KCB INVESTOR PRESENTATION FY2016 GROUP FINANCIAL RESULTS 9 MARCH 2017 JOSHUA OIGARA GROUP CEO & MD LAWRENCE KIMATHI GROUP CFO Macro-Economic Highlights: Kenya USD/KES Exchange rate GDP Growth rate (%) 105.3 6.1 5.7 6.0 5.6 5.3 6.0 102.3 2013 2014 2015 2016P Jan-15 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 2017P Interest Rates 2016 (%) Inflation (%) 18.20 7.50 7.78 18.18 17.79 7.50 6.84 6.45 6.39 5.27 5.80 6.26 6.34 6.47 6.68 6.35 5.00 11.5 11.4 2.5 Mar Apr May Inflation rate-2016 Jun Jul Aug Target: Upper Sep Oct Nov Dec Jan 8.9 Feb Mar Apr 91 day T bill Target: Lower Source: Bloomberg, CBK 2 10.0 10.6 8.2 2.5 Feb 13.70 13.80 10.0 10.5 8.7 Jan 102.4 92.3 91.7 2012 101.3 100.9 98.6 4.6 2011 101.3 May 7.3 Jun 8.4 8.0 7.7 Aug Sep Oct 8.4 8.7 Nov Dec 6.2 Jul Average lending rates CBR Rate Macro-Economic Highlights: Regional 7.4% 7.0% 7.2% 6.8% 47 6.0 % Inflation GDP 9.3% 7.0%6.9% 5.5%6.5% 6.0% 5.0% 5.0%4.9% Tanzania Uganda 4.7% 4.6% Rwanda 3.0% Burundi 2.9% South-0.2% Sudan -2.8% 9.3% 8.4% 6.8% 6.8% 6.5% 6.1% 6.6% 5.7% 4.9% 5.0% 3.1% 1.8% Indicators Tanzania 2013 2014 2015 52.8% 1.7% 0.0% Uganda 2013 2016 9.0% 7.9% 9.6% 7.1% Rwanda 2014 2015 Burundi South Sudan 2016 -13.1% Interest Rates - 91 Day T-Bills SSP Exchange Rate 20.0% 83.90 15.0% 14.0% 13.6% 11.8% 9.8% 9.0% 9.0% 8.8% 9.2% 6.0% 7.1% 6.0% 6.0% 4.4% 2.4% 7.0% 3.6% 3.0%3.0% 18.50 3.06 Tanzania Uganda 2013 Rwanda 2014 2015 Burundi South Sudan 2016 2.95 2013 Source:IMF 3 2014 2015 2016 KCB 2016 HIGHLIGHTS Significant Issues for KCB in 2016 1. Interest Rate Cap. •Banking Amendment Act 2016 (CBR+4%) 6. Capital Raising 2. South Sudan Hyperinflation •Rights issue cancelled •Debt of $75M with IFC •Loss on net Monetary position KCB Group PLC 5. Chase Bank (IR) 3. Credit Quality •Slow progress due to large corporate names •End of assignment •CBK Resolution by 31/03/2017 4. T24 R14 •Increased Capacity for over 30M customers 5 Impact of Interest Rate Capping Downside Upside 6 Milestones for KCB in 2016 Brand awareness (Our Brand tracker) up 400bps to 23% Customer retention rose 10% from 89% to 99%. Employee satisfaction rose from 82% to 87% Sustainable Finance Initiative training (KBA) certification score of 84% Operationalisation of the Group Holding Company Difficult operating environment in South Sudan, Tanzania and Burundi 7 DIGITAL CHANNEL PERFORMANCE Strong Momentum on Mobile Customer footprint, over 10 million customers Mobile Customers (M) 90% 53% of Total Loans processed on mobile of customer interactions are on mobile Mobile Banking 0.3 0.4 1.5 2.1 Mbenki 4.7 KCB M-PESA 7.8 6.5 Total 10.3 2015 2016 Source: KCB data KCB M-Mpesa Mobile Loans 14 9.9 6.6 8.5 5.3 5.7 3.2 3.5 Loan Count (M) Loans Disbursed (KShs B) FY 2015 FY 2016 Loan Count (M) FY 2015 9 Loans Disbursed (KShs B) FY 2016 77% of Transactions outside the Branch FY 2015 FY 2016 Agency Banking 4% Agency Banking 5% POS 7% POS 7% ATM's 13% ATM's 13% Mobile Banking 48% OTC - Branch 23% OTC - Branch 27% Channels Activity Growth In Channel Revenue 32% 6.1 83% 5.1 95% 123% Mobile Agency FY 2015 ATM 3.7 3.5 -5% POS Mobile Banking 53% Internet 3.1 2.9 2.1 Agency (Ave. Trnx Mobile (Ave. Trnx ATM (Ave. Trnx per POS (Ave. Trnx per per agent per day) per active customer ATM p.m. in `000s) POS per day) p.m.) FY 2015 FY 2016 Source: KCB data 10 4.1 FY 2016 OUR PERFORMANCE TO DATE 11% Growth in Loans and Advances driven by the Kenya Business KShs B Kenya Asset Portfolio 595 504 558 73 468 34 37 490 88 391 85 27 24 97 41 102 27 32 91 78 44 26 97 93 354 386 346 312 284 228 2013 Net Loans and advances 2014 Investment in Govt. Securities 2015 2016 2015 Cash and Balances with Central Bank and other Financial Institutions 12 2016 Other Assets Improvement in Asset Quality 8.9% 8.5% 8.3% 8.1% 8.0% 2015 2016 YOY Contribution Contribution Growth 6.6% 6.3% 1.8% 1.4% 1.3% 2013 1.6% 2014 Corporate 43% 49% 55% SME 15% 16% 46% Consumer 12% 12% 31% Mortgage 12% 12% 32% Other 18% 11% -17% 1.3% 1.0% 1.2% 2015 1Q 16 CoR NPL Group 13 2Q 16 3Q 16 2016 Stable Coverage Position 85.0% 79.5% 69.5% 56.4% 46.6% 43.6% 41.4% 36.9% 2013 2014 2015 IFRS 14 CBK 2016 75% of Funding from Deposits KShs B Kenya Funding Portfolio 595 558 490 9 97 81 10 391 76 504 14 36 44 468 7 11 81 81 26 32 7 27 63 14 448 424 387 377 306 2013 348 2014 Deposits 2015 2016 Bal. to banks and debt 15 Equity 2015 Other Liabilities 2016 65% of Deposits Primarily Demand Deposits 2% 2% 3% 0% 54% 55% 47% 47% 45% 42% 50% 53% 2013 2014 2015 2016 Corporate Retail Deposits by Type FY15 Other Deposits by Type FY16 5% 4% 26% 30% 60% 4% 6% Demand Savings 16 Term Call 65% Finalised Tier II Capital Program in Q3 with IFC Core Capital to RWA Total Capital to RWA 18.7% 22.5% 17.1% 16.8% 21.0% 19.9% 14.1% 15.4% 10.5% 10.5% 10.5% 10.5% 2013 2014 2015 2016 Min. Core/RWA Core Capital /RWA 14.5% 14.5% 14.5% 14.5% 2013 2014 2015 2016 Min. Total/TWA 17 Total Capital /RWA Accounting for Hyperinflation Financial Reporting in Hyperinflationary Economies applies where an entity's functional currency is that of a hyperinflationary economy. Indicators of hyperinflation: •The cumulative inflation rate over three years is approaching, or exceeds, 100%. •The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency; The cumulative three year inflation for South Sudan: • 31 December 2015 at 110.18%. • 31 December 2016 at 1,285.30%. • The average annual CPI 31 December 2016 at 1,592.32% Source: IMF data 18 Group Balance Sheet KShs Millions KCB GROUP Actual Dec - 15 Actual Dec - 16 Y-O-Y Change Cash Balances with Central Bank Balances with other institutions Investments in Government & Other securities Net loans and advances Fixed assets Other assets Total Assets 11,965 23,962 52,579 96,949 345,969 10,592 16,078 558,094 11,375 18,055 43,507 102,471 385,745 12,674 21,412 595,240 (5%) (25%) (17%) 6% 11% 20% 33% 7% Customer Deposits Balances due to other banks Other liabilities Long-term debt Total Liabilities Shareholders’ Equity Total Liabilities and Equity 424,391 23,138 9,182 20,130 476,841 81,254 558,094 448,174 13,123 14,395 22,982 498,674 96,566 595,240 6% -43% 57% 14% 5% 19% 7% 19 10% Growth in PBT KShs Millions KCB GROUP Actual Dec - 15 Actual Dec - 16 Y-O-Y Change Interest Income 56,384 62,806 11% Interest Expense 17,148 15,779 -8% Net interest income 39,236 47,027 20% Foreign exchange income 4,067 5,494 35% Net fees and commissions 14,160 12,625 -11% Other income 2,794 4,332 55% Total operating income 60,257 69,475 15% Total operating expenses 31,365 33,102 6% Net provisions for bad debts 2,355 3,824 62% Profit Before Loss on Monetary Position 26,538 32,549 15% - 3,458 Profit before tax 26,538 29,091 10% Tax 6,915 9,369 35% Profit after tax 19,623 19,722 1% Loss on net monetary position 20 Overview of Key Financial Ratios 1Q16 2Q16 3Q16 KENYA GROUP 22.4% 24.4% 24.6% Return on Average Equity 24.3% 22.2% 48.4% 47.9% 47.7% Cost to Income 45.2% 47.6% 8.5% 8.9% 8.3% Gross NPL to Gross Loans 7.8% 8.0% 69.1% 71.1% 76.0% NPL Coverage 79.6% 69.5% 23.3% 19.5% 17.4% Debt to Equity 25.5% 23.8% 26.0% 31.6% 28.9% Non funded income to total income 26.7% 32.3% 4.5% 3.9% 3.6% Cost of funds 3.3% 3.3% 9.4% 9.7% 10.0% Net Interest Margin 10.4% 9.6% 1.6% 1.4% 1.3% Cost of risk 1.1% 1.0% 84.4% 80.2% 84.0% 91.3% 86.1% 16% 8% 5% Growth of Net Loans and Advances 13% 11% 7% -2% -7% Growth of Customer Deposits 11% 6% Loan to Deposit Ratio 21 Dividend for 2016 AGM to be held on 21 April 2017, at Safaricom Kasarani Indoor Stadium At the AGM, we shall propose a final dividend of KShs: 3:00 per share up 50% from KShs: 2:00 per share declared in 2015 22 Our Outlook 2017 Exponentially grow our digital financial services and Fintech Excellence in Customer Experience Achieve Stronger International Business Performance Grow non interest revenue Best In class information technology Champion our sustainable business priorities Manage emerging risks in a difficult operating environment 23 Net Interest Margin 8.5 – 9.0% Non Funded Income 33.1% Cost to Income Ratio 51.4% Staff CTI 26.5% Return on Equity 20.0% Return on Assets 3.0% NPL 8.0% Cost of Funds 3.2% Customer Deposit Growth 12% Net Loans Growth 6% YOU CAN REACH US ON: Investor Relations Department Email: [email protected] www.kcbbankgroup.com
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