In 2025, the country’s nine largest commercial banks recorded a combined drop of Sh16 billion in foreign exchange trading income compared to the previous year, a sharp reversal driven not by crisis, but by calm.
At the center of this shift is the Kenyan shilling’s unusually narrow trading range. While stability in the currency is typically a sign of macroeconomic health, it has quietly eroded one of banks’ most lucrative non-interest income streams.
Foreign exchange trading thrives on movement. Banks earn from spreads the gap between buying and selling currencies and from high transaction volumes during periods of volatility. When the currency barely moves, those spreads tighten, opportunities shrink, and profits follow suit.
The result is a paradox: what benefits the broader economy is hurting bank balance sheets.
A stable shilling lowers uncertainty for importers and exporters, supports planning, and reduces inflationary pressure tied to currency swings. But for banks, it removes the price fluctuations that make forex desks profitable.
This income squeeze is already forcing a strategic pivot. Lenders are doubling down on traditional lending, expanding digital financial services, and increasing reliance on fees and commissions to plug the revenue gap. The shift signals a broader recalibration of banking models in a low-volatility environment.
The Sh16 billion decline is more than a one-off hit, it’s a structural signal. If currency stability persists, forex income may no longer be the reliable profit engine it once was.
