 million.

Treasury has also committed to injecting more capital in the bank to bring it back to compliance with regulatory requirements.

“The majority shareholder ... has committed to a capital injection ... even as the board and management are implementing other plans on sale of non-core assets,” Dr Murage said.

The bank has earmarked its properties in Muranga, Embu and Mombasa for sale to boost its capital position in a proposal forwarded to the government for consideration.

The plan will see it retain its headquarters in Nairobi, Koinange Street.

A declining interest rate environment helped the bank keep its cost of deposits low while also allowing for a 4.1 percent growth in its loan book.

The bank which has not had a substantive chief executive and chairman since early this year following non-renewal of its former CEO’s contract which split the board saw its director's remuneration fall by half to Sh11.9 million from Sh22.2 million. The bank had operated for a period without a fully constituted board, resulting in the drop in directors’ pay.

Consolidated Bank bounced back to profitability last year after a decade of loss-making and has retained a growth trajectory.

The decade-long stay in the red had wiped its core capital to negative Sh523 million. Its accumulated losses are Sh4.1 billion, with the lender non-compliant in all capital parameters set by the Central Bank of Kenya.

Its core capital to total deposit liabilities ratio is at negative four percent against a mandatory eight percent, while its total capital to total risk-weighted assets is at negative four percent against the statutory 14.5 percent.

→ gngigi@ke.nationmedia.com

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