For the first time in seven years, the Central Bank of Kenya (CBK) will not to pay dividends to the National Treasury despite reporting a surplus of KES 65.8 billion, in a bid to boost the bank’s capital base to KES 100 billion up from KES 60 billion ahead of 2027.
This decision by the CBK was propelled by the need to boost its capital in order to address vulnerabilities in the financial sector and increase its authorized capital. Profits were also retained so as to convert more of its retained earnings to paid-up capital. This move enabled the bank to increase its paid-up capital to KES 60 billion, compared KES 50 billion realized in the previous year.
“The surplus for the year was KES 65.8 billion made up of KES 52 billion operating surplus and a KES 13.8 billion unrealized gain,” – CBK audited financial statements.
“The surplus has been included as part of the general reserve fund. The directors recommend a transfer of operational surplus in the year to 30 June 2025 of Kenya shillings in million (2024: KES 30billion) to the consolidated fund.”
CBK to focus on Capitalization
The banks general reserves stood at KES 357.3 billion in June 2025, up 18.8% from KES 300.7 billion in the other year. The general reserves constitute KES 114.7 billion of actual profits while KES 242.6 billion in book gains. Following the increase in the bank’s capital, there is a potential for the bank to convert KES 40 billion from its general reserve to paid up capital. The reserve is aimed at buffering losses from the exchange that could potentially stem from instances where the shilling gains against major currencies in the near future.
Additionally, this move by the CBK, surfaces at a time when the state is seeking new sources of funding together with non-tax revenues such as dividends from state agencies and sale of government shares in blue chip firms such as Kenya Pipeline Company (KPC) and Safaricom Plc. The CBK’s decision may revive debates about the state agencies retaining surpluses while the government faces budget deficit.
The law allows the bank to retain at least 10% of its profit. It is also the banks policy that dividends be declared net of unrealized income and other revaluation gains. The CBK operates outside of the parastatals act, which gives it leeway on how it declares dividends, unlike other state-owned firms which are influenced by the treasury. CBK’s return to surplus was buoyed by a reduction in loan loss provisions and weakening of the shilling against the pound and the euro.
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