Bank of Kigali INVESTOR PRESENTATION Q4 2016 & FY 2016 Page 1
Disclaimer This presentation contains statements that constitute forward-looking statements, including, but not limited to, statements relating to the implementation of strategic initiatives and other statements relating to our business development and financial performance. While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, (1) general market, macroeconomic, government policies, legislative and regulatory trends, (2) movements in local and international currency exchange rates, interest rates and securities markets, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties and developments in the markets in which they operate, (6) management changes and changes to the Bank s structure and (7) other key factors that we have indicated could adversely affect our business and financial performance, which are contained elsewhere in this presentation and in our past and future filings and reports, including those filed with the National Bank of Rwanda and the Rwanda Stock Exchange. We are under no obligation (and expressly disclaim any such obligations to) update or alter our forwardlooking statements whether as a result of new information, future events, or otherwise. Page 2
Key Executives M a r c H o l t z m a n C h a i r m a n o f t h e B o a r d F l o r a N s i n g a C h i e f H u m a n R e s o u r c e s O f f i c e r D i a n e N g e n d o K a r u s i s i C h i e f E x e c u t i v e O f f i c e r D e s i r e R u m a n y i k a C h i e f O p e r a t i n g O f f i c e r N a t h a l i e M p a k a C h i e f F i n a n c e O f f i c e r V i n c e n t G a t e t e C h i e f C o m m e r c i a l O f f i c e r E d d y M a b a n o K a y i h u r a C h i e f I n f o r m a t i o n T e c h n o l o g y O f f i c e r Page 3
Agenda 1. Key Investment Highlights 2. Country Overview Information 3. Banking Sector Overview 4. Bank Overview 5. Corporate Governance 6. Business Overview 7. Review of Financial Performance December 2016 8. Strategic Outlook 9. Contact Information Page 4
Key Investment Highlights 1. Best Bank in Rwanda 2013, 2015 & 2016 2. Best East African Bank 2012 & 2015,2016 Sound Macro Fundamentals Politically stable country with sound governance Very attractive demographic profile: population of 12.4 million with 83% below the age of 40 Robust economic growth averaging 8% pa in the last 5 years, aiming at reaching 11.5% by 2018 Moderate inflation: Inflation rate of 7.3 % as at December 2016 The 2016 World Bank Doing Business Report ranked Rwanda as the 62 nd out of 189 countries in terms of ease of doing business and 2 nd in Africa. 3. Bank of the Year 2009-2012,2014,2015,2016 4. Best Bank in Rwanda 2009-2014,2016 5. Best African Listing 2011 6. AA-/A1+ Credit Rating The rating reflects the Bank s established domestic franchise value, strong capital position, its systemic importance, strong asset quality and financial performance. 7. Best Financial Reporting Company Rwanda 2012 & 2015 Significant Banking Sector Potential Market Leadership Conservative Business Model Experienced Management Team Profitable Growth Significant headroom for growth given under-banked and excluded population Large unbanked population of approximately 28% Total assets/gdp of 35.8% Well regulated banking sector: fairly conservative regulator relative to other regulators in the EAC Strong Market positioning & sustainable leadership by Total assets FRw 638.3 billion ; 33.9% market share as at FY 2016 Net Loans FRw 385.8 billion ; 35.0% market share as at FY 2016 Customer Deposits FRw 419.0 billion ; 32.8% market share as at FY 2016 Shareholders Equity FRw 108.5 billion ; 34.9% market share as at FY 2016 Relatively high capital adequacy ratios since 2010 averaging >20% Manageable level of non-performing 4.0% of gross loans as at 4.5% FY 2016, down from 19.4% in 2007. liquid assets holding of 32.8% (minimum requirement 20%) Management team with significant banking sector experience Complemented by an experienced and diversified Board of Directors Track record of producing stellar results Robust asset growth at a CAGR of 26.3% (2011-2016) - FRw 638.3 billion as at 31 December 2016 ROAA ranging from 3.5 % - 4.0% between 2010 and 2016 Page 5
COUNTRY OVERVIEW INFORMATION Page 6
Rwanda Country Profile Area Population Official Languages Capital Currency Credit Rating National Facts Macro Economic Indicators 26,338 sq km 12.4 million Kinyarwanda, French, English Kigali Rwandan Franc (FRw) {807 FRw = 1 US$ as of end December 2016} B + (Fitch Ratings) B+ (Standard & Poors) Nominal GDP 2016 US$ 8.1 billion Nominal GDP Per Capita 2016 US$ 720 Nominal GDP 2017P US$ 8.0 billion Nominal GDP Per Capita 2017P US$ 720 Business Environment Ranked Second after Mauritius as the best destination to do business in Africa in the World Bank 2016 Doing Business Report. Since 2005, Rwanda has implemented over 22 business regulation reforms in the areas measured by the World Bank Doing Business Index. Today, entrepreneurs can register a new business online in 6 hours Ranked first in Africa in the 2014 World Bank Country Policy and Institutional Assessment (CPIA) report. The report shows that Rwanda s economic management and structural policies as the most improved in sub-saharan Africa. Rwanda was also named the most competitive economy in East Africa and third in Africa by Global Competitiveness Index Report 2014 Real GDP Growth rate 2016 6.0% Real GDP Growth rate 2017P 6.2% Inflation Rate (Dec 2016) 7.3% Private Sector Growth(2016P) 26.7% Private Sector Credit (% GDP) 2016P 19.7% Net External Debt (%GDP) 2016P 11.8% Currency Depreciation against USD Dec 2016 9.7% Foreign Reserves 2016-2017 3.5-4 Months of Imports Source: IMF,CIA World Factbook, World Bank, Ministry of Finance and Economic Planning, National Institute of Statistics of Rwanda and National Bank of Rwanda, Standard and Poors Research Update March 2015, Fitch Ratings- Feb 2016 Page 7
Sound Macro Fundamentals GDP per Capita continues to grow Population Pyramid for Rwanda Mln 14 12 10 8 6 4 2 0 719 720 644 540 10.4 10.5 10.9 12.4 2010 2012 2014 2015 Population Nominal GDP per capita Healthy GDP growth with moderating inflation US $ 800 700 600 500 400 300 200 100 0 US $ Bn 9 8 7 6 5 4 3 2 1 5.7% 6.4 5.7 2.3% Nominal GDP(US $ Bn) 6.3% 8.4 8.1 7.9 7.2 7.5 5.7% 4.2% 2.5% 1.8% 0 2010 2011 2012 2013 2014 2015 2016 Source: Ministry of Finance and Economic Planning, World Bank, 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 54% of the population is under 19 years. 83% of the population is under 40 years. 3% of the population over 65 years. Source: National Institute of Statistics of Rwanda Page 8
Macroeconomic Indicators GDP Breakdown By Economic Activity 2016 Trade Structure Taxes less Subsidies on products,5% Rwanda s exports are dominated by coffee, tea and minerals (tin, coltan and wolfram). Other services, 33% Agriculture, 33% The country remains a net importer. Major imports include fuel and oils, intermediary goods especially construction materials, consumer goods, and capital goods. Rwanda s trade deficit improved by 5.9% in 2016, to USD 1649.8 Trade and Transport, 15% Source: National Institute of Statistics of Rwanda Industry, 13% million from USD 1752.5 million. Total formal exports value increased by 7.1% while total imports value recorded a modest decline of 2.7 percent during the same period Source: BNR Monetary Policy Statement Trade Deficit as a % of GDP Trade Deficit as a % of GDP 19% 20% 15% 14% 15% 15% 16% 15% 16% 15% 13% 11% 14% 10% 5% 0% 2007 2008 2009 2010 2011 2012 Source: Ministry of Finance and Economic Planning 2013 2014 2015 2016 2017P 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 11.9% 13.7% Current Account Deficit as a % of GDP 12.6% 14.7% 10.1% 7.3% 7.2% 7.4% 5.9% 4.9% 2.2% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P Source: National Institute of Statistics of Rwanda, African Economic Outlook Page 9
Review of the Macro Economic Environment OK Macro Economic Review In the third quarter of 2016, GDP at current market prices was estimated to be FRw 1,662 billion, up from FRw 1,506 billion in the same quarter of 2015. Real GDP was 5.2 percent higher in real terms compared to the same quarter of 2015. The Services sector contributed 48 percent of GDP while the agriculture sector contributed 33 percent of the GDP. The industry sector contributed 13 percent of the GDP and 5percent was attributed to adjustment for taxes and subsidies on products. In this quarter, Agriculture sector grew by 1 percent and contributed 0.4 percentage points to the overall GDP growth. Activities in the industry sector increased by 7 percent and contributed negative 1 percentage points. Service sector increased by 6 percent and contributed 3 percentage points to the overall GDP. Generally, inflation in 2016 averaged 5.7% compared to 2.5% in 2015, higher than previous three years due to high food price inflation and exchange rate depreciation. Source: National Institute of Statistics of Rwanda, BNR Monetary Policy & Research Department African Economic outlook 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Inflationary Environment Exchange Rate Developments 2015 2016 11.4% 9.2% 4.7% 3.2% USD GBP EURO UGX KES -2.8% -2.3% -5.3% -7.6% -9.7% -9.6% Page 10
BANKING SECTOR OVERVIEW Page 11
Significant Banking Sector Potential Banking Assets/GDP (US$) Banking Assets Per Capita 5 Large Unbanked Population Economy is moving away from being cash-based through the various financial inclusion initiatives being undertaken by financial institutions including the launch of agency banking and mobile money transfer services. Approximately 72% of the population have or use financial products or mechanisms including those offered by non- bank formal financial institutions such as SACCOs Source: Finscope Rwanda 2012 Prudential Regulations (1) Source: Exotic Frontier Equities (2) Source: National Bank of Rwanda YE 2013 Monetary Policy Statement (3) Source: Population stats by World Bank Page 12
Banking Sector Overview USD Mln 3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 - Rwanda Banking System Total Assets 2,850 2,947 2,592 2,252 1,976 1,474 1,226 1,011 2009 2010 2011 2012 2013 2014 2015 2016 Interest Rate Analysis Source: BNR Supervision Department Source : BNR Supervision Department Banking Sector Review Total assets of the industry registered annual growth rate of 11.5% in Dec 2016, from FRw 2.1 trillion in Dec 2015 to 2.3 trillion in Dec 2016 The capital adequacy ratio (CAR) stood at 21.8% in Dec 2016 well above Basel committee benchmark of 13% and the BNR regulatory minimum requirement of 15% Profitability indicators reduced Compared to the same period in 2015, Return on assets (ROA) and return on equity (ROE) as at Dec 2016 decreased to 9.2% and 1.7% respectively from 2.1% and 11.2% as at Dec 2015. The asset quality of the industry is generally improving with however nonperforming loan ratio (NPLs ratio) increased to 7.5% as Dec 2016 compared to 6.2% recorded in Dec 2016. Recent Regulatory Reforms To Improve Access To Credit Enactment of Law on Mortgages, requiring the registration of mortgages and enabling lenders to foreclose on defaulters Establishment of Commercial Courts dealing solely with commercial disputes Reorganization of the Land Centre which has computerised records and operations in addition to timely issuance of property titles Reorganization of the Office of the Registrar General to enhance and fast track registration of mortgages and foreclosures Establishment of Credit Reference Bureau to enhance information sharing among banks and other financial institutions in order to assist with credit risk assessment Page 13
Timeline of Foreign Investment In The Rwandan Banking Sector 80% stake in BCR 40% stake in Cogebanque I &M Bank acquires 80% stake in BCR 2004 2007 2008 2009 2010 2011 2012 2014 2015 30% stake in BPR 70% stake in FINA Bank 90% stake in Agaseke Bank 2010 2011 2012 2013 2014 2015 2016 Bank of Kigali Market Share by Total Assets 27.4% 32.3% 31.7% 35.8% 33.7% 34.1% 33.9% * Market share among commercial banks BK Analysis Page 14
Competitive Landscape Market Share Dynamics Bank of Kigali Growth vs. Commercial Banks Growth, CAGR YE 2011 2016 Commercial Banks Bank of Kigali 35.0% 30.0% 25.0% 26.3% 21.3% 30.6% 25.3% 27.4% 20.0% 15.0% 16.2% 14.8% 16.1% 10.0% 5.0% Source: BNR Supervision Department Selected Indicators 2016 0.0% Total Assets Net loans Client Deposits Shareholders' Equity Concentration of Banking Sector Assets 25.0% 20.0% Banking Sector Bank of Kigali 20.0% 9M 2016 15.0% 10.0% 7.5% 5.0% 4.5% 1.7% 3.5% 0.0% NPLs/Gross Loans Return on Average Source: BNR Supervision Department, BK 2016 Assets 9.2% Return on Average Equity Others, 25.0% Top 5 Banks, 75.0% Source: 9M2016 Published Financial Statements *BPR 1H Published financials Page 15
Strong Market Leadership 9M 2016 1 34.4% 37.9% 37.4% 39.2% 2 11.1% 11.3% 10.3% 10.7% 3 10.7% 10.7% 10.0% 9.9% 4 9.6% 9.4 9.9% 8.1% 5 9.2% 9.0% 8.0% 7.8% 6 8.6% 7.2% 7.3% 6.5% 7 6.3% 7.1% 6.6% 5.4% 8 4.3% 3.6% 4.8% 3.9% 9 4.2% 3.1% 4.5% 3.9% 10 1.0% 0.7% 0.7% 2.6% 11 0.7% 0.0% 0.5% 2.0% Source: 9M 2016 Published Financial Statements *BBPR 1H Published financials Page 16
BANK OVERVIEW Page 17
Background and History Established in 1966 as a JV with Belgolaise S.A Current management team assembled Supervisory Board enhanced & internationalized US$62.5 mln Initial Public Offering of 45% of its shares and listing on the RSE Signed lines of credit with: PTA Bank- US$ 10 mln OFID- US$ 10 mln EADB- US $10 mln Signed lines of credit with: EIB- EUR 9.2 mln SBM- US$ 10 mln 1966 2006 2009 2010 2011 2013 2015 2016 Government of Rwanda acquired 50% stake fom Belgolaise becoming 100% shareholder New strategy focusing on the universal banking business model and profitable growth adopted A+ credit rating by GCR (Global Credit Rating) AFD loan signed: US$ 20 mln 10 years EIB Loan 5 mln AfDB loan signed: -US$12 mln -10 years Shelter Afrique loan $10 mln Launch of BK Registrars Launch of Mastercard Launch of BK General Insurance Ltd Launch of BK TecHouse Ltd Page 18
A Snapshot of Bank of Kigali Key Facts The leading bank in Rwanda (33.9% market share by Total Assets as at 31 Dec 2016), offering a wide spectrum of commercial banking services to Corporate, SME and Retail customers As at 31 Dec 2016 the Bank had: Over 25,000 Corporate clients Over 236,000 Retail clients 79 branches 91 ATMs and 1,002 POS 1,225 employees 1,280 Agents Western Union, Money Gram services for International Transfers US$ million 2010 2011 2012 2013 2014 2015 2016 FRw/USD Period End rate 594.4 604.4 630.6 670.2 686.1 725.0 807.0 Source: : BNR Supervision Department, BK Q4 & 2016 Branch Network Evolution CAGR 2011-2016 Total Assets 332.6 476.3 511.9 630.2 703.4 774.1 791.0 26.3% Net Loans 170.6 203.7 293.5 297 340.3 433.0 478.1 30.6% Client Deposits 228.3 299.5 330.5 418.5 473.1 530.6 519.2 25.3% Shareholders' Equity 53.6 101.9 100.1 105.7 130.5 136.9 134.4 27.4% Net Income 10.4 14.4 18.5 22.0 26.7 28.2 25.7 Growth figures are calculated on FRw Values. Market Share 2010 2011 2012 2013 2014 2015 2016 Total Assets 27.4% 32.3% 31.7% 35.8% 33.7% 34.1% 33.9% Net Loans 31.5% 29.4% 31.5% 31.5% 30.3% 33.9% 35.0% Client Deposits 25.9% 28.2% 28.1% 32.2% 31.0% 32.6% 32.8% Shareholders' Equity 32.2% 41.9% 41.9% 44.3% 43.0% 43.0% 34.9% Growth in ATMs, POS Terminals and # of Retail Current accounts Page 19
CORPORATE GOVERNANCE Page 20
Shareholding Structure & Corporate Governance Shareholding Structure as at 31 December 2016 Corporate Governance Free float- 45% The Board has Seven independent non-executive directors (including two non-resident directors with extensive expertise in international banking practices) The Board of Directors is appointed by the shareholders and approved by the Central Bank and meets on a quarterly basis or more frequently as the business demands. The Board sets the strategy and retains full responsibility for the direction and control of the Bank as spelled out in the Memorandum and Articles of Association, the Board Charter and the BNR Corporate Governance guidelines. The Board sub-committees have clear TORs which underscore the scope and context of their mandate and performance as approved by the Board & the BNR Corporate Governance regulation. The Board receives detailed financial information and regular presentations from the management on the Bank s business performance; this enables the Directors to make informed decisions on governance, strategic, financial and operational issues. Page 21
Share Trading Performance 31 December 2016 Current price, FRw 243 Market Cap, US$ mln 187 Free float 45% Free float in US$ mln 84.2 Average daily turnover in US$ mln 0.12 Common shares outstanding, mln shares 672.2 12-month high 267 12-month low 264 P/E 2016 (based on current price) 7.48x P/BV 2016 (based on current price) 1.38x Dividend yield, 2015 (based on current price) 5.1% EPS, 2016 30.9 Ticker Code BOK Bloomberg BOK. RW Analyst Coverage Recommendation: HOLD Target Price: FRw 319 Last coverage report: February 2016 Recommendation: BUY Target Price: FRw 370 Last coverage report: June 2016 FRw/USD Exchange Rate of 807.0 as at 31 December 2016 (BNR Middle Rate) *Capital gains on RSE transactions are exempted from Capital Gains Tax Share Price Performance Page 22
BUSINESS OVERVIEW Page 23
Overview of the Loan Book FRw Bn 400.0 350.0 300.0 250.0 200.0 150.0 100.0 50.0 Gross Loan Portfolio Corporate Loans Retail Loans 397.6 324.8 58.4 246.7 61.7 211.9 194.0 59.0 339.2 65.5 61.5 263.1 187.7 132.5 146.4 2012 2013 2014 2015 2016 Retail Loans 14.7% YE 2016 Corporate Loans 85.3% Loan Book Segmentation Retail Loans 19.0% YE 2015 Corporate Loans 81.0% Total Loan Book 2016 Corporate Loan Book 2016 50 M-100 M 3.2% <50 M 7.4% 500 M-1 Bn 5.6% 100 M-500 M 13.7% Over 1 Bn 70.1% Other Corporate Loan 57.0% Top 10 Corporate Loan 43.0% *TWC- Transport, Warehousing and Communication Page 24
Overview of Deposit Structure FRw Bn 500.0 400.0 300.0 200.0 100.0.0 Total Deposits Growth Corporate Deposits Retail Deposits Bank's and OFIs Deposits 243.1 31.3 62.9 297.8 61.3 68.2 148.9 163.8 447.1 407.3 339.8 104.9 119.3 80.5 84.3 92.2 73.4 185.9 218.1 235.6 2012 2013 2014 2015 2016 Bank's and OFIs Deposits 26.7% Retail Deposits 20.6% YE 2016 Customer Deposit Segmentation Corporate Deposits 52.7% Bank's and OFIs Deposits 25.8% Retail Deposits 20.7% YE 2015 Corporate Deposits 53.5% Corporate: FRw 235.7 Bn Structure of Deposits, YE 2016 Retail: FRw 92.2 Bn YE 2016 Customer Deposits Concentration YE 2015 Large Depositors (TOP 10) 30.6% Other 69.4% Large Depositors (TOP 10) 32.9% Other 67.1% * depositors with total balances above 5% of shareholders equity Page 25
Corporate Banking Description Key Segments at YE 2016 Clients include corporate, SMEs and NBAs* NBAs Loans 1.5% Interest rates are in the 16.0% - 18.5% range. Key products: CAPEX loans: long-term loans for investment or expansion of the business SMEs Loans 21.0% 18.8% Commercial mortgage loans: typical customer participation at 30% of property value, typical tenor of up to 10 years Corporate Loans 77.5% 28.1% 53.1% Working capital loans: financing business needs to an agreed limit for a short period (usually <1yr) Overdrafts Strategy Corporate Loans: FRw 339.2 Bn Number of Corporate Accounts Corporate Deposits: FRw 235.6 Bn Tolirwa Introduce new services, integrate client Total Corporate Clients Corporate Current Accounts Merez Petroleum coverage Grow and consolidate market share Leverage superior lending capacity Focus on payroll services *NBAs (Non Business Associations) include Non-Profit Organizations, Charities, Religious institutions, Educational Institutions, Cooperatives, etc. 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 38,711 32,728 33,360 27,712 19,808 24,193 29,518 25,477 29,518 25,477 2012 2013 2014 2015 2016 Page 26
Executing The Retail Strategy Page 27
Retail Banking Description The Bank s retail business is primarily focused on mortgages and consumer loans with notable share of salary backed overdrafts Key products: Mortgage loan: up to 15 years with typical customer participation at 30% of property value Consumer loan: up to 12x monthly salary and 48 months Overdraft: up to 60% of monthly salary (normally repaid in 30 days) Other products include credit cards and asset based financing Strategy: Build a ubiquitous branch footprint throughout the country Build sufficient channel capacity to be able to service 500,000+ clients by 2016 Build out the retail product lineup to achieve relevance to the daily lives of the banked population Expand credit card/debit card offering to other providers (MasterCard) x etc) Our Products Source: Bank of Kigali 350,000 300,000 250,000 200,000 150,000 100,000 50,000 Retail Lending Retail Loans: FRw 58.4 Bn - Mortgages 40.9% Other 2.1% Overdrafts 4.1% 191,632 Consumer loans 52.8% Retail Client Accounts No. of Retail Clients 231,409 266,239 Retail Deposits Demand Deposits 80.6% Term Deposits 9.7% Retail Deposits: FRw 92.2 Bn Retail Accounts 247,973 192,872 239,510 288,022 327,441 236,545 2012 2013 2014 2015 2016 Savings Deposits 9.7% Page 28
Growing Our Distribution Network Ubiquitous footprint Agency Banking Agency Banking platform BK Yacu began operating in Nov 2012. Expanded the agency banking network to 1280 operational agents as at 31 December 2016 Agents are able to perform cash in and cash out transactions, open customer accounts as well as send and receive money. 320,000 300,000 280,000 260,000 240,000 220,000 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 118,255 No of operational agents 165,599 147,452 157,160 158,070 No of Transactions 283,830 311,328 1400 210,207 249,678 861 909 944 1006 1079 1133 1178 1240 1280 0 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 1200 1000 800 600 400 200 Other Initiatives A total of 9 mobile vans have been deployed across the country Launch Airtel Money across all branches Page 29
Expanding Our Self Service Products Growing our Card Business Key Achievements Launch of MasterCard line of products Launch of e-commerce acquiring Over 200,000 Visa debit & credit cards currently in circulation Union Pay and Diners Club Card Acquiring and Amex ATM acquiring Deposit-taking ATMs 2016 Targets Issuing of MasterCard Contactless cards Credit card issuing of 5,000 cards Launch of MasterCard Corporate Credit Card Implementation of MasterCard World loyalty program Increasing our Mobile Product Offering Enhancing our mobile banking service Our mobile banking service Mobiserve allows customers to perform the following transactions: Send money to any mobile phone user regardless of whether they operate a bank account or not Purchasing prepaid TV, airtime and electricity Check Balances and Bank information Order cheque books Page 30
REVIEW OF FINANCIAL PERFORMANCE Page 31
Balance Sheet Highlights Total Assets Net Loans and Advances Customer Balances and Deposits Shareholder s Equity Page 32
Maturity Profile Loans and Advances to Clients Customer Balances and Deposits Page 33
Asset Quality Cost of Risk**, % Improving Coverage Ratio Notes: ** LLP charge / Average gross loans for period NPLs by segment Manageable NPLs Ratio YE 2016 Corporate NPLs, 73.6% Retail NPLs, 26.4% Corporate NPLs, 66.8% YE 2015 Retail NPLs, 33.2% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 8.5% 8.3% 6.5% 6.9% 6.6% 4.9% 4.5% 2010 2011 2012 2013 2014 2015 2016 Page 34
Asset Quality NPLs by Segment 12.0% Retail Corporate 10.0% 10.2% 9.8% 9.2% 8.0% 6.0% 5.4% 4.0% 4.0% 3.9% 2.0% 0.0% Dec-14 Dec-15 Dec-16 Gross loan Yield by Segment Retail Corporate 25.0% 20.0% 19.9% 20.8% 20.8% 20.4% 20.8% 18.8% 19.0% 17.2% 15.0% 10.0% 5.0% 0.0% YE 2013 YE 2014 YE 2015 YE 2016 Page 35
Funding Funding Structure, % Significant Potential For Growth In Higher Yielding Assets YE 2016 YE 2015 % Net Loans/Customer Deposits Net Loans/Assets 17.0% 4.4% 13.0% 65.6% 17.7% 4.0% Customer Deposits FIs Deposits 9.7% 68.6% 100.0% 80.0% 60.0% 40.0% 20.0% 87.4% 74.7% 68.0% 71.0% 72.1% 57.3% 51.3% 47.1% 48.4% 42.8% 92.1% 81.6% 60.4% 55.9% Shareholders Equity Other 0.0% 2010 2011 2012 2013 2014 2015 2016 Highlights Strong Capital And Liquidity Position % Liquidity Ratio, % Total CAR,% Deposits are the primary source of funding with the share of customer deposits at 65.6% as at 31 December 2016 Strong growth in deposits has been driven by our branch expansion as well as the introduction of various deposit mobilizing initiatives such as mobile vans and agency banking 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 47.3% 20.1% 64.9% 29.1% 65.2% 64.9% 44.7% 23.2% 23.7% 26.3% 64.9% 52.9% 22.5% 19.0% 10.0% 0.0% 2010 2011 2012 2013 2014 2015 2016 Page 36
Income Statement Highlights Total Operating Income Total Recurring Operating Costs Net Profit Composition of Total Operating Income YE 2016 YE 2015 1.2% 1.6% Composition of Total Operating Expenses YE 2016 YE 2015 8.6% 8.3% 17.4% 17.9% 50.6% 38.6% 38.1% 49.4% 72.4% 72.6% 10.8% 12.5% Net interest income FX related income Fees & Commissions Other non- interest income Personnel expenses Depreciation and amortization Other operating expenses Page 37
Consistent Profitable Growth Sustainable Net Interest Margin % Attractive Cost/Income ratio 12.0% 9.0% 8.3% 8.4% 9.6% 11.1% 9.9% 10.1% 10.5% 60.0% 50.0% 40.0% 47.5% 48.4% 52.8% 48.4% 47.9% 47.8% 47.4% 6.0% 30.0% 3.0% 20.0% 10.0% 0.0% 2010 2011 2012 2013 2014 2015 2016 0.0% 2010 2011 2012 2013 2014 2015 2016 Stable Returns To Shareholders % Strong Return on Average Assets % 30.0% 20.0% 24.5% 18.6% 18.9% 22.2% 22.9% 21.7% 20.0% 5.0% 3.5% 3.6% 3.9% 4.0% 4.0% 3.9% 3.5% 10.0% 0.0% 2010 2011 2012 2013 2014 2015 2016 0.0% 2010 2011 2012 2013 2014 2015 2016 Source: Bank of Kigali Audited 2010-2014 IFRS Statements and Q4 2015 published financial statements Page 38
Regional Landscape East African Banks - Cost of Risk Nigerian Banks - Cost of Risk East African Banks - NPLs & Coverage ratio Nigerian Banks - NPLs & Coverage ratio East African Banks - ROAE Nigerian Banks - ROAE Source: Bank of Kigali Audited 2010-2015 IFRS Statements and Page 39
STRATEGIC OUTLOOK Page 40
Strategic Outlook Objectives Strategies Action Outcomes Customer growth in terms of current accounts increase current accounts by 100,000 in 2016 Build an ubiquitous branch footprint throughout the country Build sufficient channel capacity Expand retail product offering Expand the branch network to 80+ branches by YE 2017 Increase the number of ATMs, POS terminals and cards outstanding Build a modern and scalable mobile banking and Internet banking platforms Alternative client acquisition & service channels (retail chains, cobranded cards, utilities, etc) Flexible, offset, variable-rate, etc. mortgages Full range of consumer loan products Revolving credit cards Payroll & pension-backed loans & overdrafts Modern, multi-currency current accounts with debit cards Ubiquity of ATMs and POS terminals in urban centers and reasonable proximity elsewhere Payment & e-wallet solutions Full range of deposit products Benefit from first-mover advantage outside the capital city, making it more difficult for the competitors to follow suit Reach out to the unbanked (but bankable) population Become the bank of choice and convenience for the middle class and youth entering the employment sector Create capacity to service 500,000+ clients Maximize the product-to-client ratio Grow with clients Valuable source of retail clients through payroll programs Growth of loan book and F&C income Healthy structure & CAGR - 5 years for balance sheet >20% growth Increase the loan to asset ratio to Integrated client coverage 60% Diversification of funding base Leverage the superior lending capacity Cross-selling opportunities Increase retail loans penetration Documentary operations & trade finance, FX, other solutions Rep offices in EAC Consolidate the leading position in corporate banking Increase the maturity profile of liabilities Create a universal banking platform Leverage the superior access to wholesale funding to complement the deposit funding base Private Banking, Securities, Insurance Expand the share of higher-margin lending Maximize the cross-sell opportunities Grow the share of retail in the loan book up to 30%-40% in the medium term Reduce maturity gap Enable further expansion of long-term lending Further diversification of revenue streams Earnings CAGR - 5 years >22% Return on Average Equity > 20% Maintain profitable growth Continuous improvement of risk management policies & procedures Disciplined capital management, medium term target CAR > 20% and ROAE > 20%, implying ROAA in the 4.0% range No profitability sacrifices for the sake of market share gains Sensible dividend policy as the growth curve flattens out over time Page 41
Management Targets Return on Average Equity Other Selected Management 2016 targets 25.0% 21.7% 20.0% 20.0% 15.0% 10.0% Net Income CAGR- 5 years >22% Total Assets CAGR- 5 years >20% Reduce NPL ratio to < 5% Increase number of retail accounts by 100,000. 5.0% 0.0% 2015 2016 Page 42
Contact Information For further information please contact: Marc Holtzman Chairman of the Board Email: mholtzman@bk.rw Mobile: +1 970 948 3353 Diane Ngendo Karusisi Chief Executive Officer Email: dkarusisi@bk.rw Mobile: +250 788 143 000 Shivon Byamukama Company Secretary Email: sbyamukama@bk.rw Mobile: +250 788 384 547 Diane Mukunde Investor Relations and Commercial Manager Email: dmukunde@bk.rw Mobile: +250 788 552 136 Visit our website, www.bk.rw to access our Investor Presentations, Press Releases and Annual Reports. Telephone number: +250 252 593 100 Address: Plot 6112, Avenue de la Paix, Kigali, Rwanda. Page 43