Kcb Group Plc · NSEKE:KCB
Kcb — Q3 2021 Earnings Presentation
45 slides from Kcb's earnings presentation, Nov 17, 2021
Slide 1: Q3 2021 Investor Presentation
Q3 2021 INVESTOR PRESENTATION 17 NOVEMBER 2021
Slide 2: Group Overview
GROUP OVERVIEW
Slide 3: Largest Footprint in the Region
LARGEST FOOTPRINT IN THE REGION 25.9 M Customers 8,373 Staff 491 Branches 1,154 ATMs 27,371 Agents & POS / Merchants Kenya Tanzania South Sudan Rwanda Uganda Burundi KCB KCB KCB Ethiopia Rep Branches 295 Branches 14 Branches 13 Branches 150 Branches 13 Branches 6 Bancassurance Capital Foundation Off
Slide 4: High Level Organisation Structure
HIGH LEVEL ORGANISATION STRUCTURE Board 11 Directors 8 Independent 1 NED and 2 Executive HR & AUDIT & RISK OVERSIGHT STRATEGY & IT NOMINATIONS GOVERNANCE Group CEO & MD Reporting to the Board & executing delegated powers Executive Committee General Management Assets & Liabilities Group Operational R
Slide 5: The Executive Committee
THE EXECUTIVE COMMITTEE Joshua Oigara Group Chief Executive Officer and Managing Director *MD NBK Lawrence Kimathi Samuel Makome Bonnie Okumu Japheth Achola Paul Russo Group Chief Finance Officer Chief Commercial Officer Group General Counsel Group HR Director Group Regional Business Director* Dr. L
Slide 6: KCB's 2023 Strategy
KCB’s 2023 STRATEGY Our Strategic Our Thrusts Aspirations CES <15% Customer first, with leading value 3 Year Strategy NPS 45%+ Total assets propositions Vision 1.5 Tr Step change in CIR efficiency & 40-43% productivity The very best in customer experience, driving NFI 40% Digital leader & digital a
Slide 7: Customer First: Steady improvement in customer satisfaction
CUSTOMER FIRST Customer Excellence Scores 200 ATM Deposits 59 172 Steady improvement in 54 48 150 49 customer satisfaction 42 38 driven by investment in 39 self serve channels 30% 100 89 24% 29 20% 24 50 40 19 12 93% 0 9 Growth in value of ATM Q3 19 Q3 20 Q3 21 Q3 19 Q3 20 Q3 21 deposits to Kes 172B
Slide 8: Customer First: Non-branch channel transactions in Q3 2021
CUSTOMER FIRST Number of non-branch channel transactions in Q3 2021 (M) 98% YoY growth of transactions conducted 8.1 3.4 Mobile Lending 61% 8.9 through non-branch channels Mobi Service 47% 42.4 Agency 25% 50% YoY growth 187.3 Merchant POS 68% 95.9 ATMs (8%) Internet Banking 79% 8
Slide 9: Supporting MSMEs Through the Pandemic
SUPPORTING MSMEs THROUGH THE PANDEMIC SME NPL ratio improved Revised lending criteria Actively upgrading by 440bps to 8.7% due to through extended loan Participation in risk customers to the prudent credit tenures and enhanced sharing guarantees to corporate segment upon management limits, fueling a
Slide 10: Driving Efficiency Through Non-Branch Channels
DRIVING EFFICIENCY THROUGH NON-BRANCH CHANNELS Value transacted through digital channels (Kes B) Improvement in 47 YoY growth efficiency ratios in 2021 256 supported by deepening Mobi Service 70% of digital channels 449 Internet banking 36% 56% YoY growth Agency 46% 1,563 ATMs 43% 499 Merchants POS
Slide 11: Driving Efficiency Through Non-Branch Channels: Revenue
DRIVING EFFICIENCY THROUGH NON-BRANCH CHANNELS Group Q3 21 Revenue Digital Channels Revenue 79.9 (1.9%) Kes 6.6B Total revenue from digital 69.1 Other NFI, 6.7 6.6 channels. 9.0 Other NFI 7.0 1.1 0.8 88% being NFI, equivalent to half of KCB Bank F&Cs Kenya’s total fees and F&Cs, 14.5 commissions 14.
Slide 12: Growing Our Payment Universe
GROWING OUR PAYMENT UNIVERSE Ready to build something amazing? PAYMENTS Developer sandbox online with 20 partners live Available APIs on Buni ✓ To pay – to Vooma wallet, till to till & notifications ✓ Queries – query and validate utility bill by account, merchant till or agent name & number ✓ Deposi
Slide 13: Building Momentum from Our Regional Businesses
BUILDING MOMENTUM FROM OUR REGIONAL BUSINESSES Contribution of subsidiaries outside KCB Bank Kenya 80% Profit before tax Total assets Organic growth of PBT from subsidiaries outside KCB Bank Q3 19 7.7% Q3 19 12.7% Kenya to Kes 5.1B in Q3 2021 Q3 20 11.7% Q3 20 23.9% Q3 21 14.4% Q3 21 26.4% 13
Slide 14: Operating Environment Highlights
OPERATING ENVIRONMENT HIGHLIGHTS
Slide 15: COVID-19 Positivity Rates Declining Across the Region
COVID-19 POSITIVITY RATES DECLINING ACROSS THE REGION 99% of KCB staff in 0.6 Tanzania 1 Kenya and 89% across the region have been 1.5 Nigeria 2 vaccinated with at least one dose, enabling Ghana 2.7 4 resumption of up to 80% of our staff to their South Sudan 0.3 6 primary working sites Uganda 0.9 8
Slide 16: Regional GDP Recovery Outlook
REGIONAL GDP RECOVERY OUTLOOK Projected GDP Growth Rates Kenya’s GDP expanded by Kes 515B, to Kes 10.2T, after it was rebased to 7.0% capture new sectors whose 6.5% 6.0% output had grown in recent 5.6% years. 5.3% 5.1% 5.1% 5.1% 4.7% 4.2% 4.0% 1.6% Kenya Uganda Rwanda South Sudan Burundi Tanzania 20
Slide 17: Regional Currencies Performance
REGIONAL CURRENCIES PERFORMANCE Performance of regional currencies against USD Year to Sep 2021 KENYA Diaspora remittances up 20% to USD 2.7B in 3.41% nine months of 2021 0.10% UGANDA -1.16% Shilling driven by inflows -2.28% -2.07% and coffee exports SOUTH SUDAN Devalued its currency in Q1 21 -43.21
Slide 18: Regional Current Accounts Trend
REGIONAL CURRENT ACCOUNTS TREND Current account deficit as a percentage of GDP KENYA Import cover 5.77 months 2020 2021* 2022* at the end of Sep 2021 0.2 Exports up 11.5% in year -2.7 to Aug 2021 -4.3 -3.9 -4.8 -5.2 -4.5 -5.4 -5.7 Imports up 22.9% in year -8.4 -9.1 to Aug 2021 -11.4 -11.9 -12.2 -12.
Slide 19: Inflation and Lending Rate Movement
INFLATION AND LENDING RATE MOVEMENT Inflation rates 18.3% Inflation remained moderate in most countries in the region on account of reduced 8.0% 6.9% 8.0% prices of locally 6.3% 4.2% 5.1% produced food items 2.7%2.2% 3.1%4.0% 1.8% Rwanda Uganda Tanzania Kenya Burundi South Sudan Sep-20 Sep-21 Centra
Slide 20: Continued Focus on ESG
CONTINUED FOCUS ON ESG OUR APPROACH TO SUSTAINABILITY IS GUIDED BY THE FOLLOWING SDGs KCB Group is committed to creating long term value for shared prosperity through alignment of our strategy to sustainable practices. As we deepen our presence across the region, we seek to address the environmental
Slide 21: Continued Focus on ESG: Communities and Diversity
CONTINUED FOCUS ON ESG Supporting our Communities through shared value Embracing diversity at the workplace Kes 11.1B distributed to the elderly, 45% of all employees and 40% of orphans and vulnerable under the Inua managers are women Jamii programme. KCB Scholarship programme expanded to 41% compos
Slide 22: Improved Stock Performance
IMPROVED STOCK PERFORMANCE Share price (Kes) Shareholder profile Kes 150B 46.75 Market capitalization 20% 11.6% Share price appreciated by 39.10 23% in 2021 outperforming NSE20 index by 14% 19.8% 3.2B issued 42.5% shares with 72% being free float KCB’s shares are listed on the NSE, DSE, USE and RSE
Slide 23: Declaration of Interim Dividend
DECLARATION OF INTERIM DIVIDEND The Board of Directors approved payment of an interim dividend of Kes 1.00 per Kes 9.92 share. The dividend will be paid on or about 14 JANUARY 2022, to shareholders Annualized earnings per registered at the close of business on 9 DECEMBER 2021 share in Q3 2021, up 92
Slide 24: Stable and Strong Ratings
STABLE AND STRONG RATINGS KCB BANK KENYA 2019 2020 2021 Credit ratings at par Rating B2 B2 B2 with the sovereign rating and affirmed in Outlook Stable Negative Negative October 2021 Credit rating affirmed KCB’s: • Solid profitability metrics • Stable deposit-based funding structure, and; • Strong ca
Slide 25: Awards
AWARDS THE BANKER Best Bank in Kenya by: • Global Finance World’s Best Bank Awards. • Global Business Outlook Awards. TOP • World Economic Magazine Awards. 1000 • Best Bank in Kenya and Africa’s Best Responsibility Bank by Euromoney Global BANKS Awards. • Safest Bank in Africa by Global Finance. • B
Slide 26: Financial Performance
FINANCIAL PERFORMANCE
Slide 27: Substantial Balance Sheet Growth
SUBSTANTIAL BALANCE SHEET GROWTH Q3 2021 15% Growth in balance sheet Government Securities 252.4 7% 15.8 size to Kes 1.1 trillion Net loans 651.8 13% 74.3 13% Customer deposits 859.1 11% 86.4 Loan book growth driven by improved lending in Kenya, Uganda and Rwanda and BPR acquisition Long term debt 3
Slide 28: Resurgence in Mobile Lending
RESURGENCE IN MOBILE LENDING Mobile loan product split Recovery in mobile lending in 2021 Kes 115B 14% Value of mobile loans 41 advanced. 12 38 5 Significant improvement in 15 36 Q3 21 3 the year driven by limit 115B 4 enhancements for qualifying customers 11 12 Q3 20 11 118B 53 34 69 50 23 25 21 Q1
Slide 29: Double Digit Loan Book Growth
DOUBLE DIGIT LOAN BOOK GROWTH Gross loans growth 32 718 12% 640 46 19% Growth in Gross Loans LCY driven by personal and FCY manufacturing sectors. 81% Q3 20 Retail Corporate Q3 21 Gross loans per segment Q3 20 308 179 31 122 640 Q3 21 340 207 48 123 718 Corporate Consumer SME Others* Amounts in Kes
Slide 30: Improved Asset Quality: NPL Evolution
IMPROVED ASSET QUALITY NPL evolution 20 98 98 100 13.7% 19 97 97 96 Group NPL ratio down 18 95 140 bps year on year 17 16 90 15.1% 14.7% 14.8% 15 14.3% 14 14.5% 13.9% 85 14.1% 14.0% 13.7% 13 13.6% 12 80 11 10 75 Q3 20 FY 20 Q1 21 H1 21 Q3 21 NPL ratio Kenya industry NPL ratio Gross NPL (Kes B) 30
Slide 31: Improved Asset Quality: Cost of Risk
IMPROVED ASSET QUALITY 25 10 Cost of risk vs ECL charge Gross loans staging 9 Cost of Risk 20.0 126 improvement driven by 20 8 reduced provisions in 516 corporate and digital 7 loans 76 15 6 5 10 4.8% 9.3 4 IFRS provisions staging Stage 1 3 Stage 2 5.8 6.6 Stage 3 5 2 2.0% 5.9 1.7% 1 0 0 Q3 19 Q3 20
Slide 32: Distribution of the Non Performing Book
DISTRIBUTION OF THE NON PERFORMING BOOK NPL breakdown by segment 11.8% 17.9% KCB Bank Kenya NPL 10.7% ratio in September 2021 9.1% down from 12.8% in December 2020 2.8% CHECK OFF MORTGAGE CORPORATE SME & MICRO FY 20 Q1 21 H1 21 Q3 21 13.9% Kenya industry NPL NPL breakdown by subsidiary 42.8% ratio a
Slide 33: Consistent Improvement in Coverage Ratios
CONSISTENT IMPROVEMENT IN COVERAGE RATIOS Coverage ratios 75.0% Medium term target 73.4% 72% Regulatory coverage 70.1% 72.0% 70.0% Short term target ratio 200bps above our 68.6% 69.0% short term target 67.7% 69.5% 67.9% 66.7% 66.2% 65.2% 63.5% Q3 20 FY 20 Q1 21 H1 21 Q3 21 Q3 21* IFRS Coverage Ratio
Slide 34: Diversified Deposit Portfolio
DIVERSIFIED DEPOSIT PORTFOLIO Deposit mix Deposit growth (Kes B) 7 6 30 41% Liquidity ratio, up 320bps 43 Retail, 47% Retail, 46% supported by low cost and stable funding mix driven by 859 growth in demand and term 773 Corporate, Corporate, deposits 53% 54% 11% Q3 20 Demand Term Savings Call Q3 21 Q
Slide 35: Significant Capital Headroom
SIGNIFICANT CAPITAL HEADROOM KCB Group All Group subsidiaries 5.0% 5.1% 6.1% except NBK above minimum capital ratios. 7.6% 7.3% 6.8% Loan recoveries and retained earnings to 14.5% 14.5% 14.5% bridge NBK’s capital 10.5% 10.5% 10.5% shortfall Q3 19 Q3 20 Q3 21 Q3 19 Q3 20 Q3 21 KCB Bank Kenya 3.3% 2.8
Slide 36: Doubling Up of Group Profitability
DOUBLING UP OF GROUP PROFITABILITY Q3 2021 Customer loans 53.4 17% 7.7 109% Growth in PBT driven by Government securities 18.9 12% 2.1 increased interest income from loans and Interest expense 17.1 11% 1.7 government securities, FX trading income and a Lending fees 6.6 -0.2 (3%) decline in the provi
Slide 37: Steady Growth in Interest Earning Assets
STEADY GROWTH IN INTEREST EARNING ASSETS Loans and Govt. securities (Kes B) Yields vs Cost of funds Net interest income up 18% to Kes 56.4B driven 11.1% 10.9% 10.9% by increase in earning 252 assets and interest write- 10.9% backs. 236 10.4% 10.0% 129 Cost of funds dropped by 10bps on account of low
Slide 38: Operating Costs Outlay
OPERATING COSTS OUTLAY 34.8 *Cost growth consistently 31.9 below inflation and other 26.5 11.8 NBK operating expenses down 12.9 10.0 4.4 Other opex by 9.0% yoy on account 29.0* 3.8 Depreciation of cost savings initiatives 2.9 26.4* Staff costs 18.6 13.6 15.2 *Excluding NBK Q3 19 Q3 20 Q3 21 Amounts
Slide 39: Asset Contribution per Subsidiary
ASSET CONTRIBUTION PER SUBSIDIARY 11% 12% 26% 17% 5% (18%) 20% 73.6% 818 Proportion of total assets in KCB Bank Kenya. 740 146 130 45 31 39 23 27 22 23 17 14 10 12 KCB Bank NBK BPR KCB KCB KCB KCB South KCB Burundi Kenya Tanzania Rwanda Uganda Sudan Q3 20 Q3 21 YoY change Amounts in Kes B 39
Slide 40: Profitability Growth and Distribution per Subsidiary
PROFITABILITY GROWTH AND DISTRIBUTION PER SUBSIDIARY 14.4% PBT contribution from subsidiaries outside of KCB Bank Kenya 102% 164% 110% 73% 96% 30% 23% 2% 30,479 15,118 1,415 927 836 754 537 483 475 442 385 440 366 358 264 268 191 KCB Bank Kenya NBK KCB Rwanda KCB South KCB Tanzania KCB KCB Burundi K
Slide 41: Overview of Key Financial Ratios
OVERVIEW OF KEY FINANCIAL RATIOS KCB GROUP Q3 2021 Q3 20 FY 20 H1 21 KCB KENYA KCB GROUP 10.9% 14.4% 20.7% Return on Average Equity 24.4% 22.0% 46.3% 45.0% 44.3% Cost to Income 37.7% 43.5% 15.1% 14.7% 14.3% Gross NPL to Gross Loans 11.8% 13.7% 68.6% 66.7% 70.1% NPL Coverage 73.0% 72.0% 15.0% 26.0% 2
Slide 42: Measuring Up Against Our Outlook
MEASURING UP AGAINST OUR OUTLOOK 29.4% 33.0% Improving economic NFI Ratio performance supporting 43.5% 44.7% the confidence to meet Cost/Income ratio the 2021 outlook. 13.7% 14.0% NPL ratio 1.8% 2.0% Cost of risk All outlier items recorded improvement 2.6% Cost of funds QoQ 7.4% 7.6% NFI ratio 80bps
Slide 43: Summary Statement of Financial Position
SUMMARY STATEMENT OF FINANCIAL POSITION KCB Group KCB Bank Kenya Y-O-Y Y-O-Y Kes Billion Q3 2020 Q3 2021 Q3 2020 Q3 2021 Change Change Cash and balances with central bank 48.6 68.1 40% 38.2 56.5 48% Balances with other institutions 36.6 60.1 64% 8.5 21.3 152% Investments in Government & other securi
Slide 44: Summary Statement of Comprehensive Income
SUMMARY STATEMENT OF COMPREHENSIVE INCOME KCB Group KCB Bank Kenya Y-O-Y Y-O-Y Kes Billion Q3 2020 Q3 2021 Q3 2020 Q3 2021 Change Change Interest income 63.3 73.5 16% 49.9 56.9 14% Interest expense (15.4) (17.1) 11% (11.4) (11.9) 5% Net interest income 47.9 56.4 18% 38.5 45.0 17% Foreign exchange in
Slide 45: Thank You
THANK YOU KCB Investor Relations [email protected] www.kcbgroup.com