FY 2018 RESULTS
OUR STRATEGY WHO WE ARE Our Purpose Simplifying your world to enable your progress Our Promise Go Ahead Our Values Inspiring Simple Friendly WHAT DRIVES US Customer perspective Market share Shared Value Brand position 2015-2019 STRATEGY: TRANSFORMATIVE PARTNERSHIPS Learning and growth Staff productivity Staff development Culture change Financial PBT Efficiency Shareholder Value Internal Business processes System reliability Sustainability Control environment HOW WE ACHIEVE IT Business growth while achieving the women and youth agenda Customer centricity Drive shareholder value Growth in Digital Financial services Operational efficiency Talent management 2
OUR REGIONAL PRESENCE KShs. 114B TOTAL EQUITY 258 BRANCHES 946 ATMS, 16,642 AGENTS & MERCHANTS 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 SOUTH SUDAN KCB BANK KENYA (ETHIOPIA REPRESENTATIVE OFFICE ) KCB BANK KENYA KCB INSURANCE AGENCY KCB FOUNDATION KCB CAPITAL 6,220 STAFF 17.4 MILLION CUSTOMERS KCB BANK RWANDA KCB BANK BURUNDI KCB BANK TANZANIA 3
2018 GROUP HIGHLIGHTS
2018 KENYA HIGHLIGHTS Overview of the year to date Adoption of IFRS 9: Impact on capital ratios and the introduction of a 5 year grace period the Central bank of Kenya Impact on the loan book and provisions, subsequent effect on P&L Banking Industry: Momentum for mergers & acquisitions Imperial Bank Limited (In Receivership) (IBLR) -Acceptance of binding offer and verification of part of the assets for transfer to KCB Bank Kenya Increased regulatory oversight on compliance with Kenya s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) and Imposition of a fines Economic drivers: Big Four Housing Healthcare Manufacturing Food security Resilient Kenya Shilling supported by record growth in diaspora remittances, tourism & horticulture 5
2018 GROUP HIGHLIGHTS Overview of the year to date TANZANIA Strong growth in the domestic demand and expansion of credit, especially to households trade and manufacturing Expectation is high on the major national projects on the SGR and the facilitation of improved access to modern energy services A favorable monetary policy in 2018 with the BOT slashing its discount rates in from 9% to 7% UGANDA Robust activity in the manufacturing, oil and mining sectors expected to drive growth over 6% in 2019 Growing fiscal deficit driven largely by public infrastructure investment Favorable weather conditions are key to the largely agricultural economy RWANDA Sustained >7% growth over the last decade Primary drivers of the economy diversifying to service, trade and ICT, over and above the mainstay, Agriculture Made in Rwanda initiatives and international conferences boosting tourism and inflow of foreign currency 6
2018 GROUP HIGHLIGHTS Overview of the year to date SOUTH SUDAN Improved economic conditions following the signing of the peace agreement Reduced internal conflicts and a moderate improvement in the oil prices supporting the growth of the economy Oil production is expected to recover fully in 2019 boosting the inflow of foreign currency into the economy BURUNDI Moderate recovery of the predominantly agricultural economy Annual GDP growth improving from to 0.5% in 2017 to 2.8% Positive outlook after the referendum held in 2018 Opportunities in mining and the hydropower capacity 7
2018 Group Awards THE BANKER AWARDS Bank of the Year Banking in the Community (2Jiajiri) THE EABC AWARDS Best East African Company BANKER AFRICA EAST AFRICA AWARDS Best Retail bank in East Africa SUSTAINABLE FINANCE CATALYST Best Bank in Sustainable Finance Overall Winner, in sustainable finance integration and practices (Tier 1 Banks) 8
2018 HIGHLIGHTS KCB 2jiajiri Programme highlights DOMESTIC SERVICES 1,145 AUTOMOTIVE ENGINEERING 1,383 BUILDING AND CONSTRUCTION BEAUTY AND 4,459 PERSONAL CARE 2,119 AGRIBUSINESS 13,953 FUTURE OF 2JIAJIRI 23,059 BENEFICIARIES Kenya 21,459 Tanzania 1,500 Rwanda 100 Catalyze job and wealth creation for at least 100,000 youth engaged in the informal sector within Eastern Africa Investment of over KShs 50 billion to nurture and grow youthful and SME entrepreneurs 9
2018 HIGHLIGHTS KCB Foundation Case studies From hustling to an employer Kodhis, the Beautician Humble beginnings in hawking safari bags to the realization of the pedicure and manicure business. Introduced to KCB Foundation s 2Jiajiri in 2016, and now after his expansion journey, employs 15. Starting a garage business: One entrepreneur s journey Joseph Mutai was a mechanic training on the job at a garage in Kericho when he was introduced to the 2Jiajiri programme in 2016. He is now a proud owner of a motor vehicle spares and garage business with 8 employees. 10
MACRO- ECONOMIC HIGHLIGHTS
MACRO- ECONOMIC HIGHLIGHTS Kenya Contribution to GDP Q32018 (%) Q3 2018 Growth (%) 18.89 6.2% 5.20 9.62 3.20 8.73 8.69 5.80 6.80 7.12 7.33 6.00 5.40 6.15 2.60 5.75 6.80 9.10 3.78 5.10 8.50 1.85 1.12 AGRICULTURE MANUFACTURING REAL TRADE EDUCATION TRANSPORT & FINANCIAL & CONSTRUCTION ICT HEALTH MINING& ESTATE STORAGE INSURANCE QUARRYING 2018P GDP Growth Rate(%) 12
MACRO- ECONOMIC HIGHLIGHTS GDP Growth (%) Regional GDP Growth 8.0 7.2 7.1 6.1 5.7% 2.8 South Sudan Ethiopia Rwanda Tanzania Uganda Burundi 2018P* East Africa GDP Growth Rate (%) -6.3 13 *Source: AfDB, Africa Economic Outlook 2019
Inflation Evolution (%) MACRO- ECONOMIC HIGHLIGHTS Kenya Inflation rate 7.50 4.83 Target Upper Target Lower Non Food Fuel 5.71 4.20 3.50 2.50 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 Interest Rate Evolution (%) 13.65 13.49 13.22 10.00 9.50 8.03 8.04 8.02 8.00 7.97 7.73 9.00 12.78 12.61 12.61 7.67 7.64 7.63 7.56 7.36 7.34 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 91day bill Avg lending rates CBR rate 14
USD/KES Exchange Rate(%) MACRO- ECONOMIC HIGHLIGHTS 103.3 101.4 101.3 100.6 101.0 100.7 100.6 100.8 101.1 102.6 102.3 Currency Movement JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 Exchange Rates to USD 3,712 2,300 1,803 876 130 28 Uganda Tanzania Burundi Rwanda South Sudan Ethiopia 15
MACRO- ECONOMIC HIGHLIGHTS Kenya Overall reduction on infrastructure spending Increased exports of tea and horticulture Increased diaspora remittances Strong receipts from tourism Lower imports of food Kenya Malawi Uganda Nigeria Seychelles Mauritius Tanzania Rwanda BRVM Ghana Botswana South Africa Zambia Only African currency to strengthen against the USD in 2018-0.8% -2.0% -2.0% -2.5% -2.5% -3.0% -5.0% -7.0% -7.2% -8.0% -14.0% -16.0% 1.0% 16
MACRO- ECONOMIC HIGHLIGHTS Current Account Balance (% ofgdp) Kenya -6.7-5.2-6.2-5.4-10.4 2014 12 Month Private Sector CreditGrowth 2015 2016 2017F 2018F 4.3% 4.3% 3.9% 4.4% 2.7% 2.1% 2.0% 2.8% 3.0% 2.4% JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 17
CHANNEL PERFORMANCE
OUR December 2017 CHANNEL CONTRIBUTION MOBILE 45% AGENCY, INTERNET AND POS 26% BRANCH TELLER 16% ATMS 13% 88% of transactions performed outside the branch December 2018 MOBILE 45% AGENCY, INTERNET AND POS 32% BRANCH TELLER 12% ATMS 11% 14% decrease in average transactions / tellerper day 15% decrease in Number of branch transactions. 27% growth in non-branch revenue to over 5.2B Dec 2017 Dec 2018 Avg. Transactions / Teller perday 81.9 71.5 Dec 2017 Dec 2018 Number of Branch Transactions(M) 18.6 16.2 19
OUR CHANNEL CONTRIBUTION 84% Growth in Mobile Loans Advances Value of Transactions (KShs.B) 172 331 236 62.1 52.0 32.9 FY 16 FY17 FY18 No. of transactions (M) FY 16 FY17 FY18 Mobile Revenue (KShs.M) 2,261 FY17 3,175 FY18 Mobile Transaction type(%) FY 2018 FY 2017 29.6B 54.4B 49.9 55.0 32.4 24.3 16.2 19.4 1.4 1.3 2017 2018 B2C B2B C2B LIPA KARO 20
OUR CHANNEL CONTRIBUTION 61% Growth in Agency Banking Value Value of Transactions (KShs.B) 78 127 204 FY 16 FY17 FY18 Agency Transaction type(%) No. of transactions (M) 15.8 22.8 34.7 Agent revenue (KShs M) 431 481 542 FY16 FY17 FY18 FY 16 FY17 FY18 FY 2017 FY 2018 58.8 64.6 17.9 14.4 12.1 11.2 9.4 7.8 1.7 0.8 1.0 0.3 CASH DEPOSIT CASH WITHDRAWAL SCHOOL FEES BALANCE ENQUIRY BILL PAYMENT OTHERS 21 *Others: Account opening, mini statement, load cards and Funds transfer
OUR CHANNEL Value of Transactions (KShs.B) No. of transactions (M) ATM revenue (KShs M) CONTRIBUTION 51% Growth in ATM Value 465 496 Over KShs 22.6B collected through 70 intelligent ATMs 78 86 130 7.4 15.0 15.4 390 FY 16 FY 17 FY 18 FY 16 FY 17 FY 18 FY 16 FY 17 FY 18 22
OUR CHANNEL CONTRIBUTION Value of Transactions (KShs.B) POS Revenue (KShs. M) 17% Growth in the average value per Merchant/ POS transaction 41 42 49 822 856 944 FY 16 FY 17 FY 18 FY 16 FY 17 FY 18 23
OUR FINANCIAL PERFORMANCE TO DATE
BALANCE SHEET HIGHLIGHTS 10% Total Assets growth Govt. Securities KShs 110.0B Net Loans & Advances KShs 422.7B KShs 120.1B KShs 455.9B Customer Deposits KShs 499.5B KShs 537.5B Total Assets KShs 647.7B KShs 714.3B 25 2017 2018
Sectoral Loans Comparison LOAN Industry Sept 2018 KCB Dec 18 BOOK PERFORMANCE 0.4% 3.7% 4.7% 0.0% 3.0% 3.0% Mining and Quarrying Agriculture Energy and water 8% Growth in Net Loans and Advances 2.6% 6.8% 3.6% 18.9% 4.8% 13.0% 3.0% 5.0% 6.0% 8.0% 8.0% 11.0% Tourism, restaurants and hotels Transport and communication Financial Services Trade Building and construction Manufacturing 26.0% 15.5% 17.0% 36.0% Real estate Personal/Household * Group gross loans KShs.B 439 19 17 2 477 19% LCY FCY 81% Dec-17 Retail Corporate Mortgage Dec-18 26
Asset Quality Review LOAN BOOK PERFORMANCE 9.1% 10.6% 12.0% 11% 6.9% Asset quality improvement 6.8% 6.6% 1.4% 8.0% 8.5% 1.0% 1.5% 6.9% 0.7% LCY FCY 89% FY 2015 FY 2016 FY 2017 FY 2018 NPL Breakdown Industry NPL (Kenya) 14.8% 16.3% 13.0% 7.4% 7.9% 8.5% 3.2% 3.3% CHECK OFF MORTGAGE CORPORATE SME & MICRO 27 Q1 2018 Q2 2018 Q3 2018 FY 2018
Improved IFRS Coverage LOAN BOOK PERFORMANCE 40,000 37,496 150.0% 15% Decrease in stock of Non- Performing Loans 30,000 31,813 32,692 120.0% 90.0% 72.5% 72.4% 69.5% 68.6% 60.0% 37.3% 42.6% 20,000 FY 16 FY17 FY 18 30.0% Gross NPL Central Bank Coverage Ratio IFRS Coverage Ratio 28
BALANCED DEPOSIT MIX 3% 3% 2% 47% 46% 48% 50% 51% 49% 2016 2017 2018 Corporate Retail Other Currency Mix Deposits by Type 2017 Deposits by Type 2018 6% 8% 12% 24% 24% 88% 5% 65% 5% 63% 29 LCY FCY Demand Savings Term Call
Core Capital to RWA Total Capital to RWA STRONG CAPITAL BUFFERS Group 15.3% 15.4% 18.1% Group 18.0% 16.6% 19.5% 14.5% 14.5% 14.5% 10.5% 10.5% 10.5% Kenya 2016 2017 2018 2016 2017 2018 Kenya 16.9% 14.9% 16.4% 19.9% 16.1% 17.8% 14.5% 14.5% 14.5% 10.5% 10.5% 10.5% 2016 2017 2018 2016 2017 2018 30
P&L HIGHLIGHTS Profit before tax Up 16% 22% earnings growth to KShs 24.0B Net interest income KShs 48.4B Total non Interest Income KShs 23.0B Operating Expenses KShs (36.4B) Profit before tax KShs 29.1B KShs 48.8B KShs 23.0B KShs (35.0B) KShs 33.9B 31 2017 2018
P&L KShs. M Net loans & advances PBT HIGHLIGHTS: International Businesses KCB Bank South Sudan 379 735 568 664 17% 64% growth in subsidiary PBT KCB Bank Burundi KCB Bank Uganda 1,403 2,397 6,777 6,274 109 220 281 446 102% 59% KCB Bank Rwanda 11,899 12,776 567 424 (25%) KCB Bank Tanzania 14,283 16,465 19 777 3,989% 32 2017 2018
Strong balance sheet driven by KShs 33B growth in net loans KShs Billion Actual 2017 KCB Group Actual 2018 Y-O-Y Change KCB Bank Kenya Actual 2017 Actual 2018 Y-O-Y Change Cash and balances with central bank 29.1 50.1 72% 26.0 39.1 51% Balances with other institutions 43.9 32.0 (27%) 14.4 16.6 15% Investments in Government & Other securities 110.0 120.1 9% 94.6 103.0 9% Net loans and advances 422.7 455.9 8% 387.9 417.2 8% Fixed assets 14.0 14.1 1% 9.5 10.1 6% Other assets 27.1 42.1 56% 23.2 35.7 54% Total Assets 646.7 714.3 10% 555.6 621.7 12% Customer deposits 499.5 537.5 8% 440.2 475.4 8% Balances due to other banks 11.0 20.1 82% 5.2 11.2 114% Other liabilities 15.2 20.6 36% 10.7 18.4 72% Long-term debt 14.9 22.4 51% 10.6 18.9 79% Total Liabilities 540.7 600.7 11% 466.6 523.9 12% Shareholders equity 106.0 113.7 7% 89.0 97.8 10% Total liabilities and equity 646.7 714.3 10% 555.6 621.7 12% 33
22% GROWTH IN EARNINGS KShs Billion Actual 2017 KCB Group Actual 2018 Y-O-Y Change Actual 2017 KCB Bank Kenya Actual 2018 Y-O-Y Change Interest income 63.7 66.3 4% 56.9 59.3 4% Interest expense (15.3) (17.5) 14% (12.8) (15.0) 17% Net interest income 48.4 48.8 1% 44.1 44.3 0% Foreign exchange income 4.7 4.4 (6%) 2.9 2.7 (6%) Net fees and commissions 14.7 14.2 (3%) 10.7 11.9 11% Other income 3.6 4.4 20% 3.3 3.9 20% Total other operating income Total other operating expenses 23.0 23.0 0% 16.9 18.6 10% (36.4) (35.0) 4% (28.6) (28.3) 1% Provisions for bad debts (5.9) (2.9) (50%) (5.0) (3.1) (37%) Profit before tax 29.1 33.9 16% 27.5 31.4 14% Tax (9.4) (9.9) 5% (8.2) (9.0) 9% 34 Profit after tax 19.7 24.0 22% 19.2 22.4 17%
OVERVIEW OF KEY FINANCIAL RATIOS FY17 H1 18 Q3 18 KENYA GROUP 19.5% 23.5% 22.8% Return on Average Equity 24.4% 21.9% 51.0% 48.2% 49.7% Cost to Income 45.1% 48.3% 8.5% 8.4% 7.5% Gross NPL to Gross Loans 6.9% 6.9% 72.5% 75.0% 82.7% NPL Coverage 65.3% 72.4% 14.0% 20.9% 19.7% Debt to Equity 19.6% 19.7% 32.2% 32.3% 33.3% Non funded income to total income 29.5% 32.0% 3.0% 3.0% 3.2% Cost of funds 3.2% 3.2% 8.9% 8.3% 8.0% Net Interest Margin 8.1% 8.1% 1.5% 0.4% 0.5% Cost of risk 0.7% 0.7% 85.1% 85.5% 88.0% Loan to Deposit Ratio 91.8% 84.8% 10% 4% 4% Growth of Net Loans and Advances 8% 8% 11% 9% 6% Growth of Customer Deposits 8% 8% 35
Dividend 2018 DIVIDEND 17% dividend increase to KShs. 3.50 KCB Group paid an interim dividend of KShs 1.00 per share in November 2018. The Directors recommend a final dividend for the year ended 31 December, 2018 of KShs 2.50 36