CfC Stanbic Holdings Ltd

CfC Stanbic Holdings Ltd

Contents 1 Section Page 1. Introduction 2 2. Year in review 4 3. Financial analysis 6 4. Corporate and Investment Banking (CIB) 18 5. Personal and Business Banking (PBB) 21 6. SBG Securities (SBGS) 24 7. Strategy and prospects 27 Q & A

Introduction Kitili Mbathi Chief Executive, CfC Stanbic Holdings Limited

Operating environment 3 2013 was another year of two halves. The first half of the year was marked by subdued economic activity ahead of the elections but economic activity accelerated strongly in the second half of the year. Headline inflation reached 7.2% year on year in December 2013 compared to 3.2% in December 2012. The increase was mainly driven by higher food prices and the amendment of the VAT law in September 2013 that expanded the basket of applicable goods. We expect inflation to largely be within the target range of the Monetary Policy Committee and similarly expect policy rates to remain at current levels. Central Bank of Kenya was consistent in its Monetary Policy stance, reducing the Central Bank rate to 8.5% from 11% in December 2012. In turn we were able to pass on the benefits to our customers by reducing our base rate from 17% to 13.5% over the course of the year. The currency was largely stable for most part of the year with the Central Bank of Kenya being quite resolute in mopping up excess liquidity. Liquidity conditions were volatile primarily due to the implementation of devolution which slowed down Government spending. The successful elections combined with the improving economic prospects has resulted in increased foreign investor interest in the region. The unfortunate events in South Sudan will make operations more difficult but we remain committed to our business. Both the Bank and Stock Brokering businesses won a number of awards which is testament to our continuous efforts to better serve our customers.

Year in review Greg Brackenridge Chief Executive, CfC Stanbic Bank

Key metrics 5 Dec-13 Dec-12 Change % Total revenue (Kes m) 16,203 14,092 15 Profit after tax (Kes m) 5,127 3,010 70 Return on average equity 17.2% 12.7% Return on average equity (excluding goodwill) 25.0% 21.1% Credit loss ratio 1.1% 1.0% Cost to income ratio 50.7% 62.9% Earnings per share 12.97 9.90 31 Dividends per share 0.63 0.73 Tier 1 capital ratio 18.2% 20.5% This year s financial performance demonstrates successes in various areas namely: Improved interest margins which were mainly driven by improved liability mix which lowered the cost of funds. Lower operating costs. Strong full year South Sudan results. Improved performance from SBG Securities. Personal and Business Banking was able to grow customer balances at rates higher than the total industry. Significant growth in trade finance products more than offset a reduction in term loans in Corporate and Investment Banking. Total capital ratio 21.0% 25.5%

Detailed Financial Analysis Edwin Mucai Chief Financial Officer

Summarised group income statement 7 Dec-13 Dec-12 Change Kes millions Kes millions Net interest income 7,542 6,542 15 Non-interest income 8,661 7,550 15 Total income 16,203 14,092 15 Credit impairment charges Total income after credit impairment charges Operating expenses (767) (635) % (21) 15,436 13,457 15 (8,212) (8,869) Profit before tax 7,224 4,588 57 Tax (2,097) (1,578) Profit after tax 5,127 3,010 70 7 (33)

Net interest income Kes millions 14,000 12,000 10,000 Net interest income increased year on year by 15% as explained by: A drop in cost of funds on customer deposits of Kes 2b. This decline was mainly driven by a change in the funding mix. 8 8,000 6,000 4,000 Interest income Interest expense Net interest income Partly offset by a decline in interest income by Kes 1b mainly driven by decrease in the Bank s base rate, which reduced from 17% at the start of 2013 to 13.5% as at December 2013. 2,000 - Dec 2012 Dec 2013

Non-interest revenue 9 10,000 9,000 Kes millions 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Dec 2012 Dec 2013 Other revenue Trading income Net fees and commissions Net fees and commission income Net fees and commission income increased from Kes 2,543m in 2012 to Kes 2,881m. This was mainly attributable to revenues earned from higher transactional banking revenues in South Sudan and growth of the trade finance activities. 2012 2013 Trading revenue 54% 46% 53% 47% Income from trading increased from Kes 4,974m to Kes 5,659m. This increase was mainly driven by increased trading volumes in South Sudan and increased equity trading income. Net Interest Income Non-interest revenue

Credit impairment charges 10 Kes millions 900 800 700 1.11% 1.15% 1.10% Impairments have increased year on year and this is mainly because the retail lending book is now a larger part of the total lending book. 600 500 400 300 200 0.96% 1.05% 1.00% 0.95% PBB credit losses CIB credit losses CLR Quality of the Corporate and Investment Banking book continues to be good with no credit impairment charges booked in current year. 100 0.90% 0 Dec 2012 Dec 2013-100 0.85% CLR- Credit loss ratio

Operating expenses 11 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Kes millions 62.9% 50.7% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% Other operating expenses Staff costs CTI Operating expenses for 2013 were lower than 2012 costs by Kes 1.1 billion mainly due to costs associated with implementation of strategic projects that did not recur as well as a number of cost saving initiatives which have paid off. Employee compensation and related costs increased by Kes 487 million mainly due to full year South Sudan costs; in 2012 the branch was only in operation for eight months. - Dec 2012 Dec 2013 0.0% The cost to income ratio reduced to 50.7% from 62.9% in 2012 reflecting various productivity gains realised from investments made in prior years. CTI- Cost to income ratio

Summarised group balance sheet 12 Dec-13 Dec-12 Change Kes millions Kes millions % Assets Financial investments 48,545 24,089 >100 Loans and advances to banks 34,714 12,334 >100 Loans and advances to customers 69,133 66,150 5 Other assets 15,773 27,886 (43) Property and equipment 2,175 2,303 (6) Intangible assets 10,172 10,450 (3) Total assets 180,512 143,212 26 Liabilities Deposits from banks 35,558 25,556 39 Deposits from customers 94,728 74,907 26 Borrowings 5,848 6,698 (13) Other liabilities 11,952 8,810 36 Equity 32,426 27,241 19 Liabilities and equity 180,512 143,212 26 Contingents 25,724 13,479 91 Letters of credit 13,142 7,759 69 Guarantees 12,582 5,720 >100

Customer loans and advances 13 69,500 69,000 Kes millions 69,133 68,500 68,000 67,500 67,000 66,500 66,000 65,500 65,000 66,150 Customer loans growth was mainly within the Personal and Business Banking space. 64,500 Dec-12 Dec-13 2013 Loans and advances by product 2013 Loans and advances by business unit 16% 43% Home loans 27% Overdrafts PBB, 48% CIB, 52% 14% Vehicle asset finance(vaf) Term lending

Customer loans and advances- Non-performing loans (NPLs) 14 2,000 1,800 1,600 1,400 Kes millions 1,785 NPLs have increased by Kes 736m mainly within Personal and Business Banking. 1,200 1,000 1,048 800 600 400 200 0 Dec-12 2013 NPLs by product Dec-13 2013 NPLs by business unit 5% 9% 40% Home loans 20% Overdrafts Installment sales(vaf) Card 25% Corporate lending 1% Term lending PBB, 75% CIB, 25%

Customer deposits 15 100,000 90,000 80,000 70,000 60,000 Kes millions 74,907 95,027 Customer deposits grew by 26.8% year on year with growth in current account balances registering the highest growth of 42.7%. 50,000 40,000 30,000 20,000 10,000 - Dec-12 Dec-13 2013 customer deposits per product 2013 customer deposits by business unit 15% 8% 7% Current accounts PBB, 35% 70% Savings accounts Call deposits CIB, 65% Fixed deposits

Funding, liquidity and capital 120% 100% 80% 60% 40% 20% Funding mix 19% 18% 6% 7% 5% 3% 18% 20% 52% 53% Total assets funded mainly from customer deposits. The liquidity and capital requirements have been complied with for the period. 16 0% Dec-12 Dec-13 Customer deposits Deposits with Banks Borrowings Other liabilities Equity Liquidity ratio (Bank only) Capital adequacy (Bank only) 80% 70% 60% 50% 40% 30% 20% 10% 0% 46% Dec-12 68% Dec-13 30% 25% 20% 15% 10% 5% 0% 26% 20% 21% 18% 15% 12% 11% 8% Dec-12 Dec-13 Core capital to risk weighted assets Total capital to risk weighted assets Statutory minimum core capital to RWA Statutory minimum total capital to RWA

Group shareholder value 17 14 12 10 8 6 4 2 0 Kes Earnings per share 9.90 Dec-12 12.97 Dec-13 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Return on average equity 12.73% Dec-12 17.19% Dec-13 Dividends per share Return on average equity net of goodwill 0.74 0.26 0.72 0.25 0.7 0.24 0.68 0.66 0.64 0.62 0.6 0.73 0.63 0.23 0.22 0.21 0.2 21.05% 25.03% 0.58 Dec-12 Dec-13 0.19 Dec-12 Dec-13

Corporate and Investment Banking (CIB) Mike Blades Director, Corporate and Investment Banking

CIB Summary performance Dec-13 Kes millions Dec-12 Change Kes millions Net interest income 4,271 3,521 21 Non-interest revenue 7,257 6,442 13 Total income 11,528 9,963 16 Credit loss ratio 0.0% 0.2% Customer loans and advances 35,988 39,824 (10) Customer deposits 62,344 47,496 31 Total assets 143,599 112,084 28 % 2013 highlights Customer loans and advances dropped by 10% due to subdued credit appetite coupled with large repayments on the term book. Customer deposits grew by 31%. Total revenue growth of 18% year on year. Strategically repositioned the business to focus on customer revenues which is consistent with Corporate and Investment Banking (CIB) globally. Higher proportion of the short-term loans within total loans. Strong year on year growth on off-balance sheet items. 19 Contingents 23,686 12,531 89 Letters of credit 11,859 7,622 56 Guarantees 11,827 4,909 >100

CIB 2014 strategic priorities 20 Improve the customer experience. Credit turnaround times. Service levels. Balance sheet; growth to be centered around Transactional Products and Services. Leverage on CIB Global businesses with a focus on Oil and Gas and Power and Infrastructure. Grow linkages with our other CIB operations on the continent.

Personal and Business Banking (PBB) Adam Jones Head, Personal and Business Banking

PBB Summary performance Dec-13 Kes millions Dec-12 Change Kes millions Net interest income 3,239 2,998 8 Non-interest revenue 922 875 5 % 2013 highlights Net interest income increased by 8% impacted by; Decreases in base lending rate over the course of the year. 22 Total income 4,161 3,873 7 Asset growth achieved in last quarter of 2013. Credit loss ratio 2.3% 2.1% Customer loans and advances 33,145 26,326 26 Customer deposits 32,684 27,411 19 Total assets 36,913 31,128 19 Contingents 2,038 948 >100 Slower growth in customer deposits. Non-interest revenue rose by 16% excluding Direct Sales Agents commissions. CLR ratio at 2.3% compared to prior year of 2.1% driven by growth in the customer loans and advances. Quality of the asset book has been maintained. Strong growth achieved by both Business Banking and Personal markets, with 24% increase in current account balances. Letters of credit 1,283 137 >100 Guarantees 755 811 (7)

PBB 2014 strategic priorities 23 Continue to improve the customer experience. Reduce customer turnaround times. Transactional and liabilities account growth. Commercial Banking including trade finance offering. Leverage the CIB corporate banking relationships. Digital channels investment. Costs containment.

SBG Securities (SBGS) Nkoregamba Mwebesa Chief Executive, SBG Securities

SBGS Summary performance 2013 highlights 25 Dec-13 Dec-12 Change Kes Kes % millions millions Net interest income 32 23 35 Non-interest revenue 482 233 >100 Total revenue 514 256 100 Total expenses (241) (176) 36 Profit before tax 273 80 >100 Tax (84) (21) >100 SBG Securities profit after tax increased by >100%. Brokerage Commissions up by >100% buoyed by an 80% increase in NSE turnover. Market Share; In 2013, SBGS was ranked: 3 rd in the equities market with a market share of 12.18% up from 5 th position in 2012 with 10.21% market share. 5 th in the bonds market with a market share of 9.74% from 7 th position in 2012 with a market share of 3.43%. SBGS won the Capital Markets Award for East Africa Broker of the year 2013/2014. Profit after tax 189 59 >100

SBGS 2014 strategic priorities 26 Focus on deepening client interactions to help maintain market share momentum. Enhanced sales function with dedicated resources at both Institutional and Retail Segments. Continue to improve the quality of our research product. Widen distribution of Equity Research offering to Institutional Investors. Tailor Macro-economic and Equity Research to meet the needs of High-Net Worth individuals. Innovation Re-launch and enhancement of itrader to potentially include international markets. Improvement on real time aspect of funding and payment options for itrader. Strong pipeline of Capital Market placement deals in 2014.

Strategy and prospects Greg Brackenridge Chief Executive, CfC Stanbic Bank

Strategic priorities 28 Creating a universal bank servicing all customer segments: Stanbic Bank Kenya was primarily an investment bank focusing on the corporate and high end retail segments of the market with some Global Markets capability whilst CfC Bank was mainly an asset finance bank. Upon merger, strategic focus was to build out the capabilities necessary to deliver a full service bank. Investment in infrastructure, technology and people was key to delivering the strategy. Maintain above market average Compounded Annual Growth Rate in profit after tax. Improve Return on equity. Continue with productivity improvement initiatives aimed at further improving our cost to income ratio.

Medium term goals 29 Cost discipline maintain Cost to Income ratio within the range of 50%. ROE performance target of 25%+. Non Interest Revenue as a proportion of total income target of 50%. Funding mix increase share of core accounts (current and savings accounts). Increase PBB contribution to PAT and balance sheet.

Appendix

Appendix 1: Overview of the Group s businesses 31 Business activity We lend money to our customers We provide investment solutions to our customers Balance sheet item created Loans and advances Financial investments Deposits Income statement impact Interest income net of credit impairment charges Interest expense We source funding Subordinated debt Interest expense Risks arising from this activity Credit risk Interest rate risk Operational risk, including compliance Environmental and social risk Liquidity risk Interest rate risk Operational risk, including compliance Liquidity risk Interest rate risk Operational risk, including compliance We provide transactional services and knowledge based services to our customers, including equity and bond brokerage services Current account balances Net fees and commission revenue Operational risk, including compliance We offer risk mitigation products and sell and buy foreign exchange Trading revenue Market risk Credit risk Operational risk We earn revenue from other sources linked to our core banking activities Other revenue Market risk Credit risk Insurance risk Operational risk We invest in our people as our most competitive advantage Staff costs Operational risk, including compliance Social risk We invest in our operations Operating expenses Operational risk, including compliance Social risk

Appendix 2: Awards in 2013 32 KPMG awards 2013 Most customer-focused bank, CfC Stanbic Bank 2013 African banker awards Deal of the year, CfC Stanbic Bank Best in transaction methods and systems, CfC Stanbic Bank The Banking awards 2013 Capital Markets awards 2013 Best bank in customer satisfaction, CfC Stanbic Bank IPO of the Year, Umeme Ltd IPO (Transaction Advisor), CfC Stanbic Bank Best bank in Kenya Tier II, 2nd place, CfC Stanbic Bank East Africa Broker of the Year, SBG Securities Best bank in vehicle and asset finance, 3rd place, CfC Stanbic Bank Best bank in product marketing - Pure save, 3 rd place, CfC Stanbic Bank Best Lead Transaction Advisor, 1st runner up, CfC Stanbic Bank Bonds Dealer of the Year, 1st runner up, SBG Securities Bond Issuer of the Year 1st runner up, CfC Stanbic Bank Investment Bank of the Year, 2nd runner up, CfC Stanbic Bank

Contact Details Edwin Mucai Immaculate Mbithe Chief Financial Officer +254 20 363 8601 Edwin.Mucai@stanbic.com Investor Relations Analyst +254 20 326 8568 Immaculate.Mbithe@stanbic.com