Kenya’s equities market recorded a correction during the week ending 6th March 2026 following the strong rally observed in February. The decline was largely driven by profit-taking in banking sector counters, which had been the primary drivers of the market’s recent gains. Despite the weekly pullback, the market remains in positive territory on a year-to-date basis, supported by improved investor sentiment and stronger corporate earnings expectations.

Market Performance

During the week, the equities market trended downward, with all major indices recording declines. The NSE 20 Index fell by 3.9%, while NASI declined by 3.5%, and both the NSE 10 and NSE 25 indices declined by 3.1%.

Despite the weekly decline, the market continues to maintain positive performance for the year. Year-to-date gains now stand at 14.8% for the NSE 20, 12.6% for the NSE 25, 11.3% for the NSE 10, and 11.2% for NASI.

The market weakness was largely attributable to declines in several large-capitalization banking counters. Absa Bank Kenya, Standard Chartered Bank Kenya (SCBK) and NCBA recorded the largest losses during the week, declining by 6.4%, 6.1% and 4.9% respectively. These losses reflect a period of consolidation following the strong gains recorded by the banking sector in recent weeks.

However, the downside was partly cushioned by gains in select counters. Co-operative Bank and DTB-K recorded modest increases of 2.7% and 1.5% respectively, suggesting that investor interest in the banking sector remains intact despite the short-term correction.

Banking Sector Performance

The banking sector remained central to overall market movements during the week. The banking sector index declined by 3.1%, closing at 238.3 from 245.9 recorded the previous week.

The decline was primarily driven by losses in Absa Bank Kenya, Standard Chartered Bank Kenya and NCBA, which collectively exerted downward pressure on the sector index. The correction appears to reflect short-term profit taking following the sector’s strong performance earlier in the year.

Nevertheless, the gains recorded by Co-operative Bank and DTB-K suggest that investor sentiment toward the banking sector remains broadly positive, supported by improving asset quality trends, easing interest rates and expectations of gradual credit growth recovery.

Market Activity and Foreign Participation

Market activity slowed during the week. Equities turnover declined by 20.6% to USD 39.4 mn, compared to USD 49.6 mn recorded the previous week, bringing the year-to-date turnover to USD 332.1 mn.

Foreign investor participation remained negative, with offshore investors recording net outflows of USD 4.3 mn during the week. This marks the sixth consecutive week of foreign net selling.

Year-to-date, foreign investors have recorded net outflows of USD 39.3 mn, compared to USD 92.9 mn during the same period in 2025. While foreign participation remains subdued, the pace of outflows is still lower than the levels observed last year.

The continued foreign selling suggests that global investors remain cautious toward frontier markets amid broader global economic uncertainties.

Corporate Earnings Highlight

Absa Bank Kenya – FY2025 Financial Performance

During the week, Absa Bank Kenya released its FY2025 financial results, reporting a 9.7% increase in profit after tax to Kshs 22.9 bn, compared to Kshs 20.9 bn recorded in FY2024.

The improvement in earnings was largely driven by a significant reduction in operating costs. Total operating expenses declined by 12.2% to Kshs 28.6 bn, supported by a 31.8% decline in loan loss provisions as asset quality improved.

However, revenue growth remained constrained. Total operating income declined by 1.6% to Kshs 61.4 bn, reflecting lower interest income during the year. Interest income fell by 10.9%, largely due to reduced lending yields and lower income from interbank placements.

The bank’s cost of funds declined to 3.5% from 4.5%, supported by a 22.2% decline in interest expenses, mainly driven by lower interest paid on customer deposits. Despite this improvement, net interest margin declined to 9.1% from 10.1%, reflecting the broader compression in lending yields.

Non-funded income provided some support to revenue, increasing 12.2% to Kshs 18.1 bn, driven mainly by growth in fee-based income streams.

Balance Sheet Performance

Absa Bank Kenya’s balance sheet expanded during the year, with total assets increasing by 6.2% to Kshs 537.6 bn, compared to Kshs 506.5 bn in FY2024.

The growth was largely driven by a significant increase in the bank’s holdings of government securities, which rose 20.7% to Kshs 157.7 bn. This reflects a strategic shift toward government securities as banks reposition their portfolios in response to interest rate movements.

Net loans and advances increased modestly by 1.0% to Kshs 312.2 bn, while customer deposits grew by 1.4% to Kshs 372.4 bn.

The bank’s loan-to-deposit ratio declined slightly to 83.8%, indicating a cautious lending stance amid the evolving interest rate environment.

Asset quality improved during the year, with the gross non-performing loan (NPL) ratio declining to 11.5% from 12.6% in FY2024. The improvement was supported by an 8.4% decline in gross NPLs to Kshs 38.9 bn.

Capital and Shareholder Returns

Absa Bank Kenya maintained strong capital buffers during the period. The bank reported a core capital to risk-weighted assets ratio of 18.3%, well above the statutory minimum of 10.5%, while the total capital ratio stood at 21.0%, exceeding regulatory requirements.

The bank declared a total dividend of Kshs 2.05 per share, comprising a final dividend of Kshs 1.85 per share and an interim dividend of Kshs 0.20 per share. This represents an increase from the Kshs 1.75 per share distributed in FY2024, translating to a dividend yield of 6.8% and a payout ratio of 48.6%.

Capital Markets Development

Kenya Pipeline Company (KPC) IPO

A key development during the week was the release of the Kenya Pipeline Company (KPC) IPO results.

The offer was oversubscribed by 105.7%, with investors applying for 12.5 bn shares valued at Kshs 112.4 bn, compared to 11.8 bn shares valued at Kshs 106.3 bn offered at Kshs 9.0 per share.

The IPO attracted strong participation from institutional investors, particularly domestic institutions. Kenyan institutional investors emerged as the largest shareholder block, accounting for 41.0% of the allocation.

Following the transaction, the Government of Kenya retained a 35.0% stake, while East African Community investors secured approximately 21.2% of the allocation.

Retail investor participation remained relatively modest, accounting for 2.6% of the allocation, while foreign investors received a marginal 0.02% stake.

The strong institutional participation reflects investor confidence in KPC as a strategic infrastructure asset. At the same time, the low retail participation likely reflects liquidity constraints among individual investors.

The shares are expected to begin trading on the Nairobi Securities Exchange on 10th March 2026, marking an important milestone in Kenya’s ongoing efforts to broaden ownership of strategic state assets and deepen the domestic capital markets.

Market Outlook

The correction observed during the week appears largely technical following the strong rally recorded earlier in the year. The banking sector remains a key driver of market performance, supported by improving asset quality and easing monetary conditions.

Corporate earnings releases continue to provide important signals about sector performance, while developments such as the KPC IPO highlight ongoing progress in deepening Kenya’s capital markets.

Going forward, investor sentiment will likely be influenced by corporate earnings trends, monetary policy developments and the trajectory of foreign investor flows into frontier markets.