Top banks forex earnings dip 53% as shilling holds
By John Otini, August 12, 2025Kenya’s tier one banks are the biggest casualties following a collapse of their foreign exchange trading income by more than half in the first half of 2025, as a year of stability in the shilling-dollar exchange rate squeezes the lucrative spreads they had enjoyed during recent currency turbulence.
Fresh half-year results show industry-wide FX income dropped 53 per cent compared to the same period last year, marking a sharp reversal from 2023 and early 2024, when the shilling’s volatility against the US dollar created windfall gains for lenders.
The Kenya shilling has traded in a narrow band around Sh129.2 to the dollar for nearly 12 months, following the Central Bank of Kenya’s aggressive monetary tightening and increased dollar inflows from external financing.
The calm stands in stark contrast to the previous two years, when the shilling depreciated sharply and the wide spreads between interbank and customer rates drove exceptional trading profits for banks. Stanbic Bank Kenya Chief Financial Officer, Dennis Musau, said that the slowdown was expected.
“We did think the movie would continue playing. The banking industry showed a 53 percent drop in FX income,” he said.
For KCB Group, Equity Group, Absa Bank Kenya, and Co-operative Bank all of which have a substantial share of their total income tied to FX operations the first half of the year has been a test of adaptability. Detailed results from these lenders, expected in the coming days, will likely mirror Stanbic’s experience, showing steep declines in FX trading income but stable or slightly higher fee-based revenues from transaction growth.
At Stanbic, foreign exchange income fell even more sharply — down 58.21 per cent year-on-year to Sh1.962 billion in the six months to June. “The beauty with that is that you have confidence that when you go out looking for dollars, you will find them.
Hence there is more volumes, thus higher income in fees,” Musau added, noting that while spreads have narrowed, transaction activity remains robust. The shift has forced banks to adjust to an environment where currency stability, while beneficial for importers, exporters, and price predictability, compresses a key earnings line for lenders.
For many institutions, FX trading had emerged as a significant contributor to overall profitability, particularly during the period of intense shilling depreciation. In 2023, banks such as KCB, Equity, and Absa booked billions in foreign exchange income as they capitalised on the wide gap between their dollar buying and selling rates.
The volatility also created opportunities to profit from positioning in anticipation of further currency moves.
With the shilling now anchored within a tight range, those opportunities have largely evaporated. The US dollar is more readily available in the market, cutting down on scarcity premiums and making it harder for banks to justify higher rates to customers.
Musau said the industry had anticipated the shift, but the scale of the impact is now clearly visible in the HY2025 earnings season. “The moment is now firmly here with us,” he said. “FX income lines are coming under immense compression.” Even with reduced spreads, transaction volumes in the FX market remain strong. A more stable exchange rate has encouraged businesses to transact without fear of sudden currency shocks, boosting the number of trades processed by banks. This has helped to partially offset the decline in trading margins, with institutions earning more from transaction fees and commissions. For corporates, the predictable rate environment allows for more accurate planning and less need for costly hedging arrangements.
The currency’s stability during a period of global uncertainty has however raised eyebrows. The decline in FX income is expected to push banks to lean more on interest income, non-funded income from other lines such as mobile banking fees, and lending to high-growth sectors.