Equity Group Holdings Limited · NSEKE:EQTY

Equity — Q1 2019 Earnings Presentation

60 slides from Equity's earnings presentation, May 2019

  1. Slide 1: Investor Briefing Q1 2019 Performance

    Investor Briefing Q1 2019 Performance May, 2019

  2. Slide 2: Macroeconomic & Operating Environment

    Macroeconomic & Operating Environment 1

  3. Slide 3: Macro-economic & Operating Environment

    Macro-economic & Operating Environment Interest Rates (April 2019) FX (Local Currency v/s USD) Inflation GDP Growth Changes in Central Bank Rate Change CBR (Q1 2018 v Q1 2019) 31-Mar-19 Year to Date Mar-19 (2019 Projected) Kenya 9.0% -50 Basis Points 100.80 0% 4.4% 6.0% Tanzania 7.0% -200 Basis Poin

  4. Slide 4: Macro-economic & Operating Environment

    Macro-economic & Operating Environment • KES strengthening – KES has defied pressure from USD as compared to other regional currencies that lost ground against the USD. KES remained unbowed against the USD while KES has gained 1%, 3%, 4% against UGX, TZS and RWF respectively • Renewed vigour to figh

  5. Slide 5: Governance & Organizational Structure

    Governance & Organizational Structure 4

  6. Slide 6: Governance and Organizational Structure

    Governance and Organizational Structure Each subsidiary with own Board of Directors compliant with local regulations 5

  7. Slide 7: Equity Bank Business Model & Strategy – Post Interest Rate Capping

    Equity Bank Business Model & Strategy – Post Interest Rate Capping (Adjusting and adapting to the new norm) Focus areas: 1. Non-funded income growth 2. Treasury 3. Geographical and business diversification 4. Balance sheet agility 5. Innovation and digitization 6. Efficiencies and cost optimization

  8. Slide 8: Focus Area 1: Non-funded income growth & contribution

    Focus Area 1: Non-funded income growth & contribution In Kes Billion Loan Interest Income Total Interest Income Non Funded Income Contribution to Total Income Growth Trend Growth Trend Growth Trend +7% +10% 13.5 17.6 12.7 16.5 +3% 15.2 +7% 11.5 9.1 4.4 8.8 3.9 Treasury Interest +7% 8.2 +6% 3.2 Incom

  9. Slide 9: Focus Area 1: Growth of diversified streams of non-funded income

    Focus Area 1: Growth of diversified streams of non-funded income In Kes Million Fees & Commissions (Key Lines - Group) Our market share consolidation continue to drive merchant commission up. +22% Visa volumes command 80% of our Q1 2018 acquiring volumes Q1 2019 815 Visa business in Kenya has 8 othe

  10. Slide 10: Focus Area 1: NFI Contribution

    Focus Area 1: NFI Contribution Equity Group more diversified than the sector Strategically reducing income volatility from interest income 42 41% 41% 40% 40% Equity Group 40 38% 38 36 34% 34% 34% 34 33% Tier 1 Banks (ex Equity Group) 32 30 2 Mar,2018 Jun,2018 Sep,2018 Dec,2018 Mar,2019 9

  11. Slide 11: 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 7% 19% Declining yields compensated by +13% mark-to-market gains on 5.7 20.7 Government Securities

  12. Slide 12: Focus Area 3: Geographical & business diversification

    Focus Area 3: Geographical & business diversification In KES Billion Regional Regional Subsidiaries EBKL Contribution Contribution TZ RW UG SS DRC EIA EIB Finserve Total/Growth Total/Growth Q1 2019 Q1 2018 Deposit 15.5 20.8 22.6 5.4 48.8 113.1 345.4 25% 24% Growth -25% 21% 11% 16% 40% 16% 15% Loan 1

  13. Slide 13: Focus Area 3: Geographical diversification

    Focus Area 3: Geographical diversification Ratios - Banking Subsidiaries RoAE RoAA Subsidiary Q1 2018 Q1 2019 Subsidiary Q1 2018 Q1 2019 EBKL 31.1% 31.4% EBKL 4.6% 4.5% EBUL 28.9% 20.8% EBUL 4.2% 3.1% EBRL 17.6% 23.0% EBRL 2.5% 3.2% EBTL 18.7% 14.5% EBTL 2.2% 1.7% DRC 18.0% 17.8% DRC 2.4% 2.0% EBSSL

  14. Slide 14: Focus Area 3: Geographical diversification

    Focus Area 3: Geographical diversification Strategic transaction with ATMA announced on 30th April 2019 Today Proposed footprint Trade corridors 6 countries in East Africa 8 countries ▪ population of ~265 million ▪ 2 new countries and scaling operations in two others ▪ Nominal GDP of ~USD 231 Bn ▪ p

  15. Slide 15: Focus Area 3: Geographical diversification

    Focus Area 3: Geographical diversification Proforma impact of the acquisition to Balance Sheet Loans Deposits Total Assets +20% 724.0 118.3 605.7 +18% 506.6 78.1 +17% 428.5 356.7 305.5 51.2 Group TargetCos Proforma Group TargetCos Proforma Group TargetCos Proforma 14

  16. Slide 16: Focus Area 3: Entry into New Markets in Zambia & Mozambique

    Focus Area 3: Geographical diversification Entry into New Markets in Zambia & Mozambique Macro-economic Overview Interest Rates (April 2019) FX (Local Currency v/s USD) Inflation GDP Growth Changes in Central Bank Rate Change CBR (Q1 2018 v Q1 2019) 31-Mar-19 Year to Date Mar-19 (2019 Projected) Zam

  17. Slide 17: Focus Area 4: Balance Sheet Agility

    Focus Area 4: Balance Sheet Agility In KES Billion Funding Split Asset Split Group Group +15% Growth +15% Growth 605.7 605.7 89% 18% 27.1 45.8 Deposits 12% Net Loans 527.8 25% 54.6 Other 527.8 Other Assets 38.7 84.7 Liabilities 14.3 Cash & Cash +12% Borrowed 48.9 67.8 13% 95.4 16% Equivalents Funds

  18. Slide 18: Focus Area 5: Innovation and digitization

    Focus Area 5: Innovation and digitization Transformation from a place you go to; to something you do Transactions in millions • Most transaction +22% 140 are now done 137 Mobile using the digital 135 (App, STK & MKey) channels which 115 112 have continued 110 109 to grow 105 • Transforming 100 the c

  19. Slide 19: Focus Area 5: Leveraging off variable cost 3rd party infrastructure

    Focus Area 5: Innovation and digitization Leveraging off variable cost 3rd party infrastructure Variable cost channels Fixed cost channels +36% Transaction numbers in millions +8% 64.6 70.5 +16% 60.1 52.0 21.5 +34% -9% +78% 18.5 -3% 1.6 7.1 6.4 5.1 6.2 6.0 0.6 3.8 0.4 0.0 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1

  20. Slide 20: Focus Area 5: Fintech Innovations in Merchant Banking

    Focus Area 5: Fintech Innovations in Merchant Banking • The use of a Universal POS that converges Mobile Wallets, Cards & Digital payments +24% 523.5 +20% 456.1 +15% +23% 18.0 +35% +34% 340.4 15.0 25.6 12.3 20.7 15.3 ▪ Equity is leading in Acquiring and Issuing Q1 2017 Q1 2018 Q1 2019 Q1 Q1 Q1 2017

  21. Slide 21: Focus Area 5: Fintech Innovations in Diaspora Remittances

    Focus Area 5: Fintech Innovations in Diaspora Remittances (KES millions) +27% 30,932 +652% 24,427 3,247 183 192 +5% +339% 42 Q1 2017 Q1 2018 Q1 2019 Transaction Volumes in Kes Mn Diaspora Commissions in Kes Mn 20

  22. Slide 22: 97% of our Transactions outside the branch

    Focus Area 5: Fintech Innovation and digitization 97% of our Transactions outside the branch Q1 2018 Q1 2019 Branch Others Branch Others ATM ATM 4% 3% 4% 3% 3% 5% Agency 12% Agency 12% 76% Mobile 77% (App, STK & MKey) Mobile (App, STK & MKey) 21

  23. Slide 23: 50% of our Transactions Value outside the branch

    Focus Area 5: Fintech Innovation and digitization 50% of our Transactions Value outside the branch Branches now handling high value transactions for SME, corporates, wealth management & advisory services Q1 2018 Q1 2019 Others ATM Others ATM 8% 7% 6% 10% Agency 15% Mobile (App, STK & MKey) 16% 50% M

  24. Slide 24: 93% of our Loan Transactions via Mobile Channel

    Focus Area 5: Fintech Innovation and Digitization 93% of our Loan Transactions via Mobile Channel Q1 2019 Transaction count Q1 2019 Transaction value Branch Lending 7% Mobile Lending 20% 80% 93% Branch Lending Mobile Lending 23

  25. Slide 25: Finserve Rebranded

    Finserve Rebranded EQUITY

  26. Slide 26: The New Face of the Fintech

    Z .. € Finserve THE NEW FACE OF THE FINTECH \

  27. Slide 27: Fintech Transactions & Volume

    Fintech Transactions & Volume 93% of loans processed by the Group are channelled through mobile channels. Equitel has close to 2 Million active users, making it one of the fastest growing MVNO in the world. 1 out of every 5 shillings that flow through Kenya’s mobile money system are processed by Equ

  28. Slide 28: Finserve's M-Key

    Focus Area 5: Fintech Innovation and digitization Finserve’s M-Key Cumulative Downloads 321,339 324,971 328,009 298,420 215,547 99,970 9,452 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Cumulative Activations 217,610 220,370 195,998 160,443 108,851 51,567 5,836 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19

  29. Slide 29: Finserve's M-Key

    Focus Area 5: Fintech Innovation and digitization Finserve’s M-Key Cumulative Transactions Value (Mn) 1,422.0 1,199.1 868.2 456.5 3.4 18.4 94.6 18-Sep 18-Oct 18-Nov 18-Dec 19-Jan 19-Feb 19-Mar Cumulative Transactions (Mn) 3.47 2.95 2.48 1.88 1.04 0.32 0.03 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 M

  30. Slide 30: Focus Area 6: Fintech Innovations in EazzyPay

    Focus Area 5: Fintech Innovations in EazzyPay 203 Cumulative No. of Transactions ("000") Monthly No of Transactions ("000") 528 166 159 166 153 147 137 143 128 +94% 109 101 93 99 87 272 84 Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Q1 2018 Q1 2019 18 18 18 18 18 18 18

  31. Slide 31: Focus Area 6: Efficiencies and cost optimization

    Focus Area 6: Efficiencies and cost optimization Staff Cost Trend Other Expenses Trend Cost to Group Income Ratio Trend (including loan provisions) (Without Loan Loss Provision) EBKL EBKL EBKL 3.8 3.9 48.3% 3.4 42.5% 41.8% 1.6 1.7 1.6 Q1 2017 Q1 2018 Q1 2019 Q1 2017 Q1 2018 Q1 2019 Q1 2017 Q1 2018 Q

  32. Slide 32: Focus Area 6: Efficiencies and cost optimization

    Focus Area 6: Efficiencies and cost optimization Group Net Interest Margin Yield on Interest Earning Assets % % 8.4 8.4 8.5 8.1 8.2 11.1 11.0 10.8 11.2 10.7 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Cost of funds % 2.7 2.7 2.7 2.7 2.6 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 31

  33. Slide 33: Focus Area 6: Efficient Financial Intermediation

    Focus Area 6: Efficient Financial Intermediation 13.0 12.8% 12.7% 12.5 12.4% 12.1% 12.1% 11.9% 11.9% Equity Yield on Loans 12.0 11.8% 11.7% Tier 1 Banks Yield on Loans Equity Group’s superior 11.3% 11.3% 11.5 lending yields higher 11.0% than Tier 1 Banks 11.0 10.7% lending yields reflecting 10.5% Ti

  34. Slide 34: Focus Area 7: Asset quality

    Focus Area 7: Asset quality (Group) NPL’s – Sector vs EGH Plc as at Mar 2019 NPL per sector as at Mar 2019 Sector (Kenya) 12.7% 12.8% 12.4% 12.0% 12.0% 10.8% 10.9% Group 10.7% 10.6% 9.0% 9.9% 9.5% 8.7% 9.0% 8.4% 7.3% 7.4% 7.6% 5.5% 7.1% 5.0% 4.4% 6.3% 6.3% Micro Enterprises SME Large Enterprises Con

  35. Slide 35: Focus Area 7: Asset distribution

    Focus Area 7: Asset distribution (Group) Split by market segmentation Split by economic sectors 100% 100% 2% 2% Agriculture Agriculture Manufacturing Consumer 21% Tourism, Rest & Hotels Building Energy & Water 4% 3% 3% & Construction Micro 23% 3% 7% Others Enterprises 3% 2% 2% Transport & Comm. 9% S

  36. Slide 36: Focus Area 8: Impact & Social Investment Programs

    Focus Area 8: Impact Investment Impact & Social Investment Programs USD 353 M in Social Investment Programs Health Energy & Environment Agriculture Financial Education & Entrepreneurship 3% 2% 5% 3% Equity Leaders Program 35% 53% Wings to Fly Program 35

  37. Slide 37: Shared Prosperity Business Model and its Social Impact

    Focus Area 8: Impact Investment Shared Prosperity Business Model and its Social Impact PEASANT FARMERS TOTAL WINGS TO FLY 16,168 2018 GRADUATING 638,522 TRANSFORMED TO 18,000 16,168 16,000 SCHOLARS 14,168 15,168 CLASS AGRI-BUSINESSES 14,000 12,488 SMALL & MEDIUM- • 96% secondary school completion 12

  38. Slide 38: Business Validation

    Business Validation EQUITY

  39. Slide 39: Global Ratings and Accolades

    Global Ratings and Accolades 38

  40. Slide 40: Global Ratings and Accolades

    Global Ratings and Accolades 39

  41. Slide 41: 2018 National Banking Awards and Accolades

    2018 National Banking Awards and Accolades 40

  42. Slide 42: 2018 National Banking Awards and Accolades

    2018 National Banking Awards and Accolades 41

  43. Slide 43: Market Validation: Market Capitalization

    Market Validation Market Capitalization +19% Mkt Cap at at 31st Dec 2018 Mkt Cap at at 29th Mar 2019 157 +17% 135 132 115 +4% 88 +10% 84 +9% 74 67 64 +33% 59 -17% +10% 47 44 40 +28% 35 36 36 26 20 -4% -17% 2 2 2 2 EQUITY KCB COOP STANCHART BBK I&M DTK STANBIC NIC HFC NBK 42

  44. Slide 44: Intermediation & Financial Performance

    Intermediation & Financial Performance 43

  45. Slide 45: Balance Sheet

    Balance Sheet KES (Billion) GROUP Q1 2018 Q1 2019 Growth Assets Net Loans 271.1 305.5 13% Cash & Cash Equivalents 67.8 84.7 25% Government Securities 150.2 169.7 13% Other Assets 38.7 45.8 18% Total Assets 527.8 605.7 15% Liabilities & Capital Deposits 382.4 428.5 12% Borrowed Funds 48.9 54.6 12% Ot

  46. Slide 46: 5% Growth in PAT

    5% Growth in PAT GROUP KES (Billion) Q1 2018 Q1 2019 Growth % Interest Income 12.7 13.5 7% Interest Expense -2.9 -3.1 7% Net Interest Income 9.8 10.4 6% Non-Funded Income 6.7 7.2 7% Total Income 16.5 17.6 7% Loan Loss Provision -0.4 -0.4 14% Staff Costs -2.6 -2.6 1% Other Operating Expenses -5.2 -5.

  47. Slide 47: RoAE and RoAA Trend

    RoAE and RoAA Trend RoAE 31.1% 31.4% Q1 2018 Q1 2019 27.0% 26.0% EBKL Group RoAA 4.6% 4.5% 4.5% 4.2% Q1 2018 Q1 2019 EBKL Group 46

  48. Slide 48: Financial Ratios

    Financial Ratios EBKL EBKL Group Group Q1 2018 Q1 2019 Q1 2018 Q1 2019 Profitability Ratios Yield on Loans 11.7% 11.0% 12.8% 12.1% Yield on Government Securities 10.7% 10.0% 10.7% 10.0% Yield on Interest Earning Assets 10.9% 10.4% 11.0% 10.7% Cost of Deposits 2.3% 2.2% 2.5% 2.4% Cost of Funds 2.6% 2

  49. Slide 49: 2019 Outlook – Group

    2019 Outlook – Group Group 2019 Outlook Q1 2019 Actual Loan Growth 10% - 15% 13% Deposit Growth 10% - 15% 12% Net Interest Margin 8.5% - 10% 8.2% Non Funded Income Mix 42% - 45% 41% Cost to Income Ratio 48% - 52% 47.5% Return on Equity 23% - 25% 26.0% Return on Assets 3.8% - 4.5% 4.2% Cost of Risk 0

  50. Slide 50: Thank You

    THANK YOU Dr James Mwangi, CBS Group Managing Director & CEO KeEquityBank @KeEquityBank Email: [email protected] Website: www.equitybankgroup.com 49

  51. Slide 51: Appendix

    Appendix EQUITY

  52. Slide 52: Macroeconomic Environment Indicators & Trends - Kenya

    Macroeconomic Environment Indicators & Trends - Kenya 51

  53. Slide 53: Interest Rates - Kenya

    Interest Rates - Kenya The Monetary Policy Committee (MPC) met on 27th Mar 2019 and retained the Central Bank Rate (CBR) at 9.0% Short term rates have since come down due to high liquidity in the banking sector 91 Days 364 Days % 182 Days CBR 11.5 11.1 11.2 11.1 11.1 11.1 11.1 10.9 10.910.9 10.9 10.

  54. Slide 54: Foreign Exchange – Kenya

    Foreign Exchange – Kenya The Shilling has opened the year being buoyant and has already gained 1.1% against the USD within 3 months of 2019. KES/USD +0.4% 103.23 [29-Dec-17] 105 +1.4% 101.85 [31-Dec-18] 104 103 +1.1% 102 101 103.66 [2-Jan-17] 100 99 100.75 [29-Mar-19] 98 101.62 [28-Feb-18] 1 0 2017

  55. Slide 55: Diaspora Remittances – Kenya

    Diaspora Remittances – Kenya Kenyan Diaspora remittances on a steady growth supporting FX reserves Diaspora Quarterly Remittances (USD Mn) 737 683 +3% 666 642 636 565 495 447 455 437 433 416 425 392 402 390 373 365 364 340 341 349 327 309 315 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

  56. Slide 56: Foreign Reserves – Kenya

    Foreign Reserves – Kenya The Kes remains sufficiently cushioned against by the FX reserves from supply pressure in the economy 7.5 7.0 6.5 6.0 Months of 5.5 Import Cover 5.0 Statutory requirement 4.5 (4 Months) 4.0 EAC convergence 3.5 criteria (4.5 Months) 3.0 6.1 6.1 6.1 5.9 5.8 5.8 5.6 5.4 5.4 5.4

  57. Slide 57: FX – Selected East Africa Countries

    FX – Selected East Africa Countries KES continues holding ground against her East African peers and against the USD YoY 104 103.2 0% 102 100.8 100.8 KES/USD 100 98 40 38 36.9 36.5 UGX +1% 36 35.2 23.1 22.4 TZS +3% 21.7 22 8.6 9.0 8.3 RWF +4% 0 Feb-17 Mar-17 Feb-18 Mar-18 Feb-19 Mar-19 Aug-18 Oct-18

  58. Slide 58: International debt market – Overview on USD LIBOR

    International debt market – Overview on USD LIBOR Libor down 25 Bps in 2019 and the downswing trend is expected to continue. This will bring funding cost reprieve to Kenyan banks with FX debt. 3.0 Libor down 25 Bps in 2019 2.9 2.8 6-Month USD LIBOR 2.7 2.6 2.88 [31 Dec 18] 2.5 2.65 [27 Mar 19] 2.4 2

  59. Slide 59: Banking System Credit

    Banking System Credit Credit by Banking System Public debt/Private debt Public debt/Private debt Public debt/Private debt 31% 38% 41% 2.5 +3% 2.4 2.4 2.4 2.4 +3% 2.4 Credit to 2.4 2.4 2.4 private sector 2.4 2.4 2.4 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 +12% 2.3 2.3 2.3 2.3 2.3 2.2 2.3 1.0 Public d

  60. Slide 60: Private Sector Credit Growth Trend

    Private Sector Credit Growth Trend Negative effects of interest capping putting Kenya at the risk of loosing her credentials as the regional business hub if businesses can’t access increased credit as is happening in regional markets Kenya Uganda % 17.0 18 16 15.5 14.3 14 12.6 11.1 11.0 12 10.5 10.7

Equity Group Holdings — Q1 2019 Earnings Presentation on 6ix