SBM Bank Kenya cleared KES 17.6 billion owed to the Central Bank, and that swap explains most of its 171% profit jump

SBM Bank Kenya published its unaudited results for the six months to 30 June 2026 on 22 July. Every licensed bank in Kenya publishes these statements twice a year in a format set by the Central Bank of Kenya, so the figures are comparable across the industry. SBM’s board approved this one on 16 July 2026.

Group profit before tax was KES 547.0 million, up 170.8% from KES 202.0 million a year earlier. After tax the group made KES 380.2 million, up 88.2%. The gap between those two rates is tax. In the first half of 2025 SBM paid none. This year it booked a deferred tax charge of KES 166.8 million, which is not cash leaving the bank. SBM holds a KES 2.41 billion deferred tax asset, the future tax relief owed to it for past losses, and trading profitably uses that relief up.

Where the profit came from

SBM earned KES 5.38 billion in interest income in the half, 0.8% less than a year earlier. Interest on loans fell 1.4% even though the loan book grew 18.3% to KES 54.09 billion. Kenyan lending rates have been falling since the Central Bank cut its benchmark from 9.25% in October 2025 to 8.75% in February 2026, where it has stayed.

The improvement came from the other side. Interest expense fell 10.7%, from KES 3.59 billion to KES 3.20 billion, and almost all of that saving sits in one line: interest paid on deposits and placements from other banking institutions dropped 60.1%, from KES 1.03 billion to KES 412 million.

The balance sheet shows why. On 30 June 2025 SBM owed the Central Bank of Kenya KES 17.57 billion. By December that was KES 10.02 billion, by March KES 6.87 billion, and on 30 June 2026 it was zero. Over the same twelve months customer deposits rose by KES 17.90 billion, from KES 76.17 billion to KES 94.07 billion. SBM swapped expensive wholesale borrowing for retail and business deposits, almost shilling for shilling. The statement does not say what the Central Bank borrowing was for or on what terms, and SBM’s announcement does not mention it.

The Pesalink piece

Deposits do not arrive on their own.

Pesalink is the instant bank-to-bank transfer rail launched in 2017 and run by Integrated Payment Services Limited for the Kenya Bankers Association. It moves money between bank accounts in real time, from KES 10 up to KES 999,999. It does not reach an M-PESA wallet directly, though the two systems have been integrating. Each bank used to set its own price, in tiers that ran as high as KES 250 a transfer.

SBM moved first on the industry’s replacement, a flat KES 20 above KES 1,000 and nothing below it, under its own “Tuma na Mbao” branding. We covered the campaign when KCB joined in May. Nineteen banks and microfinance banks have since signed up, according to Business Daily.

From 1 May 2026 SBM went past the industry price and dropped its Pesalink fee to zero on any amount from KES 1 to KES 999,999 sent through its Mfukoni app or online banking. SBM’s website put the end date at 31 July 2026. The advertisement printed alongside these results extends it to 30 September 2026.

That is a real cost. SBM earns nothing on those transfers, and it is competing against Safaricom, which in July started letting people send M-PESA money for free inside its My OneApp, with conditions. What SBM buys instead is cheap funding. Interest paid to depositors rose 9.6% while the deposit book grew 23.5%, so the average rate SBM pays has come down.

What the fee income does not show

Group non-interest income grew 43.7%, to KES 1.40 billion. The components tell a different story from the payments framing. Fees and commissions on loans and advances went from KES 29.5 million to KES 179.2 million. Other fees and commissions, the line that captures transaction charges, grew by KES 137.0 million. Foreign exchange trading income was flat at KES 417 million. “Other income”, which the statement does not break down, added KES 143.1 million and is now roughly a third of the total.

The largest single driver of fee growth is lending, not payments.

Bad loans, and what happened to the provisions

Gross non-performing loans fell 42.4%, from KES 16.84 billion to KES 9.69 billion. A loan is non-performing when the borrower has stopped paying to a degree that forces the bank to classify it as impaired.

Provisions held against those loans fell further, from KES 7.57 billion to KES 3.58 billion. Interest in suspense, which is interest booked but never collected, fell from KES 3.00 billion to KES 368 million. Falls of that size in both lines usually mean old bad loans were written off against money already set aside for them. The statement does not disclose how much was written off and how much was recovered. Provisions now cover 37% of gross bad loans, down from 45%. SBM reports a net non-performing exposure of KES 45.6 million, but that figure rests on KES 5.70 billion of discounted collateral values holding up.

SBM puts its gross NPL ratio at 17.3%, down from 32.4%. The statement does not disclose gross loans, so that ratio cannot be checked against it. Our own calculation from the disclosed lines gives roughly 17%, down from about 30%.

Capital, and who is paying for it

Core capital rose from KES 7.69 billion in December to KES 9.05 billion in June. KES 814 million of that came from the parent, SBM Holdings in Mauritius, which took paid-up capital from KES 3.94 billion to KES 4.76 billion in six months. The parent put in more than twice what the bank earned.

The Business Laws (Amendment) Act 2024 raises the minimum core capital for a Kenyan bank from KES 1 billion to KES 10 billion by the end of 2029, with KES 5 billion due by the end of this year. We have written about how that law is reshaping the sector. SBM clears the 2026 step with room and is KES 951 million short of the 2029 figure. Tighter is the total capital ratio, 15.9% against a 14.5% minimum, headroom worth about KES 867 million at current risk-weighted assets. Lending growth of 18% eats that quickly. SBM also still carries accumulated losses of KES 2.23 billion, roughly where they stood a year ago.

One figure that does not reconcile

SBM’s announcement puts operating income growth at 35% and operating profit at KES 852 million, up 279%. The published statement gives group operating income growth of 27.2%. On a pre-provision basis, which matches the 12% expense growth SBM quotes, group operating profit was KES 870.3 million, up 121.5%. Nothing in the statement produces 279%.

What to watch

The free Pesalink offer now expires on 30 September 2026. If SBM goes back to charging on 1 October, the test is whether the deposits it bought stay. If it extends again, the cost keeps running. Watch the Central Bank line on the next statement too. If it moves back above zero in September, deposit growth is not keeping up with lending growth.

Three things the statement leaves open, and which SBM could answer: what the Central Bank borrowing was for, how much of the bad-loan reduction was write-offs rather than recoveries, and what sits inside “other income”.