Give me the [Foreign language]. You know, [Foreign language] KCB has taken a lot of my energy. I thought I used to look a bit bigger. Okay, so good afternoon, everybody. The KCB board members that are present, Group CEO, Mr. Paul Russo. Thank you, Sole. Let me begin again. The KCB board members present, KCB CEO, Mr. Paul Russo, senior management team and staff that are present, stock brokers, investors, analysts, and fund managers, our media partners. Ladies and gentlemen, good afternoon once again. Good afternoon to [Foreign language]. On behalf of the Group Board of Directors, I welcome you to this ceremony as we release the KCB Group 2025 half-year financial results. Thank you for finding time to join us today, physically or virtually, as we reflect on our performance for the period ending June 30th, 2025.
Before I proceed, I wish to thank all our stakeholders that include shareholders, customers, staff, regulators, and other partners for the unwavering support and trust in our business over the years. KCB would not be the regional powerhouse that it is today without you. You are the bedrock of our success, and for that reason, we salute you. I acknowledge the directors of the KCB Group Board and the subsidiaries for their dedication, continued support, and commitment to providing oversight, governance, and effective leadership in our business. May I request those who are present today to rise so that we can appreciate them? Please. [Foreign language]. In the same breath, allow me to thank the Group Leadership Team led by the Group CEO, Mr. Paul Russo, for their generously steering our bank shape and ensuring that KCB continues to deliver value to its stakeholders.
Ladies and gentlemen, before we get to the results, allow me to give an update on a few issues which defined the first half of the year, a period that I would say was all about resilience, firstly the operating environment. As you are aware, the geopolitical landscape globally remains fluid, with prolonged conflicts in Eastern Europe and the Middle East. These conflicts have and continue to exert significant pressure, particularly on the energy and commodity markets, thereby adversely impacting the operating environment of our organization. According to the International Monetary Fund's latest update, the global economy is projected to grow at about 3% in 2025, edging up to 3.1% in 2026.
You can see, indeed, the rate at which the overall global economy is growing is, yes, one might say still somewhat strong because we are talking of the global, but not one that one can say is doing as we would have wanted. Closer home, however, we note some degree of resilience. Indeed, the IMF data and regional analysts indicate sustained above-average growth for many countries in our footprint. For 2025, the IMF's country numbers, to mention but a few, point to real GDP growth of about 4.8% for Kenya, 6% for Tanzania, and 6.1% for Uganda, reflecting a mixing of services, recovery, infrastructure, investment, and in some cases, commodity and natural resource-led expansion, you know, countries like South Sudan and to some extent, you know, the DRC. These developments in our national economies are encouraging for financial intermediation and created demand across the region.
However, risks remain in the form of currency volatility, climate extremes, and political transitions in some of our countries that we need to continue to put an eye on, and in some cases, commodity and natural... Sorry, in some of the countries that we need to put our eye on. For that reason, it is important that we monitor what is happening in terms of the risks associated with the currency volatility, climate extremes, and the political transitions in some of these, you know, markets. Ladies and gentlemen, it is important for me to underscore at this point, as KCB Group, we remain steadfast in supporting businesses, individuals, and communities, leveraging our expansive footprint across the region. During the period, the group maintained its solid asset growth, financing, and capital adequacy ratios.
These indicators reflect the bank's flexibility and resilience to adapt to the ever-evolving environment in which we are operating. The second issue that I feel we need to touch on is our investments in the regional businesses, which I'm happy to say they have continued to bear fruits. The subsidiaries recorded impressive performance in their contribution to profitability and balance sheet growth, as you will see in the financial results that will be presented to us, you know, later. We continue to pursue a balanced strategy focused on growing where returns are attractive, protecting capital, and improving our service model for customers. This set of results speaks to the resilience of our franchise, the trust of our customers, the discipline of our teams, and the soundness of the decisions we have taken and the disciplined execution of risks and capital management policies.
The third issue I would like to touch on is the NBK transaction. As you all know, the acquisition of the National Bank of Kenya by Access Bank was completed in May this year. That said, let me note the group is, however, open to opportunities to grow its footprint in existing and new markets. I think that's important because somebody might ask, "You are here selling NBK. Is it that you are trying to rethink your strategy?" No, we still remain open and we're looking into possibilities within the region where we could also, you know, have more of our footprint. Fourthly, I wish to reiterate that the KCB Group governance structures remain solid. We have instituted governance frameworks that are not only aligned with regulatory requirements but are also benchmarked against global best practices.
These structures ensure a clear delineation of roles and responsibilities, fostering a culture of integrity, innovation, and operational excellence. Last but not least, our commitment to sustainability remains at the core of our operations to enable us not only to mitigate operational risks but also unlock new markets, driving innovation, and build resilience in the communities we serve. During the period under review, KCB Group made significant strides in environmental, social, and governance initiatives. Ladies and gentlemen, as we navigate the second half of the year, we see opportunities in expanding trade, corridors, digital banking penetration, and regional integration. We shall continue leveraging technology to enhance banking experiences while driving impact initiatives that contribute to environmentally sustainable economic growth. We are excited about the strong potential that we see in our pipeline, supported by our growth agents and the synergies across the group.
I take this opportunity to appreciate our customers for our continued trust, our employees for their dedication under the leadership of Paul Russo here, our regulators for their continued support, and our shareholders for their faith and belief in the KCB Group brand. Going into the future, we believe that the KCB story is not just about financial strength. It is about purpose, resilience, and leadership in shaping the future of East Africa's financial sector, and I would say even beyond the financial sector, the regional economy of this part of our, you know, continent. Ladies and gentlemen, allow me now to invite Paul to present an overview of the performance of our bank. Thereafter, we will take any questions you may have. Thank you and God bless you all. Asante mchanga.
Thank you, Chairman. Good afternoon, everyone in the room and those online. You might struggle with my voice because it's always bad, but when I have a cold, it is terrible. Unfortunately, for the next few minutes, you have to bear with me. I just want to touch on a few slides, then Lawrence will come in and present the numbers. I always say in these presentations, I feel like that choir in IBC, that when people really want the results and you are in between there waiting and keeping them busy. Let me do my choir as Lawrence warms up. Just to touch on a few elements, the leadership team, Chairman, that you've congratulated, has not changed with the exception of one person. I think that's what is important about KCB Group, the consistency of the leadership team, the service for that team.
Pardon me for the rest of the team, this is not your day. It is Mark Mwongela's day. Mark Mwongela is the only one who has not been introduced before. Mark joined us as Group Strategy and Innovation Director, taking over from a role that Reggie Kikwai held before. Reggie is now a Deputy Managing Director in the DRC business, TMB. Mark joins us from PESAPAL in Singapore. Everybody you meet tells you if you want strategy, read some books from Singapore. We've got the book here with us. It's paper, not PESAP paper. Thank you, Mark, for making the choice to join us. Thank you for what you've done in the last two or three months. Three months. Join the solid team, very stable, I think now. Anastasia, you lead in the years of service. I'm closely getting there to half of that. Thank you very much.
Never did I think that I would cross 10 years in the institution. Thank you, leadership team. I move. Tony, you're no longer the new kid in the block, sorry. You have accepted and moved on. I look at as well the managing directors of the subsidiaries. All of them have been introduced before. We've not had any change in that setup. A number of them have joined us online for this purpose. When we announce the full year results, they're always with us. I thank all of them and their teams for their contribution. In terms of our business, we continue to have the largest footprint in the region, 32-33 million customers. A bit of a change in that number because Chairman spoke about the sale of National Bank of Kenya, which we concluded on the 30th of June. May, 30th of May.
Maybe I don't want them to go. 30th of May 2025. That's just the reflection of some of the changes in those numbers, particularly on the staff numbers because they accounted for 1,400 staff. You know, a diversified portfolio, and I'm trying to cut out the time. We are concluding our acquisition of Riverbank Solutions in the final stages of that, but doing quite a lot already with them. Just wanting to point out that 100% sale of National Bank of Kenya, pointing out the progress on Riverbank Solutions acquisition. Most importantly, and I know we've been quoted a number of times, let me say we are monitoring the developments in Ethiopia and keenly following that. Doing sufficient evaluation with the help of our KCB Investment Bank. We haven't made the decision yet, definitely an active assignment for us.
I just want to touch on the operating context, and I'll touch on five items on that. There are shocks from multiple fronts, and I don't want to repeat what the Chairman has said. When we talk about geopolitics, in the past, people used to believe it is only banks that are operating regionally. They're feeling that. As it is today, and I made that comment this morning under the post-MPC review, every institution is feeling the geopolitics pressure. That's why I always say we cannot stand by. We have to make our contribution at the individual level and at the institutional level. At the moment, we've had close to 15 or so branches in DRC, close to the Eastern DRC. Around 140 of those staff, we've had to deploy them into sub-retain assignments for now. We have trade tariffs that we can't predict. Today you're in Agora.
We're not sure what that is going to be. Negotiation with the U.S. government, and I'm sure our government is doing the right thing, those have impacts on what we're doing. We've seen definitely a shrinking of customer wallet, particularly in Kenya, given new taxes. Therefore, that calls for a prioritization on how you use your disposable income. We're also monitoring the cost of doing business for various reasons. We've seen new tariffs and new changes of rules and regulations, particularly on cross-border, on our neighbors. Those have an impact on business flows. The second item that I wanted to touch on, yes, interest rates locally have come down. In the long term, we still see those interest rates being high. We like what we are seeing.
I'm happy that, particularly in Kenya, we are in agreement with the Central Bank, in principle, on the elements of the new pricing model for credit. We've been trying to solution for two things. We want to solution for transparency, but as well, solution for transmission. Migrating to a common base rate is certainly going to help in that transmission, but also retaining governance within the institutions around the K is actually something very good because we are then not uniform as banks. I'm very happy on that, particularly with CBK. Sometimes you read KCB and CBK and they change who is who. In this instance, for the regulator, CBK. It's also important to see that, for the first time, we've seen lending to private sector tick up. I think we've moved from - 2.2%. I think we are now, as the last report, 3.3%.
We're also asking ourselves from a banking sector, how can we accelerate that? It's not a regulator problem. It is our problem. As long as lending to private sector is muted, we're definitely going to have challenges on the economy side, but banks will feel that heat. As KBA, as CEOs of banks, we are challenging ourselves, and we must find a solution to see how we can mitigate that. I think it's important to note that while NPL at industry level still remains high, and you can associate it with the interest rates being high and all those macroeconomic issues, we are also seeing some resolution, particularly in Kenya, on pending bills. I'm happy at the innovative solutions to try and resolve the roads' pending bills. I think in today's post-MPC, the governor confirmed the conversations around how to resolve the other bills, pending bills.
That will help a lot. We've seen, just after the resolution of the Roads Board pending bills, that we've seen that come down as well. We've seen stable currencies. Maybe as I exit that, I want to continue to challenge all of us. I thank Anastasia and team for leading at the front, taking some challenges head-on, particularly to resolve for the country, not just KCB. Playing a role in elements such as those pending bills for roads, and I know board members of the credit committee in the House, being part of the solution with KCB Investment Bank for Linzi FinCo , we must continue collectively to get new products, new solutions in the right way to be able to unlock for the countries that we operate in. I think people normally talk about KCB Kenya only.
You know, the fact that BPR Bank Rwanda led the consortium in funding the Bugesera Airport, the new airport in Rwanda, is something that we're proud of. The KCB brand must be useful, meaningful in the markets that we operate in. I'm proud to lead the team that says, what do we need to do to mitigate risks? That's what we are paid to do. We want to grow manufacturing. We have to put our heads together. You want to increase employment. If manufacturing doesn't come into the mainstream, I have no idea how we are going to do it. We need to crack our heads and work with the different stakeholders to do that. That's the only way we are going to tackle some of these rates. Stable currencies, I think Kenya, Uganda, and Tanzania shillings have appreciated here on U.S. dollar.
We've seen depreciation against U.S. dollars and Kenya shillings, particularly for South Sudan and Rwanda. I think it's important to mention, and Lawrence will probably talk to that, that we see South Sudan and Burundi as being in a hyperinflation environment. They might be small businesses, but they're very meaningful in trade corridors. Those two are really entities that we are watching. We've seen resilience. I think Chairman has spoken to this. GDP growth, the Eastern Africa region is the fastest growing, Sub-Saharan Africa, projecting a 5.7% growth against a world of 3% and 3.1%, as Chairman has spoken. It still tells us there's massive opportunity out there. It's how we are taking advantage of those opportunities. I said inflation remains moderate across the old markets, as I said, save for Burundi and South Sudan. I may want to joke with Chairman here, but it's actually not a joke.
Do you know in Burundi you have to queue for fuel for more than two weeks plus? When we played the first role on G2G, some of us were crucified. Today, everybody wants a share of share business. Anastasia is strong in wanting to defend that one or two. We should be bold, bold, bold, bold. It will never be perfect. I'm not a spokesman for the government. We have to look for solutions that work for all of us. Then you can perfect going forward, or when you get out of that hole, you can find other solutions. Our strategy remains the 2024-2026 strategy, transforming today together, anchored on our purpose for people for better. For every human being that we touch, we leave them better. It's the easiest way to explain our purpose. We have not changed our strategy. We are on course with a strategy.
Lawrence will speak to the numbers, but I really want to say that at the end of the day, we just have to get our customer experience right. That's why we're making investments, people, technology, and partnerships. Some significant milestones that I want to touch on briefly. The sale of NBK , I said we concluded that on 30th May 2025. Sometimes I say to my media brothers and sisters, don't crucify us. Because some of them told me, "Paul, we don't think this thing will happen." They know themselves. I wish it was like selling a camel in Marsabit. It would be very fast. That one I know. Finally, that is done. It took us longer than we expected. Maybe we were extremely bullish. We concluded. I thank the teams that were involved in that transaction. Thank you to the board for supporting that decision.
I think it wasn't the easiest of the decisions. At least that I was the MD for two and a half years. On channel optimization, we've rolled out a new KCB mobile app offering bespoke experience. I just want to say particularly, it will be the first app where you can open an account end to end without stepping into a KCB branch. Not even unless there's a problem with your ID card or your image and the one you're taking and the one that is on the card is not matching, right? Or your fingerprints, whatever you've chosen to use, are not tying up. That one we have to confirm that you're the person. If all things align, download that new app, open a KCB account, transact immediately. It's been long coming, that eKYC. A few people have felt the pain.
I have not been the best boss on that, but we are all proud that it is out there. Now we will load them on various other value propositions and build onto that. For a long time, we've been told we are a government bank. You must come like a government office. I hope this one starts eroding that feeling. It's not just for the customer. It is also for our staff. It makes lives a lot easier. We have obviously opened new five branches in high-growth areas in Kenya and Tanzania. In Kenya, it's selective, but Tanzania is a business. I know Chairman mentioned something. Tanzania is a market that we have to ask ourselves, what is the optimal operating model? We haven't answered that question, but we will answer it. We've opened some two branches in specific locations to support our customers.
The growth of that business in the last five years gives them the ground to ask us what next. Therefore, as Chairman is here, we will try and answer that question together for Tanzania. The work Cosmos and his team have done in the last five years is commendable. We believe that that business has the opportunity to grow more. Our ambition is to be top five, minimum number five in that market. Therefore, we have to give it fuel. What that fuel is? Mark, welcome to the new role. You have to tell us. On customer CVPs, a significant focus on youth, women, affordable housing, and trade finance. Always proud of the work that the trade finance team has done.
What Wanjeri is doing in mortgage, elements that we are running on youth and women, particularly onto that mobile banking platform, is something that I look forward to when we go live. I know the developments are about to close. On payments, I mentioned Riverbank Solutions. Though pending regulatory approvals, I think we are on the tail end of that, but already doing two, three meaningful things. I think it's important to understand, Riverbank is not new to us. We've worked with Riverbank as a partner for the last 10 years. In fact, 11, because I found Riverbank as a partner. Maybe I can use that as a test. Then I know I'm within the ballpark. That partnership and developing of solutions faster, we continue to be, even as we make the acquisition. Multi-currency prepaid card introduced in 2025. How many currencies now? 18. Angela knows these things from the...
So 18. Maybe I just used two, three of them. Those who are blessed, 18, and work seamlessly. Well done to the team that was behind this. For anyone that has their children studying outside of the country, I'm a witness. Just get one of these cards. I think finally on this particular one, we talked about PAPSS, Pan-African Payment System for a long while. We want to send money to Nigeria, walk into any KCB branch. We want to receive money from Guinea. As long as there's PAPSS on that front, it will pick up from a KCB branch. Therefore, even in markets that we are not operating in, we can enable our customers. I think the question I've always asked Angela is, when are we going to be present in a country digitally? She's promised me I'll keep that as a secret on that date.
Is it a competitive advantage? Let me just keep that for now. Chairman, as you spoke about presence in other markets, I think we're exploring presence without physical branch network, given the investments that we've made under DFS. Our digital channels continue to overmatch the convenience. 63% of volume through digital channels. You can see the number of non-branch channels in H1. I don't have to go through each of them. An ATM is just becoming a convenience, a last resort. People say, why don't you remove ATMs? You just remove and you'll see the pain once you've removed them. They just continue to be a channel for a resort for some. There are people also who must feel the mula. You must feel it. I think we've seen growth of CDMs, cash deposit machines, significant utilization of cash deposit machines, particularly for our corporates and the ecosystem.
We've got the opportunity of unifying agency and merchant, and that project is actually live. I like what is happening at the internet banking. Chairman said it is not just about banking and making money. We drive sustainability. We issued KES 26.9 billion green loans in Kenya in H1. We've screened around KES 133.2 billion under ESG initiatives. We continue to plant trees, and we can confirm that we've planted 333,000 in H1. Largely, we're starting to push for fruit trees and something that is more sustainable. For Our foundation, Thanks Mehndi, we've created 67,996 jobs under the Tujiajiri program, which includes Young Africa, Mifugo Nimali, and DigiFlame projects. We've sponsored 3,883 students from disadvantaged backgrounds, particularly those that have experienced harmful cultural practices. We're also the first to sponsor and give sports scholarship. I think some of those kids won in the Africa Championships.
I've challenged those kids, and Mhendi, the day one of those kids win Olympics, now we are talking. I think they're now in Form 2. Our target is to get one of those kids winning Olympics for Kenya, because we continue to lift the rest, isn't it? That will be a very good way to show them that. Like I've said to the patron of KCB Football Club, KCB Rugby, Chess, Volleyball, our teams must be up there to lift ambitions, hope for those who want to pursue sports. Even if it is one, I think one of the wingers, is it a winger or defender, for Harambee Stars, he's from KCB Football. He's doing extremely well. Started all the games. Those are things we need to reflect on. When the team represents Kenya for Africa Volleyball Championship, that is what we stand for.
On corporate citizenship, we do play a number of roles. I think I've just talked about the teams. Allow me today to say we pay our teams the same day we pay staff. Staff are paid on the 23rd. All our players are paid on the 23rd because they are part of the family. They are not just players. They are not a team. I like the fact that we have a number of them that are working in our risk team. If I'm not wrong, I've met them, some rugby players and HR as professionals. We've got to impact people for better. As I bring it to a close, before people throw some shoes here to say get off, please just keep your shoes. I'm stepping down shortly. I think it's very hard to blow our horns.
Best bank in Kenya by Global Excellence, World Business and Euro Money magazines. Best SME bank in Kenya. Best CSR. Africa's fastest growing company. Financial institution of the year by AfriExim. 2025 African banker of the year. Sustainability. There's an image there that looks like me. I thank the 11,000+ staff of KCB Group for all the hard work. Looking forward to a very, very strong H2 2025. Like I say, H1 ended a month and a half ago. Actually, this is still news for staff. Because I know our staff are online, I have a challenge for H2. Deeply being, deeply consumed for the customer. Doing what we said we need to do sooner than that. Building strong partnerships. Finally, beyond the numbers, living beyond the numbers. That's my rallying call for H2. Very easy to drive the numbers. Living beyond the numbers.
I'll put the customer, put community, colleagues in there, and all stakeholders. I end my choir with gratitude and invite Lawrence to then deliver the most important part of the presentation. I don't know whether you need to sanitize this, Mike, or we give you another one. It will be a call burner. Don't say I didn't warn you.
Thank you. I think we can do better in appreciating him. Thank you. If I don't show up for work tomorrow or next week, you know it's the mic. Yeah. Good afternoon, or is it good evening to all of you, those here and those attending online? Welcome to the H1 investor presentation. Since I am the one announcing the results and not the choir, let me just get straight into it. I'm assuming it's a big red one. Okay. There we go. As usual, we start with the balance sheet. The balance sheet for H1 closed at just under KES 2 trillion, KES 1.969 trillion to be precise, which is a 7% growth, if you do like-for-like. Remember, we've talked about selling National Bank of Kenya. National Bank of Kenya was in our balance sheet, the whole of our consolidated numbers, the whole of last year.
Since we sold National Bank of Kenya on May 30, we do not consolidate for H1 on the balance sheet side. That goes to the new owner. Like-for-like, 7% growth on total assets. Deposits looking flat at just under KES 1.5 trillion. On a like-for-like basis, deposits grew by about, I think, just under 6%. Our digital channels, our branches, you saw the second slide from Paul showing our footprint in terms of branches, our digital channels played a very pivotal role in deposit mobilization. That was tapered by the transitioning of Uganda's portion of the G2G that happened at some point last year. We did have the deposits when the G2G was being done in Kenya, and that left towards around mid-last year. There is a bit of a like-for-like comparison to be done there. At net loans, 6% growth. Like-for-like, loans grew by 12%.
We were very aligned to our strategy. The main sectors that grew in loans were energy, which is one of the areas, one of the sectors that in our Transforming Today Together strategy, we called out as underserved and required a bank with the size of our balance sheet to start participating in a big way. In industrials, what we call industrials, which in many other places you'd call manufacturing, FFG was also an area that we did, the loans, our loan portfolio grew on the comparison to previous year. Lastly, infrastructure. Infrastructure started growing towards, I would say, the end of the second quarter. That talks to the innovative solutioning of some of the pending bills, the pending bill part that sits under infrastructure with the securitization of part of the fuel levy.
That has helped unlock, you know, us to be able to go in and lend to the customers. In terms of distribution of that across our subs, you see that our subsidiaries continue to perform quite well. If you look at the year-on-year growth ranging from 4% to about 29%, Paul did talk to, you know, two of our subs that have gone into hyperinflation. One went into hyperinflation last year, that's South Sudan. The second one that has just gone into hyperinflation is Burundi. You will see, you know, that those two subs will be impacted. Contribution of the subs outside KCB Kenya marginally dropped, and that's because of the, you know, selling off of National Bank of Kenya. Just unpacking the deposits a bit, 75% of our funding comes from customer deposits. Again, using our network of technology and brick and mortar to mobilize deposits.
One area that we've seen, you know, that has spiked up is the call deposit. If you look at the call deposit in 2024, it was only 5% of the total deposits. That has doubled now. This is, you know, an emerging trend. It looks like, you know, our customers, you know, want to put money in products that they could very easily call for that money to spend it without incurring a penalty. The good news is when you put term deposit and the call deposits combined together, the percentage contribution to the total cake of deposit hasn't really changed by much. Coming to my not-so-favorite conversation, NPL. We do have some good news on this one. Let me start with the ratio. The ratio has dropped 60 basis points to 18.7%. Second good news is the stock has started going the right direction.
It's probably the only slide when I'll say when things go south, we are happy. You can see the stock has dropped to KES 221. There's an element of, of course, disposing of National Bank of Kenya that has contributed to that. There's also a lot of work that, you know, our recovery team has been doing, focusing on the strategies that we've talked to here in the past, enhancing recovery efforts, rehabilitation, or restructuring to just ensure that our customers' cash flows match, you know, what we are asking them to pay. Full and final settlements, that has been actually very, very successful in the last number of years. Engaging government for entities that sit in our balance sheet and are not performing. We've been quite successful in the last, I'll say, nine months or so. We've remediated, I think, two or three of those customers. Lastly, write-off.
This is a trend that we want to continue showing in quarter three and in quarter four, that the work we are doing to get our NPL to the right level is bearing fruit. Just looking at the contributors of NPL by entity, you can see that nothing much has changed. The only, actually, maybe the only thing that has changed is that National Bank of Kenya is no longer there. The main contributors remain the big entities, KCB Kenya, TMB. I talked to South Sudan, the issues on hyperinflation. Looking at the sectorial breakdown of that NPL, and I'll ask you to look at full year 2024 vs. H1 2025, you can see all, with the exception of one, as a real estate, has actually been on the decline.
As you know, to what I talked to earlier in terms of the strategies that we are deploying for remediation are starting to work. The real estate one is actually, those of you who are keen, paid attention, part of the National Bank of Kenya sale. There was a Section 9 transfer of customers who came into KCB Kenya. They contribute a big chunk of that movement from 38 billion to 47 billion. Coming to the income statement side of the results, our total income closed at just under KES 99 billion. That's a 4% year-on-year growth, mostly driven by top line. Net interest income grew by about 2%, mostly out of volume in terms of, I talked to earlier about the net loans growing year-on-year by about 6%.
We've experienced some tightening of margins or decline in margins, especially for KCB Kenya and BPR Bank Rwanda, because the first half of the year, we have been reducing our lending rates. That has marginally taken the shine off the volume growth. FX income declined quite significantly. That's driven a lot by the Kenya business and our DRC business. We are seeing with the stability of the shilling, most treasurers will tell you they don't have much room to price. The margins are low, but also the volume has significantly reduced year-on-year. Looking at costs, I would say pretty well managed, 2.5% year-on-year growth on costs. Cost-to-income ratio coming down to 46%. A marginal positive jaw of about 2%. From a cost point, I think we are doing what we can to ensure that we convert our top line to the bottom.
Now coming to the actual performance in terms of profitability, an 8% year-on-year growth at net earnings to close at KES 32 billion. When you look at how that has been distributed, you can see very good performance from most of our subsidiaries. I'll single out BPR because the last time I singled them out on the negative, let me single them out on the positive this time, a 65% growth in terms of PAT, profit after tax. You can see Tanzania also, year-on-year growth, quite doing quite well. Our insurance business has not been left behind. They've also had a fairly good performance. As I think the CEO said to the staff watching, this is a comparison between this year and last year. We do have another comparison that we look at between this year and budget, and that is a slightly different story.
I do not want staff to go and start resting on their laurels because they're seeing that, you know, we have grown 8% on PAT and start thinking that, you know, we are there. No, we are not there. The targets we have for the second half of the year are extremely stretched. We have to double our efforts. It starts with, I think, what Paul said, putting the customer first. The customer is the person who pays you. If you do not put them first, then I'm wondering who are you going to put first? Just because the payroll is done from finance doesn't mean I'm the one who pays you. The money comes from the customer. Coming to, I think, one slide that a lot of people have been waiting for. The board met this morning and has proposed a dividend of KES 4 per share.
This is split between KES 2 interim out of the performance of H1 and KES 2 special out of the sale of National Bank of Kenya. All that amounts to a payout of just under KES 13 billion. I think that's the largest interim dividend that KCB Group has ever paid. I don't know whether there's any other company that has ever paid that. Maybe Safaricom. To those shareholders who've been bombarding our Chairman with messages about whether they will see a change in the dividend payout, remember when we were here to announce full-year results, we said we have heard, we've listened, we are waiting for, you know, all our staff to be aligned before so that we do not put the bank at risk. That has come full circle, and we are now ready to, you know, give back, you know, some of your investment back to you.
You're the owners of the bank. From a capital point of view, we have good buffers, good capital buffers across all our subsidiaries. Two subsidiaries at total capital have thin buffers at Uganda and Tanzania. We are in the process of capital raising for, you know, getting debt to capital. Uganda should be coming through in a matter of weeks. For Tanzania, it's a work in progress. That is within our capital planning. We are not going to come back to the shareholders. It's going to be debt, mostly debt. Looking at our return on equity, this is a slide that actually I feel very proud. When all your subsidiaries are operating above 20% ROE it stops the conversation and the questions we've always been asked over the years.
Why do you take money out of your big subsidiary in Kenya and put it in other subsidiaries when they were given single-digit ROE? You can see the focus on those markets, getting the strategy right, the ROE, very, very, very few of them, you can argue, are dilutive to the group. That's really good performance. Lastly, Chair and members who are watching, is our scorecard for H1. You can see the reds. We have three reds. Most of the others are right in the middle of green. NFI, that's a non-funded income ratio as a ratio to total income, has dipped below 30% for the first time in a while. That's driven by the FX income that I talked to. The year-on-year decline of about 48% on FX has greatly contributed to that. NPL, trending in the right direction, finally.
I think Bernard has told me that he's very sure he'll be between that range of 14% and 16%. He's here, he can say if I'm lying. Just don't give him a mic. The last one is deposits. Just the operating environment we are in, markets are very tight with liquidity. A growth of 6% on a like-for-like basis. We believe the strategies we put out for deposit mobilization across our subsidiaries should move that red closer to the range of the outlook that we communicated to you. I'll stop there and take any questions from here. Thank you very much.
Thank you. Thank you, Lawrence. Thank you, Paul. Thank you, Chairman, for that. I think we'll quickly move into the Q&A session, and I'll ask the team to set up for the panel. In the meantime, I can see there's a lot of engagements online. We'll take a few questions online, then we can take from the floor. We see comments online congratulating KCB Group for the good results. See comments around the subsidiaries, how the subsidiaries are performing. Lawrence, Paul, please get ready with the answers on the same. I see staff saying they hope at the end of the year they'll get their bonuses, I think. I think there's quite some engagement. I'll invite the Group Chairman, the Group CEO, and Group Finance Director to come here so that we can take a few questions. We can get the mic going.
We pick a few questions from the floor, then we'll go online. Any questions? I can see a number of people from the media, Asante and Nisana for coming, our analysts who are here. Let's get the mic going. Any questions? Very good. We'll start from you introduce yourself, then you raise your question and the organization you're coming from. Very good. Go ahead.
Good afternoon. My name is Sophia Ali from KTN, a financial journalist. My question goes to Russo. What initiatives are in place to support sustainable finance and promote financial inclusion in the region?
We can take a second one. Thank you very much. Any other question? Okay, please go ahead. Please take a mic there.
Thank you, Chair. We are cognizant and alive to the fact that an incredible leadership is the bedrock of every success in every given organization. Allow me also to say this. Thank you for being the powerhouse that you are and the blueprint of the organization's brand. We laud you for the incredible dividend that you've given us. My name is Sally Chepkorir, and I'm a shareholder. My first question is building generational wealth and/or planning in family-owned businesses. How is KCB Group structured to support these family-owned businesses, and how does it address its challenges? The question two is on AI. AI is driving us today, right? What's the bank's overall approach and the impact on cybersecurity and customer experience? My final question is on climate change. Climate change is becoming a tall order globally.
What's your take on the negative effects, and how do you ensure a green economy and enhancing resilience to this concern? Thank you.
Thank you for that question. I think we can take those four first, then we can move to another set.
Okay. Thank you, Sally. You know, when you are a shareholder, you can ask questions for a PhD thesis. Thank you, Sally. Good to see you. We'll attempt to answer them briefly. Sophia, thank you for your question. I think on sustainable finance, I'll say a few things. One, we actually have subject matter experts in KCB Group around sustainable finance. I can't see Eric Naibasha here, but we have a team that are subject matter experts in the institution to support the group. They've done an amazing job. That's why I think GCF, there's a bit of work that we're doing, even with Africa Development Bank on the same path. Most importantly, the work that we've done with schools, particularly through Anastasia's team, whether it's solarization to reduce energy cost and, you know, LPGs for schools.
I just don't want to touch on tree planting and what we do around that. It.
A key agenda, and even our own certification to be able to deliver that. This team supports the entire group. We have testaments, for example, of some schools that have reduced their energy costs by over 60%- 70%. I'm always reminded Anastasia has the exact number of 65. You see how I'm saying 60 to 70 shares? She has the exact number, 65. We have to move to scale up. As I said earlier on, particularly on the lending front, you need to cut the flow. That's why you see our growth in green lending. I think the number was KES 23 billion. We also have to go back and screen what we have and support those individuals to green. It's not an overnight if somebody has built a whole manufacturing plant. You have to walk that journey, Sophia, with those people to turn green and enable them.
It's important you ask this question because it's not just a financial discussion. It is a sustainability discussion, right? We are very clear that it is not about making money in the first instance. If they cut their cost, it means they can do a lot more with you, isn't it? They can stay with you longer. They can deploy that money instead of paying, I don't know, Kenya Power also are my clients, but if they pay them less, it means they can do something with the other amount, isn't it? Even education can start being affordable. There's an element of decency. You know, wood in school versus LPG. You're planting trees on the other side, but the schools you're banking are burning wood. It's just a contradiction, Sophia. It's a long way to answer you, but it's important that.
Even as we do that, because your question is stupid, and it's a very interesting point about inclusion. There are constituencies in Kenya that have never had a bank today. When you talk about inclusion, people just think digital. You must have seen when Anastasia opened a branch, I think, in Western, or what's the name of the town again? Kendu Bay. People just wanted to see what is a bank. We talk about financial inclusion in Kenya, isn't it? I come from Laisa mis Constituency. There is no branch. There is no bank. When people tell me, Paul, digital is 93%, but you're opening a bank, I think we are failing to get the point. The opening of branches will continue to be strategic to bring banking closer. We will use the branch as a hub and spoke, use our digital to connect.
We might never open as many branches as we used to open, but you need that presence to be able to bring people on board, and it's just the right thing to do. That's on the brick and mortar. I started with that because it's normally conflicting. People tell you, Paul, why are you opening branches? I'm just giving you a reality of my own place. When I go for holiday, they say, Paul, but you are the CEO of the bank. Why have you not opened a bank here? I still have to answer that question. Hopefully, Chairman will help me to answer it. I'm also reminded sometimes some of these areas are the other issues, right? We tried to do something in Loiyangalani. Our staff were shocked when they were coming from going to do a survey of the location. I digress.
The mobile banking that we've launched is at the heart of that inclusion. It means today, then, even in those places that we don't have branches like Laisa mis, they can open accounts and they can be able to operate. In the past, if they had to open a KCB account, they would have to go to Marsabit or Isuru. By just deploying that capability, you're opening it up for everyone. I think the work that, and I know our CRO is not here, but the work the credit team has done to perfect, you know, credit models so that you don't need a loan officer to review you. You don't need a bank. We've really moved. The partnership with Telcos, we've deepened that partnership because it's important for both parties to be able to deliver that. However, we still have to advance solutions.
I think the most difficult one that we are trying to answer, and Safaricom hosted us for an event recently, is on SMEs. I don't think we've cracked it. You see what we've learned around, sometimes you see it deteriorating. You can see there are no more people, better people who lend to them than the microfinance entities. I've not looked at the data, but I learned today that lending to private businesses by microfinance has shrank the lowest ever. That is supposed to be the areas of expertise. There is a lot that we still need to do on the SMEs. The good news is the big boys and girls seated in front of me have all the capabilities to do that. I know we have quite a lot that is on the pipeline, especially University of UET, but we should be fine when that comes to life.
I hope I've answered you, Sally. Sophia, Sally, you know in the past you will not get money market fund solutions from KCB. Today, KCB Asset Management has moved up the rank. I can't recall the latest KCB Investment Bank. You're the distributor of the product as well. It's gone to KES 18 billion. We are at zero. It's actually the fastest growing. Maybe sometimes we see them too small that Lawrence doesn't include them in their slides. Growing to KES 18 billion in less than a year or just a year is not a mean achievement for solutions. When you come to family-owned businesses and wealth management, that gentleman sitting next to you called Morris joined us, the one who you're cooperating with. Morris joined us to actually deliver those value propositions. We've built KCB, we've strengthened KCB Investment Bank resources.
We've built KCB Asset Management, and I can see the board members, including the Chairman here, to be able to offer those value propositions. AI, I think even me when I talk about AI, I feel very learned, Sally. The guy who leads that framework is Dennis Volemi. We are already on proof of concepts with a number of, we've done a lot, but significant to step up to what is truly AI. We are on proof of concept on a number of initiatives. KCB has a framework for AI. KCB has a policy for that. KCB has a target from the board. Management has a target from the board on that particular element. As you said, it comes with its own risks. You must teach it not to bite other things, isn't it? That's why he runs it on proof of concept. We have use cases.
We will get to the step where we scale that up clearly. That mandate is with Dennis. At the same as cybersecurity, I seem like I'm answering for it. I think the work that that team has done is something that we really don't shout about. The work, I think there's a time Safaricom and KCB were being targeted on a daily basis with a lot of intensity. You probably will remember that time. This team has done an amazing job to be able to do that. We'll continue to reinforce, whether it's tools, whether it's human capital. The thing about cybersecurity, even for the expert, it evolves every day. Somebody is thinking something new every day. We've got to continue to support that team to deliver on that. Our climate change, it's real. In the past, July was July, isn't it? The cold was July. Now August is July.
I don't know whether it's only me who feels cold in August. That's just the reality. It is right here with us. Like I said earlier on, we cannot leave it to government. We cannot leave it to some activists. We cannot leave it to, we have to be involved at individual levels and we have to be involved at institutional levels. As I said, as I was answering, Sophia, we are doing sufficiently enough. We can do more, but we are on the table to do what we need to do, right? We also have to run our own advocacy. As I say always, as CEO of KCB Group, you have to be able to pronounce yourself on certain things. You want to clean Nairobi River, but people are still discharging waste. Somebody is still building a flood, has nowhere to septic tank or what are they called?
Sewage is discharging into that same. You can bring whoever to clean. It will be the way it is. Certain things must start with us, must start at individual level and must start at institutional levels. That's why, for example, if somebody came to follow up on Sophia's question to ask for a mortgage from us with a property that is going to discharge to Nairobi River, we'll not do it. You can stay with it. We've got to start being responsible now. A long way, Chairman, to answer those questions. Hopefully, you know, there are strong men on my left. I'm sure they can chip in. Thank you, Sally, for the questions. Thank you, Sophia.
Thank you very much, Paul. I think Paul has already covered very comprehensively the only aspect I can mention. If you look at what was being provided in terms of sensibility and the question of business, family business, and what in terms of empowering our women, you can see clearly KCB Group is doing quite a commendable job. On the question of climate change, ensuring that within the broader national policy, KCB Group is doing a very good job. You saw the trees that we have planted. I think, Paul, you could have mentioned, you recall there's a Sun King, which you are working with other banks and which is intended actually to be aligned with the climate change. It's something that perhaps you can spend a minute so that they can appreciate what we are doing.
Let me not go beyond that, but I really appreciate that shareholder never misses this meeting. We do appreciate you are having that faith and belief in us, Asante.
Okay, thank you. Thank you, Chairman. Thank you, CEO. Any questions from the media and any other person? Go ahead.
Thank you for the opportunity. My name is David Indeje. I write for Khusoko, Business. Brother Lawrence and Mr. Paul, you spoke more around what is happening in South Sudan and Burundi. I wanted you to share more on what is the driving force in Tanzania when you said you need to give it more fuel. How much more are you going to invest in that particular market? The second question is around the DRC market. What is your update on the regulatory requirement from the government? Thank you.
Okay, thank you for that. I think, Paul, you can combine that with a question online. TMB is now fully part of KCB Group. What are some of the highlights from the business in terms of performance? Any other question? Okay, I think I can pick two more. We respond to those ones and we can wrap it up. One question, another question online. Could you speak to the specific performance of the regional businesses? I think, Lawrence, you can speak to that. The last question online. The regional economic outlook continues to be plagued by tough operating elements. How has KCB positioned itself with these headwinds? I think the Chairman can take that. If there are no other questions, we will end it there. Let's get feedback on those particular questions. Thanks.
Lawrence, you want to tackle TZ?
Thank you. Thanks for the question. TZ, as you've seen, Tanzania for H1 performance. Year on year, a good, good, good growth, I think 13%. There's a lot more that we can extract out of Tanzania. Two, three years ago, about two years ago, we've started increasing the number of branches. For a long time, Tanzania has delivered results at a certain number of branches. I think there was something like 14%- 15% for quite a number of years. They've been growing in double digits. From a strategic point of view, we made the decision that if we're going to go to the next level where we want KCB Tanzania to play within the top five, we've got to put some investment. Hence, open branches in select regions that deliver some good economic returns in regions where they support our presence within the region.
The trade flows, whether it's from coming out of DRC, coming out of Burundi, coming out of Rwanda because they neighbor on that side, and on the Kenya side. What we need to do is just make sure that we're executing flawlessly on our strategy. We need to deepen our loan portfolio to the SME. For a long time, I think we focused quite a bit on the big ticket items, the big customers, and they're supported by the KCB Group's big balance sheet on the Kenya side. We do need to get the SME so that we can complete ecosystem banking properly and you're able to retain your cake within your ecosystem. They will definitely need capital for that level of growth.
That's why I pointed out that that is one of the subsidiaries that part of the money we got from sale of National Bank of Kenya will be allocated to capitalize in Tanzania.
DRC was, there were two questions. One was about the divesture. Yeah. On the divesture, what was originally communicated, I think in 2023, 2022, 2023. Anyway, a few years ago, the one of 45%, 15%, 15%, 15%. That has since changed. It was discussed in their legislative body, and they've issued some guidelines on saying not limiting the, I think, the maximum number of shareholders to two in terms of large shareholders. Before it was sitting at four. They haven't pronounced yet the actual shareholding that is required unless that is breaking news that came out this week. We haven't seen that pronunciation. There is a new governor who has just been appointed. I think they're just trying, they're just getting their feet under the table. We expect that we'll see quite a bit of communication coming out of DRC once the new governor settles.
Can I go to the GRB? What was the second question on TMB?
The TMB was on specific highlights of the business.
Oh, okay. Okay. I'll combine that together with the GRB because you did ask a question about the GRB performance. TMB for the first half of the year has been impacted by the conflicts in the eastern side. I think Paul did mention the number of branches that have remained closed since very early in the year, I think mid-January, that have impacted obviously the revenue you make from the branches. Customers who bank with us, because of the skirmishes, would have their cash flows impacted. That has come to impact TMB on the first half of the year. With the signing of the peace accord, normalcy is starting to return. We are actually having the TMB team come here next week to discuss how we will change that trajectory in terms of recovery for the remaining part of the year. That said, it is still a very good investment.
You've seen how TMB performed in the full year 2023 and 2024. They've actually supported the group. This is the beauty of having a portfolio of subsidiaries. When one is down, another one picks up. TMB played that role for KCB Group for two consecutive years. I'm very, very optimistic that they will do a good recovery in the second half of the year. I expect to see year-on-year growth, and they should get very, very close to their targets. The other regional businesses, I'll talk about BPR, 65% year-on-year growth. Granted that there's a base effect on that growth. If you recall, when we announced the half-year results last year, BPR had just taken a big hit on a write-off that caused poor performance for their first half of last year. We did a deep dive review for them sometime at the beginning of the year.
They're pumping in terms of pushing on loans. I think BPR is an entity that we expect to see some good performance. There is a macroenvironmental element because it might not be politically correct to say this, but the conflict is at Eastern Congo. It's right at the border with Rwanda. That must have some impact on their macro. Even when you look at the competitor analysis, we are seeing the competitors in the market are not firing at all cylinders. I did talk to Tanzania, so I'll not cover that. Uganda has had a very good recovery from quarter one. Their quarter one was not a very good performance. I actually sit on the board of KCB Uganda. We had very, very stressful discussions with management, and they've had a very good quarter two. Their quarter one and quarter two comparison is chalk and cheese.
They continue with that trajectory. I have no doubt that Uganda will be delivering a very, very good performance for the year 2025.
Thank you.
I'll stop it there.
Lawrence, I think Chairman, there was a question for you on the banks, how the bank has positioned itself to either the headwinds from the international market and local.
Thank you very much for that question. Of course, in doing our business, we have to look at what is happening, not just in terms of the domestic, but also globally, because even it is like the conflict taking place in Eastern, in the European, that part of the world. Because of the trade links that are between our countries and them, they will certainly have an impact on our businesses. As I did mention in my statement, and I think it came also out from the statement by, you know, Paul and Lawrence, for our region, we have been, you know, fortunate. You can see ours, we have been able to grow stronger. The reason for that is because of the investment that has taken place in terms of infrastructure, also resource-based, kind of, you know, beginning to show better signs. That has benefited us as banks.
Of course, our team and the management, we have made it very clear to them, we have to be very insightful as to what is happening in those other, in the context of the impact they have on the businesses which we ourselves are supporting from a financing point of view. It is important, but we are, I would say, a bit more lucky than perhaps other parts of the, you know, world. That doesn't mean that we just sleep and say we are comfortable, we are moving forward. No, we have to be alert. That's an idea.
Thanks, Chairman. Paul, allow me to pick a few, the last set of questions and comments online. We have some two questions from Mokaya of Mwango Capital. What portion of NPL decline is linked to NBK sale? KCB Kenya's NPLs increased. What drove this? So one question. The second question, maybe you can comment on the NBK sale in regards to specific assets and liabilities. I think you had spoken briefly about that, that you can skip. A comment from just online also from Elder Brigadier Stephen Kimani. He says, "Good interim dividend ever. We are happy as shareholders." That's a comment. He goes and asks a question. Would you reduce investing in government securities to focus on giving loans to customers? I think we can take those ones. We can wrap it up. Thank you.
I'll ask Lawrence to comment on Mokaya's question on the portion.
I think that one must be, but as you prepare, Lawrence, let me tackle the other ones. I think Lawrence did touch on the dividend. I think we spent quite a year or so, 18 months, just fixing a few things in the organization, and we made certain commitments that we will have to focus on the shareholders. This is not by accident. The group board has been following up on this, and as management, we are committed to make sure that there are sufficient returns to shareholders. I think the person that has asked a question on investment in government securities, unfortunately, I'll have to refer you to the numbers. We're probably the only institution, Anastasia, that is showing year-on-year increase in lending to the private sector. It's only KCB Kenya. Thanks to the BCC members that I see here, I see the chair, Jerry Onyango. I see Caroline.
I see Simeon Rono. We've been deliberate. When I look at even what has been approved, pending drawdowns, that number is significant. I think it will be unfair to KCB Kenya to say about that. As Chairman of Kenya Bankers, I am actually challenged to make sure that the private sector, banking sector, prioritizes lending to the private sector. It was a discussion this morning with the governor. We've agreed collectively, we have to change that trajectory. We have to get that number to double digits. If really we have to thrive, even as institutions ourselves, we have to be ambitious to get that number to double digits. Unfortunately, I hold the mic both as CEO of the group and Chairman of Kenya Bankers. I'm in full alignment.
As CBR rates come down, one, we must pass that benefit in all ways possible, on the basis of other factors, to customers. We must also really, really increase lending to the private sector. I think today, if you talk about manufacturing, you want to talk about employment. Yes, we employ. The only one of the biggest ways for banks to contribute to employment is to support the private sector through lending. I think you're preaching to the converted, and we will continue to champion lending to the private sector. That I have no doubt about, both being a Board Member and being the CEO. I think just on NBK sale, I think, Lawrence, you can touch on NBK sale plus the portion on NPL. I think the hive out, but there's a hive out component with the NPL component. Yeah.
It talks about hive out, but let's just talk about it is hive out and what's the NPL component.
Okay.
And the impact to KCB.
Okay. So Mokaya, the straight answer on the question on NPL, which is, I'm trying to shorten this answer. It's about impact. If I say, we say the impact of taking National Bank of Kenya out of consolidation on the group, the impact is about KES 9 billion, just about KES 9 billion. The reason I'm saying it, that's just a straight answer. It's because it's not, when you look at the way the stock operates, you know, you've got a lot of work that the recovery team do to get recoveries. I think quarter to quarter, KCB Kenya on its own had a positive movement of about KES 6 billion, just in terms of the stock for KCB Kenya on its own.
Because of the hive out and hiving now, we call it hiving because it came in, there was an element of NPL that came with the assets that were transferred under section nine into KCB Kenya. When you look at KCB Kenya's stock, then it looks like it has actually gone up. In reality, that is what they've inherited from the transaction, and there's what they've actually done in terms of remediation. You have other entities. We saw a deterioration of TMB in that quarter two as well, a big increase in NPL stock from TMB that has come into that number. I'm trying to answer it in a long way to demonstrate that the work that is being done by the recovery team is bearing fruits. It might not necessarily be showing directly onto those numbers, but it's hidden somewhere in there.
Thank you. Thank you very much. I hope we haven't locked out anybody. We have responded to all the questions that came online. My end is to thank everybody for being here and for those who are online for attending the event. We shall allow you to have refreshments as you walk out, you interact and network. I'll ask the Group Chairman, the Group CEO, and the Group Finance Director to remain on stage for some photo opportunities. For the media, we have organized a few follow-up interviews for you. Just let's remain behind. For the analysts, you have a date on Monday for your session with the leadership team to speak more about the numbers and the outlook. Again, to the media, we believe everybody has now received a copy of the press release and the rest of the financials. Otherwise, thank you very much, everybody.
[Foreign language] and God bless you. Have a good evening, [Foreign language] .