KCB INVESTOR PRESENTATION Q317 GROUP FINANCIAL RESULTS NOVEMBER 2017 JOSHUA OIGARA GROUP CEO & MD LAWRENCE KIMATHI GROUP CFO
Macro-Economic Highlights: Kenya GDP Anchored by Non-Agriculture GDP Growth Rate (%) 7.5% 7.1% 6.5% 6.3% 6.1% 5.9% 6.0% 6.2% 5.7% 5.8% 5.6% 5.7% 5.5% 5.3% 4.6% 6.8% 6.1% 6.1% 5.0% 4.7% 4.9% 5.3% 5.6% 5.8% 5.0% 4.1% 4.3% 4.0% 3.8% 1.4% 0.1% Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217-1.1% Non Agriculture Real GDP Agriculture 2013 2014 2015 2016 2017P Source: CBK 2
Macro-Economic Highlights: Kenya Inflation USD/KES Exchange Rate 102.5 103.3 103.2 103.4 103.9 101.3 101.9 11.48% 11.70% 103.2 10.28% 9.04% 9.21% 7.50% 6.99% 6.34% 6.35% 5.00% 2.50% 5.50% 3.70% 7.47% 4.50% 4.30% 3.90% 8.04% 7.06% 3.50% Interest Rate Evolution (%) 13.80 13.70 13.60 13.70 10.00 10.00 8.00 7.70 8.40 8.70 8.60 8.62 8.76 8.78 8.61 8.31 8.20 8.14 8.13 Inflation rate Target Upper Target Lower Non Food Non Fuel Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 91 day T bill Average lending rates CBR Rate Sources: CBK, KNBS 3
Macro-Economic Highlights: Kenya Current Account Balance (% of GDP) -6.7% -5.2% -6.0% -6.2% -5.8% -10.4% 2014 2015 2016 Est Mar 17 Est May 17 FY17 (Forecast) 12 Month Private Sector Credit Growth 4.7% 4.6% 4.3% 4.2% 3.8% 3.3% 2.4% 2.1% 1.5% 1.4% 1.6% Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Source: CBK 4
Macro-Economic Highlights: Regional GDP (%) 10.3 9.6 7.0 6.0 7.0 7.06.8 6.9 6.3 6.5 5.4 4.4 5.4 5.4 6.0 4.9 0.5 Uganda Tanzania Rwanda Burundi Ethiopia (2.1) (3.7) 2014 2015 2016e 2017p (7.1) 6.1% 5.3% 3.1% 5.3% 1.8% Inflation 7.1% 7.9% 13.9% 8.1% 10.8% Tanzania Uganda Rwanda Burundi Ethiopia 2014 2015 2016 Q3 17 1.7% 480.0% 52.8 % 362.0% South Sudan 91 Day T-Bills 20.0% 15.0% 15.0% 13.6% 14.0% 11.8% 11.1% 9.2% 9.8% 9.8% 9.2% 9.0% 8.8% 7.1% 7.0% 7.0% 7.6% 6.0% 6.2% 4.4% 4.0% 4.0% 3.0% Tanzania Uganda Rwanda Burundi South Sudan 2014 2015 2016 1Q 2017 Q3 2017 Sources: IMF, Bloomberg 5 Exchange Rates to USD (Period Average) Country FY 2016 Q1 2017 Q3 2017 Burundi 1,629 1,690 1,748 Uganda 3,484 3,598 3,638 Tanzania 2,186 2,231 2,239 Rwanda 785.6 822.9 839 South Sudan 44.3 109.0 192.0 Ethiopia* 22.40 22.73 23.38 *Ethiopia Birr devalued by 15% in October 2017 to 26.91
DIGITAL CHANNEL PERFORMANCE
86% of Transactions outside the Branch Q3 2017 Q3 2016 Branch, 14% Branch, 20% ATM, 10% Mobile, 57% Agency, 14% Mobile, 52% ATM, 11% Agency, 12% POS, 5% POS, 5% Internet Banking, 0% Internet Banking, 0% Channel Revenue KShs M 643 661 569 493 Channel Volumes KShs B 259 21 46 288 291 354 356 28 32 56 88 114 111 168 Internet ATMs Agency POS Mobile Q3 16 Q3 17 Acquiring Agency banking ATMs Mobile Q3 16 Q3 17 Source: KCB data 7
Increased Activity on Mobile Mobile transactions (M) Mobile Loan Disbursement (KShs B) 35% 65.1 48.1 20.3 13 9.1 4 Q3 16 Q3 17 Q3 16 Q3 17 KCB App Total transactions Source: KCB data 8
Increased Activity on Digital Channels Channels Activity 7.7 Evolution of Channel Activity 3.4 4.3 5.8 3.2 3.3 3.8 4.4-14% 50% Agency (Average Trns' per agent per day) Mobile (Average Trns' per active customer p.m) ATM (Average POS (Average Trns' Trns' per ATM p.m per POS per day) in '000's) Q3 16 Q3 17 5% Distribution of Agency transactions Others Bill Payment 1.9% 1.0% 1.4% 1.8% 15% Balance Enquiry School Fees 9.6% 9.0% 11.9% 13.4% 200% Cash Withdrawal Cash Deposit 17.1% 17.1% 58.2% 57.6% Branch ATM Agency POS Internet Banking Q3 16 Q3 17 Q3 16 Q3 17 9
OUR PERFORMANCE TO DATE
15% Total Assets growth driven by Net Loans & Advances KShs B 15% 644 Kenya Asset Portfolio 558 562 27 33 88 65 100 97 595 34 73 102 36 85 104 480 27 32 89 505 28 32 91 15% 551 31 45 90 346 364 386 15% 419 332 354 16% 385 2015 Q3 2016 2016 Q3 2017 Q3 2016 2016 Q3 2017 Net Loans and advances Investment in Govt. Securities Cash and Balances with Central Bank and other Financial Institutions Other Assets 11
Composition of the Loan book 31.9% 17.1% KCB Sept 2017 Industry Mar 2017 0.6% 0.5% 2.3% 4.5% 3.0% 3.8% 3.4% 2.4% 4.8% 3.3% 5.8% 8.5% 9.1% 4.2% 10.8% 19.1% 11.2% 12.2% 16.0% 25.5% MINING & QUARRYING ENERGY & WATER AGRICULTURE TOURISM,RESTAURANT & HOTELS FINANCIALS TRANSPORT BUILDING & CONSTRUCTION TRADE MANUFACTURING REAL ESTATE PERSONAL *Gross Loans Kenya KES:B 29 16 9 4 395 336 Sep-16 Retail Corporate Mortgage SME Sep-17 12
Asset Quality within guidance level 9.1% 9.1% 9.5% 9.9% 10.7% 6.8% 6.6% 8.3% 8.0% 7.9% 7.9% 8.0% 1.4% 1.3% 1.0% 1.0% 1.0% 1.0% 2015 Q3 2016 2016 Q1 2017 H1 2017 Q3 2017 CoR NPL Group Industry NPL (Kenya) NPL Per sector Mining and Quarrying 20.78% 10.9% Trade 19.54% 14.5% 8.1% Transport and communication 16.60% Building and construction 23.9% 12.39% 10.01% 10.1% 10.2% 8.01% 7.8% 6.94% 6.3% 5.7% 4.07% 3.7% 7.3% 3.21% 1.20% 0.84% Manufacturing Agriculture Real estate Personal/Household Energy and water Financial Services Tourism, restaurants and hotels Industry Mar-17 KCB Sep 17 13
Stable Coverage Position 79.5% 76.0% 82.5% 75.4% 85.6% 69.5% 41.4% 45.6% 43.6% 50.8% 44.1% 46.5% 2015 Q3 2016 2016 Q1 2017 H1 2017 Q3 2017 IFRS CBK 14
KShs B 77% of Funding from Deposits 15% 644 606 14 558 562 14 103 9 14 97 81 91 30 36 44 28 Kenya Funding Portfolio 15% 551 505 10 480 11 88 9 79 81 19 20 26 424 429 448 16% 496 373 387 17% 435 2015 Q3 2016 2016 Q3 2017 Q3 2016 2016 Q3 2017 Deposits Bal. to banks and debt Equity Other Liabilities 15
Strong deposit mix 2% 5% 5% 6% 55% 46% 46% 45% 42% 49% 49% 49% 2015 Q3 2016 2016 Q3 2017 Corporate Retail Other Deposits by Type Q3 16 4% Deposits by Type FY 16 5% Deposits by Type Q3 17 6% 28% 26% 23% 4% 64% 4% 65% 5% 66% Demand Savings Term Call 16
Adequate Headroom on Capital Ratios Group Core Capital to RWA Group Total Capital to RWA 15.7% 16.6% 18.40% 17.40% 16.9% 17.9% 19.70% 18.60% 14.5% 14.5% 14.50% 14.50% 10.5% 10.5% 10.50% 10.50% 2015 Q3 2016 2016 Q3 2017 2015 Q3 2016 2016 Q3 2017 Min. Core/RWA Core Capital /RWA Min. Total/TWA Total Capital /RWA 17
Stable Balance Sheet supported by 16% growth in Deposits KShs Millions KCB Bank Kenya KCB GROUP Actual Q3-16 Actual Q3-17 Y-O-Y Change Actual Q3-16 Actual Q3-17 Y-O-Y Change Cash 6,535 6,119 (6%) 9,898 9,443 (5%) Balances with Central Bank 16,710 33,081 98% 16,710 33,081 98% Balances with other institutions 9,087 5,757 (37%) 38,611 42,280 10% Investments in Government & Other securities 89,104 90,447 2% 100,184 103,647 3% Net loans and advances* 332,283 384,994 16% 364,332 419,494 15% Fixed assets 9,032 9,205 2% 12,695 12,816 1% Other assets 17,477 21,740 24% 19,872 23,072 16% Total Assets 480,228 551,343 15% 562,302 643,833 14% Customer Deposits 372,612 435,095 17% 429,321 496,305 16% Balances due to other banks 4,935 6,915 40% 12,155 15,491 27% Other liabilities 8,835 9,913 12% 13,544 14,420 6% Long-term debt 14,733 11,877 (19%) 15,968 14,424 (10%) Total Liabilities 401,115 463,800 16% 470,988 540,640 15% Shareholders Equity 79,113 87,543 11% 91,314 103,193 13% Total Liabilities and Equity 480,228 551,343 15% 562,302 643,833 14% *Group Gross Loans: 433,910M 18
Resilient P&L performance KShs Millions KCB Bank Kenya KCB GROUP Actual Q3-16 Actual Q3-17 Y-O-Y Change Actual Q3-16 Actual Q3-17 Y-O-Y Change Interest Income 43,688 41,816 (4%) 48,496 46,764 (4%) Interest Expense (10,442) (9,135) 13% 12,447 11,091 11%) Net interest income 33,246 32,681 (2%) 36,049 35,673 (1%) Foreign exchange income 1,618 2,231 38% 3,530 3,632 3% Net fees and commissions 6,890 8,133 23% 8,949 11,231 26% Other income 1,908 1,879 (2%) 2,290 2,621 14% Total operating income 43,662 44,924 3% 50,818 53,157 5% Total operating expenses (18,977) (21,241) (12%) (22,044) (26,429) (20%) Net provisions for bad debts (2,977) (2,651) (3%) (3,400) (3,137) (8%) Profit Before Loss on Monetary Position 21,708 21,032 (3%) 25,374 23,592 (7%) Loss on Monetary Position - - (3,631) (1,174) 68% Profit before tax 21,708 21,032 (3%) 21,743 22,418 3% Tax 6,512 6,542-7,390 7,341 1% Profit after tax 15,196 14,490 (5%) 14,354 15,076 5% 19
Overview of Key Financial Ratios FY16 Q1 17 H1 17 KENYA GROUP 22.2% 20.3% 23.6% Return on Average Equity 24.1% 20.1% 47.6% 52.5% 47.4% Cost to Income 47.3% 51.9% 8.0% 7.9% 7.8% Gross NPL to Gross Loans 8.0% 8.0% 69.5% 79.6% 84.6% NPL Coverage 80.2% 85.6% 23.8% 23.3% 14.5% Debt to Equity 13.9% 14.0% 32.3% 35.0% 28.3% Non funded income to total income 27.8% 32.9% 3.3% 3.1% 2.8% Cost of funds 2.8% 2.9% 9.6% 7.9% 9.2% Net Interest Margin 9.5% 9.1% 1.0% 1.0% 0.9% Cost of risk 1.0% 1.0% 86.1% 86.6% 90.7% Loan to Deposit Ratio 91.5% 87.4% 11% 14% 19% Growth of Net Loans and Advances 16% 15% 6% 8% 16% Growth of Customer Deposits 17% 16% 20
Thank you. Investor Relations Email: investorrelations@kcb.co.ke www.kcbbankgroup.com