Highest-Earning Kenyan Bank CEO: Paul Russo of KCB Group Receives $9.3 Million in Compensation
In 2024, Kenya's banking sector recorded a remarkable pre-tax profit of approximately KSh 262 billion (around $2 billion), marking a significant milestone in the industry's history. This impressive financial performance, primarily driven by increased government borrowing and widening interest margins, has resulted in a substantial increase in executive compensation, despite challenging borrowing conditions for households and small businesses.
One of the key reasons for this profit surge is the banking sector's focus on government securities. By investing in these high-yield instruments, banks have been able to limit their risk exposure, even in a difficult credit environment. This strategy has enabled robust profitability across the sector.
However, this profit boom has come at a cost for many Kenyans. While banks have been recording strong earnings, borrowing costs for households and small businesses have risen sharply, leading to increased loan defaults and making credit access more difficult for these groups. The Central Bank of Kenya (CBK) had warned about these challenges, but banks still recorded significant profits.
This surge in profits has led commercial banks to raise the compensation of their top executives significantly. For instance, KCB Bank CEO Paul Russo's total pay rose by over 40% to about KSh 250 million (approximately $1.8 million). In total, CEOs of the nine largest banks in Kenya pocketed nearly $9.3 million (KES 1.2 billion) in 2024.
This increase in executive pay has drawn criticism for the disparity between soaring boardroom salaries and the struggles faced by households and small businesses. The trend highlights tensions in balancing shareholder returns, executive rewards, and broader economic inclusivity.
Notable examples of this rise in executive pay include Standard Chartered's Kariuki Ngari, whose pay jumped 43.5% to $1.3 million (KES 174.4 million), and NCBA's directors, whose compensation surged 54.4% to $5.1 million (KES 660.2 million) in 2024, the highest among listed banks.
However, it's worth noting that I&M Bank and KCB Group were the only banks to reduce board payouts in 2024, with KCB Group cutting directors' pay by 20%.
The CBK Governor, Kamau Thugge, has called on banks to lower lending rates, stating that it's in their interest and for the benefit of the economy. Whether banks will heed this call remains to be seen, but one thing is certain: the relationship between executive compensation, profitability, and economic inclusivity will continue to be a topic of discussion in Kenya's banking sector.
- In the realm of personal-finance, many households and small businesses are finding it increasingly difficult to secure affordable loans, a consequence of the banking sector's focus on investing in government securities and seeking higher profits.
- With robust profitability in the business sector, executives in Kenya's banking industry have experienced significant increases in their compensation, raising questions about the balance between shareholder returns, executive rewards, and economic inclusivity.
