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Co-op Bank, Equity and KCB get higher credit rating in review
Banks with higher credit ratings are able to borrow at cheaper rates and enjoy increased confidence from providers of various sources of funds such as deposits and share capital.
Equity Bank Kenya, Co-operative Bank of Kenya and KCB Bank Kenya have received a credit rating upgrade after improvement in Kenya's creditworthiness, which also influences how private firms are perceived by financiers.
Credit rating agency Moody's upgraded the country's top banks by one place in its ratings scales to B3 from Caa1 to match the rating issued to the country.
Banks with higher credit ratings are able to borrow at cheaper rates and enjoy increased confidence from providers of various sources of funds such as deposits and share capital.
Moody’s last week reviewed Kenya’s sovereign rating to B3 on a reduction in the country’s near-term risk of default accompanied with higher foreign exchange reserves, narrower current account deficit and a stable shilling.
“Moody's Ratings has today upgraded to B3, from Caa1, the long-term deposit ratings of three Kenyan banks: KCB Bank Kenya Limited, Equity Bank (Kenya) Limited, and Co-operative Bank of Kenya Limited,” said Moody’s.
“Today's rating action follows the strengthening of the Kenyan government's credit profile, as captured by our upgrade of the sovereign rating to B3, from Caa1, and outlook change to stable from positive on 27 January 2026,” added the rating agency.
Commercial banks' substantial investment in government securities links their credit risk profile to that of the State. The trio had invested Sh918.2 billion in Treasury bills and bonds as at end of September 2025 with Equity having the highest holding of Sh391.3 billion followed by KCB (Sh291.3 billion) and Co-op Bank Sh235.5 billion.
“The Kenyan banks' Baseline Credit Assessments (BCA) and deposit ratings were previously constrained by Kenya's sovereign rating, and the higher sovereign rating now allows the banks to be rated higher,” said Moody’s.
Co-op Bank would have been rated higher and it is the only institution whose creditworthiness score is still constrained by the sovereign rating.
“Co-op Bank's b3 BCA is positioned one notch below its financial profile scorecard outcome of b2, still constrained by the sovereign rating,” said Moody’s.
“Co-op Bank's BCA and ratings capture the high inter-linkage between the bank's own credit profile and that of the B3 rated sovereign, with government securities standing at around 1.7 times its tangible common equity as of September 2025,” added the agency.
This means that any upward revision on the country rating would automatically see an upgrade of Co-op Bank's rating.
KCB and Equity banks’ credit rating matches their financial profile scorecard.
Moody’s assigned a stable outlook to the banks rating indicating it did not see anything in the foreseeable future likely to result in lowering of the credit ratings.
The three banks reported higher profits, reduced non-performing loans accompanied by credit expansion supported their improved rating.
The National Treasury's decision to pay part of its pending bills has lowered the volume of bad loans held by banks as a large portion of them were from unpaid government contractors.
High levels of non-performing loans has been one of the major risks associated with Kenya’s banking industry.
The ratio of gross non-performing loans declined to 15.5 percent in January from 16.7 percent in December 2025 and 17.6 percent in August, underlining the improving loan repayment rates.
Improved economic environment accompanied by a drop in interest rates has stirred private sector borrowing helping to further lower the ratio of bad loans to total loans. The Central Bank of Kenya said private sector credit grew by 6.4 percent in January compared to 5.9 percent in December and negative 2.9 percent in January 2025.
