Equity Group Holdings Limited · NSEKE:EQTY
Equity — Q3 2018 Earnings Presentation
60 slides from Equity's earnings presentation, Nov 5, 2018
Slide 1: Investor Briefing Q3 2018 Performance
In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity Ratio (Kenya) 40% Investor Briefing Q3 2018 Performance 29% 5th November, 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 1
Slide 2: Equity Bank's repositioning to avoid economic turbulence
INVESTOR BRIEFING2-01.jpg Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities 2
Slide 3: Equity Group's Philosophies
Equity Group’s Philosophies INVESTOR BRIEFING2-02.jpg In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity Ratio (Kenya) 40% 29% Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 3
Slide 4: Governance & Organizational Structure
Governance & Organizational Structure Governance and Organizational Structure Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities Eachwith Each subsidiary subsidiary withofown own Board Boardcompliant Directors of Directors withcompliant with l
Slide 5: Group Executive Management
Group Executive Management In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience James Mwangi, CBS Mary Wamae Bhartesh Shah Reuben Mbindu Brent Malahay 53% Group Managing Director & Group Executive Director Chief Operations Officer Chief Officer, H
Slide 6: Group Executive Management
Group Executive Management Polycarp Igathe Samuel Kirubi Anthony Kituuka Addis Ababa Othow Hannington Namara Managing Director, Managing Director, Executive Director, Managing Director, Managing Director, Equity Bank’s repositioning to avoid the economic Equity Bank Kenya Equity Bank Uganda Equity B
Slide 7: Macroeconomic Operating Environment
In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity Ratio (Kenya) 40% 29% Macroeconomic Operating Environment Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 7
Slide 8: Macro-economic & Operating Environment
Macro-economic & Operating Environment Macro-economic & Operating Environment Interest Rates (Oct 2018) FX (Local Currency v/s USD) Inflation GDP Growth Changes in Central Bank Rate Change CBR (Year to Date) 31-Oct-18 Year to Date Sep-18 (2018 Projected) Kenya 9.0% -100 Basis Points 102 1% 5.7% 6.2%
Slide 9: Improvement in Macro-economic & Operating Environment
Improvement in Macro-economic & Operating Environment Macro-economic & Operating Environment In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience • Strong economic growth outlook – East and Central Africa one of the fastest growing regions in the
Slide 10: Macro-economic & Operating Environment
Macro-economic & Operating Environment Macro-economic & Operating Environment • The continuous drop in CBR – This has put pressure on Yields on Loans. The CBR is down 100 basis points in 2018 • Uninterrupted increase in LIBOR rates – the international debt market’s LIBOR rates continues to depress K
Slide 11: Equity Bank Business Model & Strategy - Post Interest Rate Capping
Equity Bank Business Model & Strategy- Post Interest Rate Capping Equity Bank Business Model (Adjusting and&adapting Strategyto – Post new Interest Rate Capping norm) (Adjusting and adapting to the new norm) In uncertain times “cash is king”…trade off between profitability and stability, soundness a
Slide 12: Focus Area 1: Non-funded Income Growth & Contribution
Focus Focus Area Area 1: Non-funded 1: Non-funded income Income Growth & growth & Contribution contribution In Kes Billion Loan Interest Income Total Interest Income Non Funded Income Contribution to Total Income Growth Trend Growth Trend Growth Trend -11% +9% 39.8 48.9 48.7 49.3 38.5 34.3 Treasury
Slide 13: Focus Area 1: Growth of Diversified Streams of Non-funded Income
Focus Area 1: Growth of diversified streams of Focus Area 1: Growth of Diversified Streams of Non-funded Income non-funded income In Kes Million Fees & Commissions (Key Lines In uncertain - Kenya) times “cash is king”…trade off between profitability and stability, soundness and resilience +28% 1,144
Slide 14: Focus Area 2: Treasury
Focus Area 2: Treasury Focus Area 2: Treasury In KES Billion In KES Billion In KES Billion Government Treasury Gross Income Treasury Income Mix Yield on Government Securities Securities Portfolio Contribution & Capital Gains 3% 18% Declining yields highly compensated by mark-to-market gains on 15.7
Slide 15: Focus Area 3: Geographical & Business Diversification
Focus Area 3: Geographical & Business Diversification Focus Area 3: Geographical & business diversification In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience ▪ Double digit growth in profitability by all non-Kenyan subsidiaries ▪ Enhanced PAT c
Slide 16: Focus Area 3: Geographical & Business Diversification
Focus Area 3: Geographical & Business Diversification Focus Area 3: Geographical & business diversification Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities 11 16
Slide 17: Focus Area 4: Balance Sheet Agility
Focus Area 4: Balance Sheet Agility Focus Area 4: Balance Sheet Agility In uncertain times “cash is king”…trade off between In KES Billion Funding Split Asset Split Growth per profitability and stability, soundness andGrowth resilience per Group Group Funding Type Asset Class +8% +8% 53% 560.4 560.4
Slide 18: Focus Area 4: Balance Sheet Agility
FocusArea Focus Area4: 4: Balance Balance Sheet SheetAgility Agility In KES Billion Funding Split Asset Split EBKL Growth per Growth per EBKL Asset Class Funding Type +5% +5% 424.3 424.3 405.5 6.9 21% 405.5 24.9 5.7 41.4 (2%) -32% Other Liabilities -7% 36.5 (6%) 44.5 (1%) (10%) Other Assets Borrowed
Slide 19: Focus Area 4: Balance Sheet Agility
Focus Area 4: Balance Sheet Agility Focus Area 4: Balance Sheet Agility In uncertain times “cash is king”…trade off between 58% liquidity ratio makes the balance sheet agile for opportunistic growth & diversification profitability and stability, soundness and resilience strategies in case of change
Slide 20: Focus Area 5: Innovation and Digitization
Focus Area 5: Innovation & Digitization Focus Area 5: Innovation and digitization Transformation from a place you go to; to something you do Transactions in millions • Most transaction 360 Mobile are now done 350 353 (App & STK) using the digital 260 channels which 252 250 have continued to grow 151
Slide 21: Focus Area 5: Leveraging Off Variable Cost 3rd Party Infrastructure
Focus Area 5: Innovation & Digitization Leveraging Area Focus 5: Innovation Off Variable andInfrastructure Cost 3rd Party digitization Leveraging off variable cost 3rd party infrastructure Variable cost channels In uncertain times “cash is king”…trade off between Fixed cost channels -6% profitabilit
Slide 22: Focus Area 5: Fintech Innovations in Merchant Banking
Focus AreaArea Focus 5: Fintech Innovations 5: Fintech in Merchant Innovations Banking in Merchant Banking • The use of a Universal POS that converges Mobile Wallets, Cards & Digital payments +34% 54,000 +18% +16% +34% 14.3 40,304 34,750 12.1 Equity Bank’s repositioning to avoid the economic 1,144 9
Slide 23: Focus Area 5: Fintech Innovations in Diaspora Remittances
Focus Area 5: Fintech Innovations in Diaspora Remittances Focus Area 5: Fintech Innovations in Diaspora (KES millions) Remittances (KES millions) In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience +282% 56,813 53% 48% 45% Liquidity Ratio (Kenya)
Slide 24: 97% of Our Transactions Outside the Branch
Focus Area 5: Fintech Innovation & Digitization Focus 97% Areaof5: ourFintech Innovation Transactions andbranch outside the digitization 97% of our Transactions outside the branch Q3 2017 Q3 2018 2.6% 2.8% Branch Others 0.2% Eazzy Biz & Branch Others 0.3% Eazzy Biz & Eazzy Net ATM Eazzy Net ATM 4% 3
Slide 25: 55% of Our Transaction Value Outside the Branch
Focus Area 5: Fintech Innovation & Digitization Focus 55%Area 5:Transactions of our Fintech Innovation and Value outside thedigitization branch 55% of our Transactions Value outside the branch In uncertain times “cash is king”…trade off between Branches now handling high value transactions for SME,
Slide 26: 93% of Our Loan Transactions via Mobile Channel
Focus Area 5: Fintech Innovation & Digitization Focus 93%Area of our5:Loan Fintech Innovation Transactions andChannel via Mobile Digitization 93% of our Loan Transactions via Mobile Channel Q3 2018 Transaction count Q3 2018 Transaction value Branch Lending 7% Mobile Lending 19% Equity Bank’s reposit
Slide 27: Finserve's M-Key
Focus Area 5: Fintech Innovation & Digitization Finserve’s Focus Area 5: Fintech M-KEY Innovation and digitization Finserve’s M-Key In uncertain times “cash is king”…trade off between profitability and stability, soundness99,970 and resilience Cumulative Downloads 90,641 71,250 53% 46,769 48% 45% 21
Slide 28: Finserve's M-Key
Focus Area 5: Fintech Innovation & Digitization Focus Area 5: Fintech Innovation Finserve’s M-KEY and digitization Finserve’s M-Key Cumulative Transactions Value (Mn) 17.8 15.3 11.5 7.9 5.1 2.0 3.3 0.7 1.2 1-Sep-18 8-Sep-18 15-Sep-18 22-Sep-18 29-Sep-18 6-Oct-18 13-Oct-18 20-Oct-18 27-Oct-18 31-Oct-
Slide 29: Agency Model Becoming a Net Deposit Mobilizer
Focus Area 5: Fintech Innovation & Digitization Focus Area Agency 5: Fintech model becomingInnovation a net depositand digitization mobilizer Agency model becoming a net deposit mobilizer In uncertain times “cash is king”…trade off between Agent Deposits growing an increasingly higher rate thanprofi
Slide 30: Focus Area 6: Efficiencies and Cost Optimization
Focus Area 6: Efficiencies & Cost Optimization Focus Area 6: Efficiencies and cost optimization Staff Cost Trend Other Expenses Trend Cost to Group Income Ratio Trend (excluding staff cost) (Including Loan Loss Provision) EBKL EBKL EBKL 12.7 12.4 49.3% 49.9% 48.3% 11.6 6.3 5.2 5.5 Equity Bank’s repo
Slide 31: Focus Area 6: Efficiencies and Cost Optimization
Focus Area 6: Efficiencies & Cost Optimization Focus Area 6: Efficiencies and cost optimization In uncertain times “cash is king”…trade off between Group profitability and stability, soundness and resilience Net Interest Margin Yield on Interest Earning Assets 53% % % 8.6 8.5 8.4 48% 8.3 8.1 11.2 11
Slide 32: Focus Area 7: Asset Quality (Group)
FocusFocus Area 7: Asset Area 7: Quality (Group) Asset quality (Group) NPL’s – Sector vs EGH Plc as at Q3 2018 NPL per sector as at Q3 2018 Sector (Kenya) 12.4% 12.7% 14.7% 12.0% Group 10.7% 10.6% 9.9% 9.5% 9.4% 9.1% 8.7% 8.8% 8.4% 8.7% 7.1% 7.3% 7.4% 6.8% 5.4% 6.3% 6.3% 4.6% 4.7% 5.8% Equity Bank’s
Slide 33: Focus Area 8: Impact & Social Investment Programs
Focus Area 8: Impact Investment Focus Area Impact 8: Impact & Social Investment Investment Programs Impact & Social Investment Programs In uncertain times “cash is king”…trade off between USD 343 M in Social profitability and stability, soundness and resilience Investment Programs Health Energy & En
Slide 34: Shared Prosperity Business Model and its Social Impact
Focus Area 8: Impact Investment SharedFocus Area Prosperity 8: Impact Business Investment Model and its Social Impact Shared Prosperity Business Model and its Social Impact 15,168 2017 GRADUATING 600,000 PEASANT FARMERS TOTAL TRANSFORMED TO WINGS TO FLY 14,168 15,168 12,488 CLASS AGRI-BUSINESSES 10,
Slide 35: Business Validation
In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity Ratio (Kenya) 40% 29% Business Validation Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 35
Slide 36: Global Ratings and Accolades
Global Ratings & Accolades Global Ratings and Accolades Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities 36
Slide 37: Global Ratings and Accolades
Global Ratings & Accolades Global Ratings and Accolades In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity Ratio (Kenya) 40% 29% Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 37
Slide 38: 2018 National Banking Awards and Accolades
2018 National Banking Awards & Accolades 2018 National Banking Awards and Accolades Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities 38
Slide 39: 2018 National Banking Awards and Accolades
2018 National Banking Awards & Accolades 2018 National Banking Awards and Accolades In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity Ratio (Kenya) 40% 29% 34 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 39
Slide 40: Market Validation: Market Capitalization
Market Validation Market Market Validation Capitalization Market Capitalization NSE Market Capitalization (Kes B) as of Nov 1 2018 148 117 Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining 84 64 opportunities 58 41 37 36 16 2 2 EQUITY KCB COOP STANCHART BB
Slide 41: Intermediation & Financial Performance
In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity Ratio (Kenya) 40% 29% Intermediation & Financial Performance Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 41
Slide 42: Balance Sheet
Balance Sheet Balance Sheet Balance Sheet Q3 2017 Q3 2018 Growth Assets Q3 2017 Q3 2018 Growth Assets Net Loans 265.4 288.4 9% Net Loans 265.4 288.4 9% Cash & Cash Equivalents 74.8 78.4 5% Cash & Cash Equivalents 74.8 78.4 5% Government Securities 127.7 158.6 24% Government Securities 127.7 158.6 24
Slide 43: 8% Growth in PAT
8% Growth in PAT 8% Growth in PAT In uncertain times “cash is king”…trade off between profitability and stability, GROUP soundness and resilience KES (Billion) Q3 2017 Q3 2018 Growth % 53% Interest Income 35.4 38.5 48% 9% Interest Expense -7.9 45% -9.0 13% Net Interest Income 27.5 29.5 7% Liquidity
Slide 44: RoAE and RoAA Trend
RoAE & RoAA Trend RoAE and RoAA Trend RoAE 27.9% 26.7% Q3 2017 Q3 2018 22.7% 23.0% Equity Bank’s repositioning EBKL toGroup avoid the economic turbulence and to exploit the silver lining RoAA opportunities 4.2% 4.1% 3.9% 3.9% Q3 2017 Q3 2018 EBKL Group 39 44
Slide 45: Financial Ratios
Financial Ratios Financial Ratios In uncertain times “cash is king”…trade off between EBKL EBKL Group Group Q3profitability 2017 Q3 and 2018 stability,Q3 soundness 2017 and Q3 resilience 2018 Profitability Yield on Loans 11.6% 11.1% 12.6% 12.1% 53% Yield on Government Securities 11.3% 11.5% 11.4% 11
Slide 46: 2018 Outlook – Group
2018 Outlook – Group 2018 Outlook – Group Group 2018 Outlook Q3 2018 Actual Loan Growth 10% - 15% 8.6% Deposit Growth 5% - 15% 9.1% Net Interest Margin 8.5% - 10% 8.1% Non Funded Income Mix 42% - 45% 40% Equity Cost toBank’s Income Ratio repositioning to48%avoid - 52% the economic 51.9% turbulence R
Slide 47: Ratios - Banking Subsidiaries
Ratios - Banking Subsidiaries Ratios - Banking Subsidiaries In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience RoAE RoAA Subsidiary Q3 2017 Q3 2018 Subsidiary Q3 2017 Q3 2018 53% EBKL 27.90% 26.66% EBKL 4.22% 4.11% EBUL 25.32% 23.32% EBUL 48% 3.
Slide 48: Appendix
Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities Appendix 48
Slide 49: Private Sector Credit Growth Trend
Private Sector Credit Growth Trend Private Sector Credit Growth Trend In uncertain times “cash is king”…trade off between profitability Private sector credit growth continues to be subdued mainly and as a result of the stability, interest soundness rate capping effects and resilience 21.0% 53% 21.2%
Slide 50: Debt to GDP
Debt to GDP Debt to GDP Kenya recorded a government debt equivalent to 57.1 percent of the country's Gross Domestic Product in 2017. This is expected to continue increasing trending at around 60 percent in 2018 and 65 percent in 2020. 60.0 57.1 53.8 47.0 48.1 47.1 48.8 42.8 44.2 Equity Bank’s reposi
Slide 51: Interest Rates - Kenya
Interest Rates - Kenya Interest Rates - Kenya In uncertain times “cash is king”…trade off between The Monetary Policy Committee (MPC) met on 30th Jul and reducedprofitability the Central Bankand Rate stability, (CBR) by 50soundness and basis point to 9.0% resilience from 9.5% in a response to a belo
Slide 52: Global Interest Rates
Global Interest Rates Global Interest Rates USD Interest rates continue maintaining a growth trajectory adding pressure to Net Interest Margins for Kenyan banks with USD Debt. Equity Bank remains vigilant on its gross yields on USD Loans so as to adjust with any shift in cost of USD funds. USD 6 Mon
Slide 53: Foreign Exchange – Kenya
Foreign Exchange – Kenya Foreign Exchange – Kenya In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience YoY the Shilling has gained ground against the USD as 2018 recovers from drought and political rivalry that characterized 2017. Global oil price
Slide 54: Foreign Reserves – Kenya
Foreign Reserves – Kenya Foreign Reserves – Kenya Crude Oil Prices Recovery of global oil prices has contributed to the shrinking of FX reserves putting pressure on the Shilling from Apr 2018 Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining FX reserves ho
Slide 55: FX – Selected East Africa Countries
FX – Selected East Africa Countries FX – Selected East Africa Countries In uncertain times “cash is king”…trade off between profitability KES has gained ground against her East African peers and againstand the stability, USD YoY soundness and resilience 53% +2% 103.69 48% 104 45% 101.85 102 KES/USD
Slide 56: Government Crowding Out the Private Sector
Government Crowding Out the Private Sector Government The crowding competitionout the private sector for credit The competition for credit The private sector continues to be disenfranchised in the credit market due to the ineffectiveness of the interest rate regime to price risk. This continues to s
Slide 57: Kenya Government Bond Index
Kenya Government Bond Index BanksKenya secureGovernment refuge in Government lending Bond Index Banks secure refuge in Government lending In uncertain times “cash is king”…trade off between With interest rates continuing to decline profitability and stability, soundness and resilience banks take ref
Slide 58: Maximum Lending Rates
Maximum Lending Rates Maximum Banks secure Lending refuge in Rates Government lending Banks secure refuge in Government lending With sector NPLs are increasing signaling 12.4% 12.7% Kenyan Banking Sector NPLs 12.0% heightened private sector credit risk the 10.7% 10.6% 9.5% 9.9% interest rates are dr
Slide 59: Our Inspiration
In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% OUR INSPIRATION 45% 48% That when40%years turn our vision dim and gray, Liquidity Ratio (Kenya) we shall still see beauty in the tired wrinkles of our faces and shall 29% take confort out of
Slide 60: Contact details
Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities Equity Centre P.O. Box 75104–00200, Nairobi. Tel: 0763063000, Fax: + 254-020-2737276, [email protected], www.equitygroupholdings.com @keEquityBank keEquityBank www.ke.equitybankgrou
Equity Group Holdings — Q3 2018 Earnings Presentation on 6ix