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KCB INVESTOR PRESENTATIONFY2016 GROUP FINANCIAL RESULTS
9 MARCH 2017
JOSHUA OIGARA GROUP CEO & MD LAWRENCE KIMATHI GROUP CFO
6.1
4.6
5.75.3
5.66.0 6.0
2011 2012 2013 2014 2015 2016P 2017P
GDP Growth rate (%)
91.7 92.3
98.6
105.3
102.3 101.3 100.9 101.3102.4
Jan-15 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
USD/KES Exchange rate
2
Macro-Economic Highlights: Kenya
Source: Bloomberg, CBK
7.78
6.846.45
5.27 5.00
5.806.39 6.26 6.34 6.47 6.68
6.35
7.50 7.50
2.5 2.5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Inflation (%)
Inflation rate-2016 Target: Upper Target: Lower
11.4 10.6
8.7 8.9 8.2
7.3 6.2
8.4 8.0 7.7 8.4 8.7
18.20 17.79 18.18
13.80 13.70 11.5
10.5 10.0 10.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Interest Rates 2016 (%)
91 day T bill Average lending rates CBR Rate
Indicators
3
Macro-Economic Highlights: Regional
3.06
2.95
18.50
83.90
2013 2014 2015 2016
SSP Exchange Rate
Source:IMF
6.8%
5.0% 5.0%4.6%
9.3%
7.0%
4.9%
7.0%
4.7%
2.9%
7.4%
5.5%6.9%
-2.8%
-0.2%
7.2% 6.5% 6.0%
3.0%
-13.1%
Tanzania Uganda Rwanda Burundi South Sudan
GDP
2013 2014 2015 2016
8.4%6.5%
4.9%
9.0%
6.1%
3.1%1.8%
7.9%6.8%
9.3%6.8% 7.1%
5.0%5.7% 6.6%
9.6%
Tanzania Uganda Rwanda Burundi
Inflation
2013 2014 2015 2016
0.0%
1.7%
52.8%
476.0%
South Sudan
6.0% 6.0%
2.4%
9.0%
3.0%
13.6%
11.8%
4.4%
9.8%
3.0%
9.2%
20.0%
6.0%
8.8%7.0%7.1%
14.0%
9.0%
3.6%
15.0%
Tanzania Uganda Rwanda Burundi South Sudan
Interest Rates - 91 Day T-Bills
2013 2014 2015 2016
KCB 2016 HIGHLIGHTS
KCB Group PLC
1. Interest Rate Cap.
•Banking Amendment Act 2016 (CBR+4%)
2. South Sudan Hyperinflation
•Loss on net Monetary position
3. Credit Quality
•Slow progress due to large corporate
names
4. T24 R14
•Increased Capacity for over 30M
customers
5. Chase Bank (IR)
•End of assignment
•CBK Resolution by 31/03/2017
6. Capital Raising
•Rights issue cancelled
•Debt of $75M with IFC
Significant Issues for KCB in 2016
5
Downside Upside
Impact of Interest Rate Capping
6
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
Milestones for KCB in 2016
DIGITAL CHANNEL PERFORMANCE
9
Mobile Customers (M)
10.3
7.8
2.1
0.4
6.5
4.7
1.5
0.3
Total
KCB M-PESA
Mbenki
MobileBanking
2015 2016
53% of customer interactions
are on mobile
90% of Total Loans processed on
mobile
3.5
8.5
5.7
14
Loan Count (M) Loans Disbursed (KShs B)
Mobile Loans
FY 2015 FY 2016
3.2
6.65.3
9.9
Loan Count (M) Loans Disbursed (KShs B)
KCB M-Mpesa
FY 2015 FY 2016
Strong Momentum on Mobile Customer footprint, over 10 million customers
Source: KCB data
77% of Transactions outside the Branch
10
2.1
5.1
3.13.73.5
6.1
2.9
4.1
Agency (Ave. Trnxper agent per day)
Mobile (Ave. Trnxper active customer
p.m.)
ATM (Ave. Trnx perATM p.m. in `000s)
POS (Ave. Trnx perPOS per day)
Channels Activity
FY 2015 FY 2016
POS Mobile Agency ATM Internet
Growth In Channel Revenue
FY 2015 FY 2016
32%
83%
95%
-5%
123%
Mobile Banking 53%OTC - Branch
23%
ATM's 13%
POS7%
Agency Banking 4%
FY 2016
Mobile Banking 48%
OTC - Branch27%
ATM's 13%
POS7%
Agency Banking 5%
FY 2015
Source: KCB data
OUR PERFORMANCE TO DATE
11% Growth in Loans and Advances driven by the Kenya BusinessKShs B
Net Loans and advances Investment in Govt. Securities Cash and Balances with Central Bank and other Financial Institutions Other Assets
312
354
78
9141
3237
27
2015 2016
Kenya Asset Portfolio
468
504
228
284
346386
93
97
97
102
26
24
27
34
44
85
88
73
2013 2014 2015 2016
595
558
490
391
12
Improvement in Asset Quality
13
1.3%
1.8%
1.4%
1.6%
1.2%
1.3%
1.0%
8.1%
6.3%
6.6%
8.5%8.9%
8.3%
8.0%
2013 2014 2015 1Q 16 2Q 16 3Q 16 2016
CoR NPL Group
2015 Contribution
2016 Contribution
YOY Growth
Corporate 43% 49% 55%
SME 15% 16% 46%
Consumer 12% 12% 31%
Mortgage 12% 12% 32%
Other 18% 11% -17%
Stable Coverage Position
36.9%
56.4%
41.4%43.6%
46.6%
85.0%
79.5%
69.5%
2013 2014 2015 2016
IFRS CBK
14
75% of Funding from DepositsKShs B
Deposits Bal. to banks and debt Equity Other Liabilities
595
348
387
32
26 81
81 7
11
2015 2016
468
504
Kenya Funding Portfolio
306
377424
448
14
27
4436
63
76
8197
7
10
9
14
2013 2014 2015 2016
558
490
391
15
65% of Deposits Primarily Demand Deposits
Deposits by Type FY16
65%4%
26%
5%
60%
6%
30%
4%
Deposits by Type FY15
Demand Savings Term Call
45% 42% 50% 53%
54% 55% 47% 47%
2% 2% 3% 0%
2013 2014 2015 2016
Corporate Retail Other
16
Finalised Tier II Capital Program in Q3 with IFC
10.5% 10.5% 10.5% 10.5%
18.7%
17.1%
14.1%
16.8%
2013 2014 2015 2016
Min. Core/RWA Core Capital /RWA
14.5% 14.5% 14.5% 14.5%
22.5%
21.0%
15.4%
19.9%
2013 2014 2015 2016
Min. Total/TWA Total Capital /RWA
17
Core Capital to RWA Total Capital to RWA
Accounting for Hyperinflation
18
Financial Reporting in Hyperinflationary Economies applies where an entity's functionalcurrency 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 interms 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
Group Balance Sheet
KShs Millions KCB GROUP
ActualDec - 15
Actual Dec - 16
Y-O-Y Change
Cash 11,965 11,375 (5%)
Balances with Central Bank 23,962 18,055 (25%)
Balances with other institutions 52,579 43,507 (17%)
Investments in Government & Other securities 96,949 102,471 6%
Net loans and advances 345,969 385,745 11%
Fixed assets 10,592 12,674 20%
Other assets 16,078 21,412 33%
Total Assets 558,094 595,240 7%
Customer Deposits 424,391 448,174 6%
Balances due to other banks 23,138 13,123 -43%
Other liabilities 9,182 14,395 57%
Long-term debt 20,130 22,982 14%
Total Liabilities 476,841 498,674 5%
Shareholders’ Equity 81,254 96,566 19%
Total Liabilities and Equity 558,094 595,240 7%
19
10% Growth in PBT
KShs Millions KCB GROUP
ActualDec - 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%
Loss on net monetary position - 3,458
Profit before tax 26,538 29,091 10%
Tax 6,915 9,369 35%
Profit after tax 19,623 19,722 1%
20
Overview of Key Financial Ratios
Return on Average Equity
Cost to Income
Gross NPL to Gross Loans
NPL Coverage
Debt to Equity
Non funded income to total income
Cost of funds
Net Interest Margin
Cost of risk
Loan to Deposit Ratio
Growth of Net Loans and Advances
Growth of Customer Deposits
24.4% 24.6%
47.9% 47.7%
8.9% 8.3%
71.1% 76.0%
19.5% 17.4%
31.6% 28.9%
3.9% 3.6%
9.7% 10.0%
1.4% 1.3%
80.2% 84.0%
8% 5%
-2% -7%
22.2%
47.6%
8.0%
69.5%
23.8%
32.3%
3.3%
9.6%
1.0%
86.1%
11%
6%
1Q16 2Q16 3Q16 KENYA GROUP
22.4%
48.4%
8.5%
69.1%
23.3%
26.0%
4.5%
9.4%
1.6%
84.4%
16%
7%
24.3%
45.2%
7.8%
79.6%
25.5%
26.7%
3.3%
10.4%
1.1%
91.3%
13%
11%
21
Dividend for 2016
22
AGM to be held on 21 April 2017, at Safaricom KasaraniIndoor Stadium
At the AGM, we shall propose a final dividend of KShs: 3:00per share up 50% from KShs: 2:00 per share declared in 2015
Our Outlook
Excellence in Customer Experience
Exponentially grow our digital financial services and Fintech
Grow non interest revenue
Achieve Stronger International Business Performance
Best In class information technology
Manage emerging risks in a difficult operating environment
Champion our sustainable business priorities
Net Interest Margin
Non Funded Income
Cost to Income Ratio
Staff CTI
Return on Equity
Return on Assets
NPL
Cost of Funds
Customer Deposit Growth
Net Loans Growth
2017
8.5 – 9.0%
33.1%
20.0%
3.0%
3.2%
12%
51.4%
26.5%
8.0%
6%
23
