Kenya, Tanzania overtake South Africa in bank returns as investors look east

South Africa remains Africa’s banking powerhouse, home to the continent’s biggest lenders, deepest capital markets, and most sophisticated financial system. However, when it comes to shareholder returns, East Africa is increasingly setting the pace, prompting South African banking giants to intensify their expansion across the region.

A new study by Boston Consulting Group (BCG) shows African banks delivered a Total Shareholder Return (TSR) of 24 percent last year, matching the global industry average. Yet Tanzania and Kenya outperformed the continent’s largest banking market, with Tanzania posting a three-year TSR of 59 percent between 2022 and 2025 and Kenya delivering 36 percent, compared with South Africa’s 24 percent.

The widening performance gap is reinforcing East Africa’s position as the continent’s new banking growth frontier, helping explain why South Africa’s biggest lenders are investing billions of rand to expand across Kenya, Tanzania and Uganda.

The investment wave is already underway.

Last month, Absa Group unveiled a R4 billion ($240 million) deal to increase its stake in Absa Kenya to 85 percent from 68.5 percent. Earlier this year, Nedbank agreed to acquire a controlling stake in Kenya’s NCBA Group for R13.9 billion ($830 million), a transaction Moody’s described as credit positive. Standard Bank has also set an ambitious target of becoming Kenya’s largest bank by 2030 as it seeks to dominate East Africa’s banking market.

The expansion reflects a broader search for growth as South African banks contend with a mature domestic market, while East Africa continues to benefit from faster economic growth, rising financial inclusion and rapid digital banking adoption.

Kenya remains the region’s biggest prize.

The country delivered the strongest earnings growth among Africa’s major banking markets last year. Leading lenders—including KCB Group, Equity Group, NCBA Group and Co-operative Bank—grew combined profits by 28.9 percent, outperforming South Africa’s largest banks, whose earnings rose 14.9 percent to $6.25 billion.

According to Nairobi-based Abojani Investment, Kenya’s lenders are increasingly generating income from transaction banking, payments and other non-funded revenue streams rather than relying solely on loan growth.

“The operating environment was shaped by more stable macroeconomic conditions. Inflation aligned with the central bank’s target, interest rates declined, the currency stabilised, and the Purchasing Managers’ Index improved,” said Purity Chege, research analyst at Abojani Investment.

Tanzania has also emerged as one of Africa’s standout banking markets. According to an industry by AML Finance Limited, The sector’s combined net profit rose more than 21 percent in 2025 to exceed TZS2.4 trillion ($890 million), supported by robust credit demand, expanding agent banking networks and resilient domestic economic growth.

BCG says the strong performance demonstrates the growing maturity of Africa’s financial institutions.

“One of the most important findings in the report is that financial institutions were the top-performing sector globally in 2025 in terms of value creation. African institutions have kept pace with the global average, which signals a strong basis for future growth, even if some developed markets remain ahead,” said Tijsbert Creemers-Chaturvedi, managing director and senior partner at BCG Johannesburg.

“When we look more closely at performance over the past three years, the leading business models are clear. Digital banks, universal banks with strong corporate and investment banking platforms, and specialised banks have generated the highest returns. This points to a shift toward more focused and scalable models.”

While East Africa is delivering the continent’s fastest banking returns, South Africa remains the foundation of African finance. Its lenders continue to benefit from strong capitalisation, diversified earnings and sophisticated corporate and investment banking franchises.

“South Africa represents a more mature and stable market, with strong valuations and total shareholder returns in line with the continental average,” BCG said. “Compared with faster-growing markets such as Tanzania and Kenya, performance has been more stable, underlining the opportunity to unlock further growth through innovation and new business models.”

Beyond traditional banking, East Africa’s leadership in digital finance is strengthening the region’s appeal.

Platforms such as Kenya’s M-Pesa have transformed financial inclusion, while fintech firms including Flutterwave, Paystack, Chipper Cash and Wave are expanding digital payments and cross-border commerce across the continent.

For South Africa’s banking giants, the message is becoming increasingly clear: the continent’s financial centre remains in Johannesburg, but its fastest-growing opportunities are increasingly found in East Africa.