Equity Group Holdings Limited · NSEKE:EQTY
Equity — FY2015 Earnings Presentation
76 slides from Equity's earnings presentation, March 2016
Slide 1: Investor Briefing & FY2015 Performance
Investor Briefing & FY2015 Performance March 2016
Slide 2: Equity Group Holdings Limited Headquarters
Equity Group Holdings Limited Headquarters Equity Centre, Upperhill, Nairobi
Slide 3: Equity Group's Philosophies
Equity Group’s Philosophies Our Purpose We exist to transform the lives and livelihoods of our people socially and economically by availing them modern, inclusive financial services that maximize their opportunities. Our Vision To be the champion of the socio-economic prosperity of the people of Afr
Slide 4: Macro Economic Overview
Macro Economic Overview 2 EQUITY Group Holdings Limited
Slide 5: Inflation & Foreign Exchange – Kenya
Inflation & Foreign Exchange – Kenya Inflation ▪ Inflation in Kenya was 8.01% in December of 2015 compared to 7.3% in November and 6.7% in October ▪ The increase in December was driven largely by food prices, and Excise Tax. The main food items were Irish potatoes, tomatoes, kales (sukuma wiki), car
Slide 6: KES vs East African Currencies
KES vs East African Currencies USD vs. USH,TSH, RWF, KSH 36.0 35.2 35.0 35.0 34.0 33.6 34.0 33.3 33.3 33.0 32.9 31.7 32.1 31.6 32.0 30.6 31.2 31.2 +10% 30.0 KES / USHS 28.0 26.0 24.0 21.0 21.3 21.4 21.2 21.1 21.4 21.5 22.0 20.6 20.6 20.5 20.1 20.0 20.0 KES / TSHS 20.0 19.2 19.5 +12% 18.0 16.0 14.0 1
Slide 7: Central Bank Rate & KBRR
Central Bank Rate & KBRR § The Monetary Policy Committee retained the indicative Central Bank Rate at 11.5% (on Jan 20th 2016) - the 4th time in a row. § The Monetary Policy Committee also retained the Kenya Banks’ Reference Rate (KBRR) at 9.87% (on Jan 20th 2016), ignoring the recent increase in
Slide 8: FX Reserves - Kenya
FX Reserves - Kenya § CBK’s foreign exchange reserves which currently stand at $7bn (equivalent to 4.5 months of import cover), together with the Precautionary Arrangements with the International Monetary Fund (IMF), continue to provide an adequate buffer against short-term shocks. § FX reserves e
Slide 9: GDP - Kenya
GDP - Kenya § Kenya’s Kenya GDPGDPgrew grewbybyapproximately approximately5.5% 5.5%inin2015 2015(5.8% (5.8%ininthe thethree threemonths monthstotoSeptember September2015, 2015,upupfrom froma a 5.5% in 5.5% in the the previous previous quarter) quarter) (GDP is (GDP is approximately approximately $6
Slide 10: Macro-economic Indicators – East Africa
Macro-economic Indicators – East Africa 8 6 6
Slide 11: Macro-Economic Indicators Summary (East Africa) 1/2
Macro-Economic Indicators Summary (East Africa) 1/2 Uganda Rwanda Tanzania DRC 91 Days T-Bill 18.3% 4.3% 8.3% 4.7% 182 Days T-Bills 20.5% 4.6% 13.9% 5.4% 364 Days T-Bills 21.7% 6.5% 14.6% 8.1% Central Bank Rate 16.0% 12.0% 7.0 % 6.5% Inflation 7.2% 3.1% 6.4% 4.5% 7 9 7
Slide 12: Macro-Economic Indicators Summary (East Africa) 2/2
Macro-Economic Indicators Summary (East Africa) 2/2 Uganda Rwanda Tanzania DRC Current Account to GDP -5.20% -11.80% -11.00% -7.5% Private Sector Credit Growth 11.0% 26.6% 13.7% 20.1% Real GDP Growth (World Bank 2015 Projections) 5.4% 7.0% 7.2 % 8.0% GDP (in USD Billion) 26.3 7.9 49.2 40.0 10 8 8
Slide 13: Key Events for the Group in 2015
Key Events for the Group in 2015 § Equity Bank launched Equitel - its a new newmobile mobilebanking bankingplatform platformfor forits itscustomers customers § Equity Group secures its shareholders approval for a Kshs 20billion 20 billion regional regional expansion § Equity Group Equity Group en
Slide 14: Update on Strategic Initiatives
Update on Strategic Initiatives 12 10
Slide 15: Progress in key execution priorities
Progress in key execution priorities 47% 47% growth § growth in in § IconicIconic and and socialsocial brandbrand DiaspDiaspora ora remittaremittances nces Diaspora Diaspora commissions commissions Brand Brand&& 8 8 Foundation Foundation Remittances 7 7 Remittances 53% growth 54% growth in Trade §
Slide 16: Governance & Leadership Structure
Governance & Leadership Structure 14 12
Slide 17: Strong Governance & Leadership Structure
Strong Governance & Leadership Structure Shareholders Subsidiary Boards Group Board Subsidiary Boards CEO’s office CEO Director Chief Officer, Group Governance, Finance, Director Brand, Internal Strategy, Legal, Innovation, Culture and HR Auditor Company Secretary Payments Non-Banking Corporate Bank
Slide 18: ICT Infrastructure
ICT Infrastructure 16 Group Holdings Limited
Slide 19: IT investment and impact on P&L
2 IT investment and impact on P&L KES “Billion” IT Spend over time IT Expense (P&L) Other Operating Other Operating Expenses Expenses +32% (excl. IT) (incl. IT) 15.9 +21% 13.4 +46% 11.1 +16% 12.1 10.6 +39% +7% 9.1 2.8 8.2 7.7 2.0 FY FY FY FY FY 2014 FY 2015 FY 2014 FY 2015 FY 2014 FY 2015 2012 2013
Slide 20: Regional Expansion & Diversification
ICT Infrastructure Regional Expansion & Diversification 18 14
Slide 21: Regional Expansion & Diversification
3 Regional Expansion & Diversification The The leading leading inclusive inclusive Bank bank bank across across the the Eastern Eastern Bank African region African region AAdistinctive distinctiveagile, agile, convenient convenientand andsecure secure mobile mobilechannel channelthat that seamlessly
Slide 22: Regional Expansion - key delivery under Equity 3.0
3 Regional Expansion - key delivery under Equity 3.0 3 Regional Expansion - key delivery under Equity 3.0 Equity 3.0 is a comprehensive 10 year plan to transform Equity Group Holdings Ltd (EGHL) into a diversified § regional financial Equity 3.0 services provider is a comprehensive 10inyear Africa.
Slide 23: Regional Expansion – Key Metrics
Regional Expansion – Key Metrics KES “Billion” Regional Regional Regional Contribution Contribution Tanzania Rwanda Uganda S. Sudan DRC Total FY2015 FY2014 Deposits 140 9.4 14.5 14.9 18.7 70.7 23% 21% Deposits Growth 25% 8% 49% -42% 14% 28% Loan 15.6 8.3 7.2 0.7 13.6 45.4 17% 12% Loan Growth 64% 33%
Slide 24: Diversification Impact
3 Diversification Impact KES “Million” Equity Investment Bank Equity Insurance Agency +32.3% 524.5 396.5 +808.1% 138.6 15.3 FY 2014 FY 2015 FY 2014 FY 2015 22 20
Slide 25: Regional Expansion
3 Regional Expansion (Assets and PBT contribution by countries) Total Assets split by Country PBT split by Country 100.0% 100.0% 100.0% 100.0% Rwanda 3.3% 2.9% Rwanda 0.7% 1.2% Uganda 0.5% Uganda 3.9% 4.2% 0.8% 1.1% Tanzania 0.0% DRC 1.6% Tanzania 4.3% 4.7% 2.6% 0.0% S. Sudan DRC 0.8% 6.2% 1.6% S. S
Slide 26: Digital Bank
Digital Bank : 24 Group Holdings Limited
Slide 27: Execution on Digital Banking
Execution on Digital Banking 4 (Increased number of Transaction numbers & values) Transaction numbers in millions +999% +35% 51.3 151.0 38.2 -6% +56% 32.5 30.4 7.2 4.6 13.7 FY2014 FY2015 FY2014 FY2015 FY2014 FY2015 FY2014 FY2015 Agency ATM Merchants Mobile banking Transaction value in KES billion +3
Slide 28: Execution on Digital Banking
Execution on Digital Banking 4 (Transaction numbers trend) Transactions (Millions) 79.5 Mobile 80 75 55 50 51.3 Agency 45 40 38.2 34.5 33.4 33.4 35 ATM 32.5 30 29.4 30.4 26.7 27.6 25 28.0 26.5 23.8 20 20.0 Branch 15 10 7.8 5.7 5 0 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Cash Cash related transaction
Slide 29: Execution on Digital Banking (Mobile Customer Transaction Numbers & Value Trend)
Execution on Digital Banking 4 (Mobile Customer Transaction Numbers & Value Trend) Cumulative M-Banking Transactions numbers (millions) Cumulative M-Banking Value (KES billions) 140 160 151.0 130 150 132.4 140 120 114.9 130 110 118.2 120 100 96.9 105.4 110 90 94.9 82.5 100 80 85.4 90 77.7 69.5 70 80
Slide 30: Execution on Digital Banking
4 Execution on Digital Banking (Equitel customer numbers up 230% growth in 13 months) KES “000” Linkage to M-Banking SIM uptake # of transactions per customer 13 20 per month +230% 1,800 1,750 1,665 1,591 1,600 1,500 1,500 1,400 1,369 90% 89% 89% 1,250 1,200 1,166 1,178 1,085 88% 1,024 1,000 1,000 9
Slide 31: Execution on Digital Banking
44 Execution Execution on Digital Banking Banking (Count (Count of of loan loan disbursements through Mobile disbursements through Mobile vs. vs.Branch) Branch) InIn Thousands Thousands Combined Combined Mobile Mobile Branch Branch 2,500 2,500 2,455 2,455 2,101 2,101 2,000 2,000 1,770 1,770 1,503 1,
Slide 32: Execution on Digital Banking
4 Execution on Digital Banking (KES 8.5billion Disbursed through Mobile Channel) Disbursement Count (number) Loan Value Disbursement (KES "Billion") 225,457 1,922,155 +22% 8.5 +24% 6.9 +22% 5.6 +22% +31% 4.6 3.8 +21% +22% 2.9 +25% +22% 2.4 +27% 1.9 +25% 1.6 1.3 0.8 1.0 Jan Feb Mar Apr May Jun Jul Au
Slide 33: Execution on Digital Banking (Loan Outstanding Trend)
Execution on Digital Banking 4 (Loan Outstanding Trend) In Billions +5% +44% 1.54 1.46 +21% 1.02 +59% +4% 0.85 0.82 +15% +9% +37% 0.51 0.47 +31% +7% 0.41 -3% 0.30 0.28 0.22 0.21 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 29 31
Slide 34: Continuous Growth in Agency Banking
4 Continuous Growth in Agency Banking 4 Continuous Growth in Agency Banking Focus on Variable … More transactions now processed under 3rd party infrastructure saving Focus on Variable cost model… … More on fixed transactions costs now processed under 3rd party infrastructure saving cost model… on fi
Slide 35: Continuous Growth in Agency Deposits
4 Continuous Growth in Agency Deposits… In KES Billion Agency Deposit Amount Agency Withdrawal Amount +10% +11% 69.3 +8% 62.8 +5% 56.4 +10% 52.2 49.9 45.2 29.1 24.2 25.1 21.4 22.3 18.5 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Deposits growing more than withdrawals hence a “Net Cash-Inflow” po
Slide 36: SME Strategy
SME Strategy 34 Group Holdings Limited
Slide 37: Loan book and deposit base split by type
Loan book split by type Deposit base split by type 100.0% 100.0% 100% 100% Agriculture 3.0% 2.5% Consumer 23.0% 19.7% Current 36% 41% 6.0% Accounts Micro 7.0% SME 49.0% 54.6% 44% Savings 43% Large Term 20% 18.0% 17.2% 16% Enterprises Deposits FY2014 FY2015 FY 2014 FY 2015 35
Slide 38: SME Income Contribution
5 SME Income Contribution In KES million Trade Finance Income Growth Merchant Income Growth FX Income Growth +26% 2,946.5 +26% 2,344.9 +53% +54% 891.1 809.0 1,866.1 +66% +70% 583.0 525.0 351.5 309.0 FY2013 FY2014 FY2015 FY2013 FY2014 FY2015 FY2013 FY2014 FY2015 36 34
Slide 39: SME Income Contribution
5 SME Income Contribution In KES million Trade Finance Income Growth Merchant Income Growth FX Income Growth +26% 2,946.5 +26% 2,344.9 +53% +54% 891.1 809.0 1,866.1 +66% +70% 583.0 525.0 351.5 309.0 FY2013 FY2014 FY2015 FY2013 FY2014 FY2015 FY2013 FY2014 FY2015 34 37
Slide 40: Growing Non-funded Income as a result of cross-selling to SME's
5 Growing Non-funded Income as a result of cross-selling to SME’s Non Funded Income by Type 55.6bn Other 11.2% 12.1% Income 47.6bn Foreign 21.7 12.7% 13.4% 41.9bn Exchange (39%) 36.8bn 18.5bn (39%) 15.4bn 12.9bn (37%) 28.7bn (35%) Non- 12.5bn Fees & Funded (44%) 76.1% 74.5% Commission 33.9 29.2bn (6
Slide 41: Stable net interest margin
5 Stable net interest margin 5 Stable net interest margin Percentage Percentage Increase in interest yield to counter increasing cost Increase of funds in interest yield to counter increasing cost of funds Net Interest Margin increased between Q3 and Q4… Net Interest Margin increased between Q3 and
Slide 42: Merchant Business and Payments
Merchant Business and Payments 40 38
Slide 43: Building momentum in Payment Processing and Merchants
We are building on our momentum in Payment Processing and 6 Merchants… Merchants We have partnered with key payment …which which has allowed us to grow our number of transactions companies… companies and commissions Volume (Millions) Commissions (Millions) +54% 38,161 +67% 24,743 14,837 891 +53% 583
Slide 44: Growth in Merchant Outlets
6 7 Growth in Merchant Outlets Number of outlets Number of outlets:2011-2015 +62% 7,868 +57% 4,844 +59% 3,092 +103% 1,947 959 2011 2012 2013 2014 2015 42 40
Slide 45: Diaspora Remittances
Diaspora Remittances 41 43
Slide 46: Diaspora Remittances
7 Diaspora Remittances Volume growth Commissions growth In KES Million +34% 13,543 111 752 +47% 2,169 197 VISA Direct 10,086 71 305 Equity Direct 597 PayPal 2,987 133 MoneyGram 2,973 7,524 6,140 FY2014 FY2015 FY2014 FY2015 44 42
Slide 47: Social Impact Investment
Social Impact Investment 43 45
Slide 48: EGF Programmatic Pillars
8 7 Programmatic Pillars ▪ Cash transfers EGF 7 Programmatic Pillars ▪ Fanikisha ▪ Wings to Fly ▪ Fanikisha+ (Tanzania) Education ▪ Equity African Financial Leaders Programme ▪ Financial Knowledge Inclusion and for Africa training and Literacy Leadership programme Development ▪ Transforming smallhol
Slide 49: Championing Social-Economic Revolution
8 Championing Social-Economic Revolution CARBON FUND 1Mil PEASANT FARMERS Trees planted DEVELOPED 20,744 500,000 TRANSFORMED TO AGRI-BUSINESSES 7,836 Clean energy WITH 2,400 MEDIUM-SIZED PARTNERS products distributed ENTREPRENEURS FARMERS SUPPORTED TRAINED TOTAL WINGS 12,377 TO FLY 1,260,486 WOMEN Y
Slide 50: Qualitative Analysis
Qualitative Analysis 48 Group Holdings Limited
Slide 51: Equity has earned recognition in 2015
Equity has earned recognition in 2015 Equity’s International Rankings Overall Soundness Performance Equity Bank (Capital Assets Ratio) (Profits on capital) (Return on assets) 2015 Global Rank 916 88 18 8 2014 Global Rank 999 112 8 4 Equity’s Global Credit Rating 47 49
Slide 52: Equity has earned substantial accolades in 2015
Equity has earned substantial accolades in 2015 50 48
Slide 53: Equity has earned substantial accolades in 2015
Equity has earned substantial accolades in 2015 49 51
Slide 54: Best Brand and Recognition for Transparency
Best Brand and Recognition for Transparency 2014 - Top Banking Brand in Kenya 52 50
Slide 55: Performance of Core Business (Intermediation)
Performance of Core Business (Intermediation) 51 53
Slide 56: 24% growth in funding with deposits accounting for 71%
In KES “Billion” 24% growth in funding with deposits accounting for 71% 24.2% Growth per Class 428.1 10.9 110% (3%) 42.9 42% (10%) 344.6 5.2 72.1 Other Liabilities 13% (2%) (17%) 30.2 Borrowed Funds (9%) 63.8 Shareholders’ Funds (19%) 302.2 23% (71%) 245.4 Deposits (71%) FY2014 FY2015 54
Slide 57: Customer Deposits Growth
Customer Deposits Growth Customer numbers Deposit (in KES billion) Deposit split by Country Deposit split by Type (in millions) +23% 302.2 100.0% 100.0% 100% 100% 0.0% DRC 3.4% +26% 5.9% Term Rwanda 16% 3.8% Deposits 20% Uganda 3.0% 245.4 Tanzania 4.4% 4.7% +17% +4% S. Sudan 9.9% 4.6% +15% 194.6 4.8
Slide 58: 24.1% growth in asset base
In KES billion 24.1% growth in asset base while still maintaining portfolio diversification +24.2% 428.1 Growth per Asset Class 45.2 34% (10.6%) 42.8 344.6 (10.0%) -12% 33.8 Other Assets (9.8%) 70.2 48.4 46% Government Securities (16.4%) (14.0%) 48.2 Cash & Cash Equivalents (14.0%) 269.9 26% 214.2 (
Slide 59: Net Loans & Advances Trend
Net Loans & Advances Trend Net Loans & Advances (Kes Billion) +26% 280 269.9 260 100% 100% 240 +25% Foreign 220 214.2 Currency 25% 28% Loans 200 +26% 180 171.4 160 +19% 140 135.7 120 113.8 Local 100 Currency 75% 72% 80 Loans 60 40 20 0 2011 2012 2013 2014 2015 2014 2015 55 57
Slide 60: Loan book by Segment and Entity
Loan book by Segment and Entity Split across Segments Split across the entities within the Group 100% 100% 100.0% 100.0% Agriculture 3% 2% 0.3% S. Sudan 2.1% 2.7% Uganda 2.9% 20% 3.1% Consumer 23% Rwanda 2.9% DRC 0.0% 5.0% 6% Tanzania 4.3% Micro 7% 5.7% 55% SME 49% Kenya 87.8% 83.2% Large Enterprise
Slide 61: Stable NPL Trend over time
Stable NPL Trend over time EBKL Group 4.4% 4.5% 4.3% 4.2% 4.1% 4.1% 3.9% 3.8% 3.3% 2.9% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 57 59
Slide 62: Non-Performing Loans: High Coverage Levels
Non-Performing Loans: High Coverage Levels IFRS CBK 92.8% 88.0% 89.1% 87.0% 86.2% 64.4% 63.9% 59.8% 55.4% 56.0% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 60 58
Slide 63: Financial Performance
Financial Performance 59 61
Slide 64: Asset Portfolio & Distribution
Asset Portfolio & Distribution FY2014 FY2015 Growth Y/Y Assets (bn) KSH KSH % Net Loans 214.2 269.9 26% Cash & Cash Equivalents 48.2 70.2 46% Government Securities 48.4 42.8 (12)% Other Assets 33.8 45.2 34% Total Assets 344.6 428.1 24% Asset Distribution FY2014 FY2015 Other Assets Other Assets 10% 1
Slide 65: Strong capital and liquidity position - EBKL
Strong capital and liquidity position - EBKL Core Capital to Risk Weighted Assets Total Capital to Risk Weighted Assets 17.3% 16.2% 14.8% 14.6% 14.5% Regulatory Minimum 10.5% Regulatory Minimum 2014 2015 2014 2015 63
Slide 66: Core Capital to Total Deposits; Liquidity Ratio
Core Capital to Total Deposits Liquidity Ratio 30.4% 29.1% 19.6% 20.1% 20% Regulatory Minimum 10,5% Regulatory Minimum 2014 2015 2014 2015 64
Slide 67: Stable RoAA and RoAE overtime
Stable RoAA and RoAE overtime RoAE 35.9% 35.0% 33.0% 33.9% EBKL 29.8% 29.7% 27.6% 26.6% Group 25.3% 25.5% Q4 ’14 Q1 ’15 Q2 ’15 Q3 ’15 Q4 ’15 6.4% RoAA 5.5% 5.2% 5.2% 5.1% 5.0% 4.8% 4.6% 4.5% 4.3% EBKL Group Q4 ’14 Q1 ’15 Q2 ’15 Q3 ’15 Q4 ’15 63 65
Slide 68: Delivering 12% growth in PBT from recurring operations
Delivering 12% growth in PBT from recurring operations Delivering 12% growth in PBT from recurring operations KES (Billion) FY2014 FY2015 Growth KES (Billion) FY2014 FY2015 Growth Interest Income 35.4 43.5 23% Interest Interest Income Expense 35.4 (6.2) 43.5 (9.3) 23% 51% Interest Expense Net Intere
Slide 69: Cost to Income Ratio Trend
Cost to Income Ratio Trend Group Bank 51.0% 52.0% 52.9% 46.9% 48.5% 48.0% 47.1% 44.0% FY 2012 FY 2013 FY 2014 FY 2015 ▪ Total Operating Income up 18% y/y .The growth is mainly attributed to increased diversification of income streams ▪ Operating expenses up 22% y/y 65 67
Slide 70: Positive Financial Ratios
Positive Financial Ratios Kenya Kenya Group Group FY2014 FY2015 FY2014 FY2015 Profitability NIM 11.9% 11.4% 10.8% 10.5% Cost to Income Ratio (with provisions) 50% 50% 55% 57% Cost to Income Ratio (without provision) 48% 47% 52% 53% RoAE 29.8% 37.1% 29.7% 25.5% RoAA 6.4% 5.2% 5.5% 4.5% Asset Quality
Slide 71: Appendix
Appendix 67 69
Slide 72: South Sudan – Devaluation Impact
South Sudan – Devaluation Impact KES “Billion” Sep-15 Dec-15 % Change Cash & Cash Equivalents 37.1 16.3 -56% Investment Securities 11.3 2.0 -82% Loans 3.4 0.7 -81% Other Assets 2.4 0.5 -80% Total Assets 54.2 19.4 -64% Deposits 44.0 14.9 -66% Borrowed Funds 1.6 2.4 52% Other Liabilities 3.7 1.4 -64%
Slide 73: Notes
Notes _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ ______
Slide 74: Notes
Notes _______________________________________________________________________________________________ _______________________________________________________________________________________________ _______________________________________________________________________________________________ ______
Slide 75: Ambitious growth target across Africa over the next 10 years
Equity has set an ambitious growth target across Africa over the next 10 years Today 2024 6 countries in East & Central Africa 15 countries across Africa Population of 145 Million Population of 810 Million (29 million are banked) Nominal GDP of USD 2,259 Bn Nominal GDP of USD 150 Bn 10million member
Slide 76: Equity Centre, Hospital Road, Upper Hill, Nairobi
Equity Centre, Hospital Road, Upper Hill, P.O. Box 75104-00200 Nairobi, Tel: + 254763 063 000, Fax: + 254-020-2737276, [email protected], www.equitygroupholdings.com @KeEquityBank KeEquityBank