HY 2019 RESULTS - KCB Group Limited...2015-2019 strategy: transformative partnerships who we are 2. our regional presence kcb bank rwanda ... this market from two global agencies.

HY 2019

RESULTS

OUR STRATEGY

WHAT DRIVES US HOW WE ACHIEVE IT

Our Purpose

Simplifying

your world to

enable your

progress

Our Promise

Go Ahead

Our Values

Inspiring

Simple

Friendly

Simplified customer

journey

Optimize balance

sheet and drive asset

quality

Maximize on regional

businesses

Operational efficiency

Sustainability

agenda

Digital first and fast

Customer perspective

Market share

Shared value

Brand position

Learning and growthStaff productivity

Staff development

Culture change

FinancialProfit before tax

Efficiency

Shareholder value

Internal Business

processesSystem reliability

Sustainability

Control environment

2015-2019 STRATEGY:

TRANSFORMATIVE

PARTNERSHIPS

WHO WE ARE

2

OUR REGIONAL PRESENCE

KCB BANK

RWANDA

KCB BANK

BURUNDIKCB BANK

TANZANIA

KCB BANK KENYA

KCB INSURANCE AGENCY

KCB FOUNDATION

KCB CAPITAL

258 BRANCHES979 ATMS,

18,812 AGENTS & MERCHANTS

STAFF5,980 FTE

KCB BANK KENYA

(ETHIOPIA

REPRESENTATIVE

OFFICE )KCB BANK

SOUTH

SUDAN

Banking Businesses:

•KCB Bank Kenya

•KCB Bank Tanzania

•KCB Bank South Sudan

•KCB Bank Rwanda

•KCB Bank Uganda

•KCB Bank Burundi

•Ethiopia Rep. Office

Other Investments:

• KCB Capital Limited

• KCB Insurance Agency

• KCB Foundation

• Kencom House Limited

KCB BANK

UGANDA

3

CUSTOMERS19.3 MILLION

Branches 201

ATMs 367

Staff 4,872

Agents 8,647

Branches 11

ATMs 3

Staff 125

Agents 5

Staff 302

Agents 370

Branches 5

ATMs 7

Staff 121

Agents 185

Branches 12

ATMs 25

Staff 269

Agents 193Branches 14

ATMs 16

Staff 290

Agents 102

Kenya

South

Sudan

Branches 15

Uganda ATMs 17

Burundi

Rwanda

Tanzania

Ethiopia

(Representative Office

with 1 staff)

OUR FOOTPRINT

Touch Points:

4

REGIONAL MARKETLEADER

5

NO. 1 BANK IN THE

REGION

Total Equity

Net Loans and

Advances

Customer Deposits

Total Assets

KShs. 668Bn

KShs. 747Bn

KShs. 524Bn

KShs. 563Bn

KShs. 421Bn

KShs. 479Bn

KShs. 99Bn

KShs. 118Bn

HY 2018

HY 2019

RATING AGENCY SOVEREIGN KCB BANK KENYA

B2 (Stable) B2 (Stable)

B+/B B+/B

STABLE CREDIT RATINGS

6

No deviation in rating from 2018

KCB is the only corporate to obtain the strongest rating within this market from two Global Agencies

MACRO-ECONOMIC HIGHLIGHTS


Kenya

GDP Growth Rate (%)

Contribution to GDP 1Q19 (%) 1Q19 Growth (%)

26.27

6.40

9.468.01

6.73

AGRICULTURE MANUFACTURING REAL TRADE EDUCATION TRANSPORT & FINANCIAL & CONSTRUCTION ICT HEALTH MINING&

ESTATE STORAGE INSURANCE QUARRYING

6.666.25

5.84

1.491.02

4.973.20

4.205.30

5.40

6.70

5.005.60

10.50

4.00

2.204.39

1Q19

5.6%

*Source: KNBS, Kenya National Bureau of Statistics8

GDP Growth (%)

Tanzania UgandaRwanda BurundiEthiopia

-6.3

8.0

2.8

7.2

6.1

6.7

East Africa

GDP Growth Rate(%)

5.7

South

Sudan

*Source: AfDB, Africa Economic Outlook 2019


Regional GDP

Growth

2018P*

9

Inflation

Rate

Target

Upper

Target

Lower

Non Food

Fuel

91-day T-bill Avg. lending rates CBR rate

13.22 12.7812.61 12.51

7.73 7.67 7.64 7.56 7.36 7.19 7.02 7.08

Interest Rate Evolution (%)

7.50

4.28

2.50

3.403.60

Inflation Evolution (%)

9.50

JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN2018 2018 2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 2019

7.63 7.34

9.00

12.47


Kenya


7.17 7.39 6.90

9.00

12.47

5.70

10

USD/KES Exchange Rate(%)

101.3

100.6

101.0

102.6101.6

100.2

102.3101.8

Exchange Rates to USD

TanzaniaUganda RwandaBurundi Ethiopia

235

29

1,845

899

3,6902,278

South

Sudan


Stable Currencies

across the region


101.2

11

3,738

2,277

1,772

861

14027

HY19HY18

Current Account Balance (% ofGDP)

-6.7

-4.8

-6.2

-5.1

2015 2016 2017 FY 2018

2.4%

4.3%4.3%

3.9%

4.4%

4.9%

12 Month Private Sector CreditGrowth

3.4%

-4.2

HY 2019


Kenya


-5.8

HY 2018

5.2%

4.4%

12

YEAR TODATEOVERVIEW

Imperial Bank (IR):

• Section 9 transfer of assets and liabilities to be concluded by 30 August 2019

National Bank of Kenya (NBK) offer

• KCB served NBK the detailed Offer on 19 June 2019, following shareholder

approval

• Offer period to swap shares open until 30 August 2019

• Integration team led by KCB Group CEO & MD

• We expect conclusion of the transaction with the two main shareholders

2019 KENYAHIGHLIGHTS

Overview of the year to date

14

Banking Industry:

• A motion to repeal the Interest rate cap reintroduced in the 2019/20 Finance

Bill

• Parliamentary recommendation to amend the Interest rate cap law as follows:

• the interest rate is to be applied on an annual basis

• replacing of the term ‘credit facility’ to ‘loan’,

• reaffirm maximum interest chargeable at four percentage points above

CBR

• creation of a non-discriminatory penal provision

• Demonetization of old KShs. 1,000 note

2019 KENYAHIGHLIGHTS

Overview of the year to date

15

KCB 2JIAJIRI PROGRAMME HIGHLIGHTS

AGRIBUSINESS

14,244

AUTOMOTIVE

ENGINEERING

1,579

BEAUTY AND

PERSONAL CARE

2,542

BUILDING AND

CONSTRUCTION5,725

DOMESTIC

SERVICES

1,249

27,139BENEFICIARIES

TO DATE

FUTURE OF 2JIAJIRI

Catalyze job and wealth

creation for at least

2,000,000youth engaged in the informal

sector within Eastern Africa

Kenya

25,339

Tanzania

1,500

Rwanda

300‘Young Africa Works’

KShs 10 billion funding from the MasterCard

Foundation to scale up the bank’s

2jiajiri job creation programme

5-year investment of over

KShs 50 billion to nurture and grow youthful and

SME entrepreneurs

54:46

Male : Female Ratio

16

Innovative Agri Entrepreneurs: Greenlife Veggies –

Simon Muriithi and friends

• Armed with skills from 2jiajiri agribusiness

training, they established a lettuce growing

business that inculcated the hydroponics

farming technology.

• Signed a five-year sub-award contract with an

aggregator and off-taker.

From dilapidated structure to modern salon –

Irene Wangari

• Irene trained in hairdressing and beauty at

Nyeri National Polytechnic under 2jiajiri.

• Funding from KCB Foundation moved her

from deplorable premises with obsolete

equipment and revamped her business at

Skuta area in Nyeri that currently earns her

over KShs 40,000 monthly profit.

KCB FOUNDATION CASE STUDIES

17

SUSTAINABILITY UPDATE

18

Mainstreaming our 8 Adopted SDG’s

•120 Business Bankers,

Relationship Managers and

Credit Analysts trained on

Environmental, Social Risk

screening and Assessment.

•81% of business units have

identified key performance

indicators for tracking and

monitoring of the 8 SDG’s.

UNEP FI – 6 Principles for RESPONSIBLE BANKING: Launching in Sept. 2019, NY

AlignmentImpact &

Target SettingClients &

Customers

StakeholdersGovernance &

CultureTransparency & Accountability

EUROMONEY AWARDS FOR EXCELLENCE 2019•East Africa’s Best Bank for SMEs

•Kenya's Best Bank

GLOBAL FINANCE AWARDS 2019 •Best Bank in Kenya

BRAND AFRICA AWARDS 2019 •Most Admired Financial Services Brand

AFRICAN BANKER AWARDS 2019•Best Regional Bank in East Africa

•Innovation in Banking

GLOBAL BUSINESS OUTLOOK 2019•Best Digital Transformation in Online Banking

•Best CSR Initiative – 2jiajiri

HY 2019 GROUP AWARDS

19

PERFORMANCE TO DATE

June 2018

June 2019

15% decrease in average

transactions / teller per day15% decrease in Number of

branch transactions.

OUR CHANNELCONTRIBUTION

BRANCH

TELLER

4%

AGENCY,

INTERNET

AND POS

14%

MOBILE

78%ATMS

4%

Avg. Transactions / Teller per day Number of Branch Transactions (M)

Jun 2018

Jun 2019

75.4

64.4

8.5

7.3

96% of

transactions

performed

outside the

branch

Jun 2018

Jun 2019

131% growth in

non-branch

revenue to

over 5.2B

MOBILE

42%

AGENCY,

INTERNET

AND POS

33%

BRANCH

TELLER

13%

ATMS

12%

21

293

116

HY 17 HY 18 HY 19

No. of transactions

(M)

Valueof Transactions

(KShs.B)

175

127.3

25.7 26.9

34.631.6

47.149.7

16.216.7

2.11.9

B2C B2B C2B LIPA

KARO

MobileTransaction type(%) HY 2019HY 2018

HY 18

18.8B

HY 19

103.1B

4,150

Mobile Revenue

(KShs.M)

1,304

HY 18 HY 19HY 17 HY 18 HY 19

446%Growth in

total

Mobile

Loans

Advanced


22

135

55

Agent revenue

(KShs M)

No. of transactions

(M)

Value of Transactions

(KShs. B)

10121.7

10.2

16.3

413

199

239

14.6

17.3

53.0

37.1

16.510.5

16.829.9

0.7 0.11.6 1.9

CASH

DEPOSIT

CASH

WITHDRAWAL

SCHOOL

FEES

BALANCE

ENQUIRY

BILL

PAYMENTOTHERS

Agency Transaction type (%)

34% Growth in

Agency

Banking

Volumes

*Others: Account opening, mini statement, load cards and Funds transfer

HY 17 HY 18 HY 19 HY 17 HY 18 HY 19 HY 17 HY 18 HY 19


HY 2019HY 2018

23

74

No. of transactions

(M)

Value of Transactions

(KShs. B)

65

61

6.87.4

7.7

5% Decrease

in ATM

Volumes

ATM revenue

(KShs M)

192

241234

HY 17 HY 18 HY 19 HY 17 HY 18 HY 19 HY 17 HY 18 HY 19


24

2122

POS Revenue (KShs. M)Value of Transactions (KShs. B)

24

389

451

439


HY 17 HY 18 HY 19 HY 17 HY 18 HY 19

11% reduction in

the average

value of

Merchant/

POS

transactions

25

OUR FINANCIALS

Govt. Securities

Customer

Deposits

Net Loans &

Advances

Total Assets

KShs 746.5B

12% growth

in Total

Assets KShs 478.7B

KShs 132.9BKShs 110.5B

KShs 421.5B


KShs 667.7B

HY18 HY19

BALANCE SHEET HIGHLIGHTS

27

26.0%

15.5%

13.0%

18.9%

4.8%

3.6%

6.8%

2.6%

4.7%

3.7%

0.4%

37.1%18.0%

12.0%

7.0%

6.5%

5.1%

4.5%

4.3%

2.8%

2.7%

0.2%

Personal/Household

Real estate

Manufacturing

Trade

Building and construction

Financial Services

Transport and communication

Tourism, restaurants and hotels

Energy and water

Agriculture

Mining and Quarrying

*Industry KCB Jun 19

*CBK Data as at Sept-2018

Sectoral Loans Comparison

449

502 26

24 3

Jun-18 Corporate Retail Mortgage Jun-19

* Group gross loans

KShs.B

81%

19%

LCY

FCY

12% growth

in Gross

Loans

Advanced

LOAN BOOK PERFORMANCE

28

Asset Quality Review

NPL Breakdown

8.4%

9.9%

12.0%12.7%

1.2% 1.0% 0.4%1.3%

8.9%

8.0% 8.4% 7.8%

HY 2016 HY 2017 HY 2018 HY 2019Industry NPL (Kenya) CoR NPL Group

81%19%

LCY FCY

2.4%

7.5%9.6%

14.3%

3.9%

10.6% 9.5%

14.1%

CHECK OFF MORTGAGE CORPORATE SME & MICRO

Q3 2018 FY 2018 Q1 2019 HY 2019

60bpsAsset Quality

Improvement


29

Group Coverage Ratio

33,249

37,628

39,111

75.4% 75.0%

60.8%

37.5%

72.6% 63.9%

30.0%

60.0%

90.0%

120.0%

150.0%

30,000

40,000

HY 17 HY 18 HY 19

Gross NPL Central Bank Coverage Ratio IFRS Coverage Ratio

4%Increase in

stock of Non-

Performing

Loans


30

51% 52% 49%

46% 46% 49%

3% 2% 2%

2017 HY 2018 HY 2019

Corporate Retail Other

Currency Mix Deposits by Type HY 18 Deposits by Type HY 19

87%

13%

LCY FCY

63%

5%

26%

6%

Demand Savings Term Call

64%

5%

23%

8%

BALANCEDDEPOSITMIX

31

Core Capital to RWA Total Capital to RWA

Kenya Kenya

Group Group

10.5% 10.5% 10.5%

15.7%

18.1% 18.0%

HY 18 FY 18 HY 19Min. Core/RWA Core Capital /RWA

14.5% 14.5% 14.5%

17.2%19.5% 19.4%

HY 18 FY 18 HY 19Min. Total/RWA Total Capital/RWA

10.5% 10.5% 10.5%

14.8% 16.4% 16.1%

HY 18 FY 18 HY 19

14.5% 14.5% 14.5%

16.4%

17.8%17.5%

HY 18 FY 18 HY 19

STRONG CAPITALBUFFERS

32

5% Net

earnings

growth to

KShs

12.7B

Net interest

income

Profit before tax

Operating

Expenses

Total non

Interest Income

KShs 17.9B

KShs (20.6B)

KShs 13.2B


KShs 11.5B

KShs (18.5B)

Profit

before

tax

Up 5%

KShs 17.1B

HY18 HY19

P&L HIGHLIGHTS

33

310 419

371 451

HY18 HY19

246

740

1,918

3,327

5,610

6,269

12,505 15,821

14,650 16,846

KShs. M Net Loans & Advances PBT

KCB Bank South Sudan

KCB Bank Burundi

KCB Bank Uganda

KCB Bank Rwanda

KCB Bank Tanzania

100 156

283

(143)

56%

(151%)

35%

22%

INTERNATIONAL BUSINESS

HIGHLIGHTS

23% growth

in banking

subsidiaries

loans and

advances

34

100

229 128%

• Flat

earnings

growth in

banking

subsidiaries

• 42%

earnings

growth excl.

KCB Bank

Uganda

Profit

Before Tax

(KShs. Million)

HY19

17,932

HY18

17,096

HY18

141,803

HY18

110,524

HY18

3.7%

HY18

421,509

HY18

37,628

HY18

667,682

HY18

524,939

Non-Performing

Loans

(KShs. Million)

HY19

39,111

Total

Assets

(KShs. Million)

HY19

746,519

Customer

Deposits

(KShs. Million)

HY19

563,236

Return

on Assets

HY19

3.6%

Net Loans

and Advances

(KShs. Million)

HY19

478,731Investment on

Government

Securities

(KShs. Million)

HY19

132,949

HY19

117,275Market

Capitalization

(KShs. Million)

Staff costs

(KShs. Million)

HY19

8,996

HY18

8,600

HY 2019 PERFORMANCESUMMARY

35

KShs Billion

KCB Group KCB Bank Kenya

Actual HY 18

ActualHY 19

Y-O-Y Change

Actual HY 18

ActualHY 19

Y-O-Y Change

Cash and balances with central bank

37.3 66.0 77% 34.7 42.8 24%

Balances with other institutions 49.6 17.0 (66%) 25.4 14.4 (43%)

Investments in Government & Other securities

112.5 135.0 20% 96.8 120.0 24%

Net loans and advances 421.5 478.7 14% 386.6 435.7 13%

Fixed assets 13.5 16.2 20% 10.3 11.5 11%

Other assets 33.1 33.6 1% 28.9 28.6 (1%)

Total Assets 667.7 746.5 12% 582.7 653.1 12%

Customer deposits 524.9 563.2 7% 470.3 502.8 7%

Balances due to other banks 8.6 18.8 120% 0.3 8.7 3021%

Other liabilities 14.5 24.5 69% 11.9 21.9 84%

Long-term debt 20.7 22.4 8% 17.1 19.0 11%

Total Liabilities 568.7 629.0 11% 499.5 552.4 11%

Shareholders’ equity 99.0 117.5 19% 83.2 100.7 21%

Total liabilities and equity 667.7 746.5 12% 582.7 653.1 12%

STRONG BALANCE SHEET GROWTH

36

Driven by

KShs 57.2B

growth in

net loans

KShs Billion

KCB Group KCB Bank Kenya

Actual HY 18

ActualHY 19

Y-O-Y Change

Actual HY 18

ActualHY 19

Y-O-Y Change

Interest income 32.2 33.6 4% 28.9 29.9 4%

Interest expense (8.1) (8.2) 2% (6.9) (6.9) (0%)

Net interest income 24.1 25.4 5% 21.9 23.0 5%

Foreign exchange income 2.8 2.1 (27%) 1.3 1.3 2%

Net fees and commissions 6.8 8.9 31% 5.4 7.8 44%

Other income 1.9 2.2 18% 1.7 1.9 11%

Total other operating income 11.5 13.2 15% 8.4 11.0 30%

Total other operating expenses

(17.7) (17.6) (1%) (13.8) (14.5) 5%

Provisions for bad debts (0.8) (3.0) 266% (0.7) (2.7) 265%

Profit before tax 17.1 17.9 5% 15.8 16.8 6%

Tax (5.0) (5.2) 5% (4.7) (5.0) 9%

Profit after tax 12.1 12.7 5% 11.1 11.8 5%

5% GROWTH IN EARNINGS

37

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

23.5% 21.9%

47.0% 48.3%

8.4% 6.9%

72.6% 72.4%

20.9% 19.7%

32.3% 32.0%

3.0% 3.2%

8.3% 8.1%

0.4% 0.7%

85.5% 84.8%

4% 8%

9% 8%

23.5%

45.7%

7.8%

60.8%

19.1%

34.1%

2.8%

8.3%

1.3%

89.2%

14%

7%

FY17 HY 18 FY18 KENYA GROUP

19.5%

51.0%

8.5%

72.5%

14.0%

32.2%

3.0%

8.9%

1.5%

85.1%

10%

11%

24.0%

42.7%

7.8%

73.8%

18.9%

32.3%

2.8%

8.0%

1.2%

91.1%

12.7%

6.9%

OVERVIEW OF KEY FINANCIAL RATIOS

38

INTERIM DIVIDEND

39

Following these results, the Board of Directors approvedpayment of an interim dividend of KShs: 1.00 per share.

The dividend will be paid on or about Friday 15 November, 2019, to shareholders registered at the close

of business on Thursday 5 September, 2019.

Investor RelationsEmail: [email protected]

www.kcbgroup.com

HY 2019 RESULTS - KCB Group Limited...2015-2019 strategy: transformative partnerships who we are 2. our regional presence kcb bank rwanda ... this market from two global agencies.

Documents