35
KCB GROUP PLC INVESTOR PRESENTATION. H1 2018 FINANCIAL RESULTS
KCB GROUP PLC INVESTOR
PRESENTATION.
H1 2018 FINANCIAL RESULTS
MACRO-ECONOMIC HIGHLIGHTS
Macro-Economic Highlights
3
Source: CBK, WB
4.7% 4.7%5.3%
5.7%6.2%
Q2 2017 Q3 2017 Q4 2017 Q1 2018 2018P
GDP Growth Rate (%)
1.0%1.3%
6.1%4.8%
5.7%
9.4%
5.3%
8.2%
12.5%
4.7%
7.1%
5.2%
2.3%
6.8%6.3%
6.7%7.1%
2.6%
7.2%
12.0%
5.7%
4.5%
Agriculture Manufacturing Real Estate Trade Education Transport andstorage
Financial andInsurance
Construction ICT Health Mining andQuarrying
Q1 2017 growth Q1 2018 growth
Kenya
Kenya
Macro-Economic Highlights
Sources: CBK, KNBS
4
11.70%
9.21%
8.04%
4.50%
3.73%
4.40%
7.50%
2.50%
4.30% 4.20%
3.90%
3.10%
3.90%4.00%
May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18
Inflation
Inflation rate Target Upper Target Lower Non Food Non Fuel
Kenya
Macro-Economic Highlights
Sources: CBK, KNBS
103.7 103.1
103.2 103.3 103.3 101.4
100.7
101.0
100.7
Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18
KShs/USD Exchange Rate
8.31 8.20 8.14 8.13 8.09 8.01 8.01 8.04 8.03 8.02 8.00 7.97 7.93 7.68
13.70 13.69 13.68 13.49 13.49 13.49
10.00 9.50 9.00
Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18
Interest Rate Evolution (%)
91 day T bill Average lending rates CBR Rate
5
Kenya
Kenya
Macro-Economic Highlights
6
Source: CBK
-10.4%
-6.7%
-5.2%-6.2%
-5.4%
2014 2015 2016 2017 F 2018 F
Current Account Balance (% of GDP)
1.5% 1.4% 1.6% 1.7%2.0%
2.7%
2.4%
2.7%2.1%
2.0%
2.8%
3.9%
4.3%
Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18
12 Month Private Sector Credit Growth
Kenya
Kenya
Sources: IMF, Bloomberg
Macro-Economic Highlights: Regional
5.4
7.0 6.9
(7.1)
9.6
4.4
6.5 6.2
0.1
8.5
Uganda Tanzania Rwanda Burundi Ethiopia
GDP (%)
2015 2016 2017
7.1%
14.0%
9.0%
3.6%
15.0%
2.0%
9.0%
5.3%
15.0%
Tanzania Uganda Rwanda Burundi South Sudan
91 Day T-Bills
2016 2017 Q1 2018 Q2 2018
5.0%5.7% 6.6%
9.6% 9.7%
3.6%
1.9%2.5%
7.9%
14.0%
Tanzania Uganda Rwanda Burundi Ethiopia
Inflation
2016 2017 Q1 2018 Q2 2018
1.7%
52.8%
480.0%
182.2%
South Sudan
7
2207
3491
828
1643
23 111
2258
3752
856
1778
27 133
Tanzania Uganda Rwanda Burundi Ethiopia* SouthSudan
Exchange Rates to USD
Q22017 FY2017 Q1 2018 Q2 2018
2018 HIGHLIGHTS
9
Overview of the year to date
Finance Bill:
• Interest rate cap repeal
• Debate of the financial market conduct authority
• Robin hood tax
Political Climate:
• Goodwill from the “Handshakes”
• Kenya
• South Sudan
Economic drivers:• Big Four – Housing Healthcare Manufacturing Food security
• Record growth in diaspora remittances, tourism, horticulture key to stability of the shilling
Adoption of IFRS9
• Impact on capital ratios
• Grace period provided by the Central bank of Kenya
• Impact on the loan book and provisions
10
Awards and recognition
B+ B+B+
Best Practice in Sustainable Finance
Best Retail Bank in East Africa
KCB Foundation Interventions
Provision of assistive devises and learning material to 47 students living with disabilities
Scholarship offering to 47 students living with disabilities in partnership with the Kenya Institute of Special Education & MPESA Foundation Academy
Over 5,500 beneficiaries in groups and individuals have accessed business development support
Loans valued at over KShs70 million have been disbursed to over 326 entities
11
12
Livestock value chain in Dairy, Meat, Honey and Fish.
Loans of over KShs 100M to 34 Co-operatives
RFID tagging for over 39,000 for livestock identification and
traceability
45% increased milk production
Over 1,500 secondary
student scholarships countrywide since 2005
Secondary education
fees, stipend
and allowance
to 240 students
KCB Foundation Interventions
Training of youth in a 3-month innovative
hydroponics farming initiative mainly producing leafy
vegetables, tomatoes, strawberries and livestock fodder among other food
crops.
OUR CHANNEL CONTRIBUTION
14
87% of transactions performed outside the branch
10.0
8.5
Number of Branch Transactions (M)
HY 2017 H1 2018
88.0
75.4
Avg. Transactions / Teller per day
HY 2017 H1 2018
Agency, Internet and POS
25%
Mobile45%
ATMs13%
Branch Teller17%
JUNE 2017
Agency, Internet and POS
33%
Mobile42%
ATMs12%
Branch Teller13%
JUNE 2018
(14%) (15%)
15
Agency banking: 84% growth in volumes
*Others: Account opening, mini statement, load cards and Funds transfer
58.0%
16.8%13.7%
8.7%
1.8% 0.9%
61.7%
14.8% 14.0%
8.2%
0.9% 0.4%
CASH Deposit CASH Withdrawal School Fees Balance Enquiry Bill Payment *Others
Agency Transaction type
H1 2017 H1 2018
25
49 55
101
Q1 17 Q1 18 H1 17 H1 18
Volume of Transactions (KSHs. B)
4.6
7.810.2
16.3
Q1 17 Q1 18 H1 17 H1 18
No. of transactions (M)
3.8
6.2
4.0
6.4
Q1 17 Q1 18 H1 17 H1 18
Ave.Trns'/Agent p.d)
16
56.5%
22.4%19.3%
1.8%
49.7%
31.6%
16.7%
1.9%
B2C B2B C2B LIPA KARO
Mobile Transaction Types
Jun-17 Jun-18
Mobile banking: 34% growth in volumes
5575
116
156
Q1 17 Q1 18 H1 17 H1 18
Volume of Transactions (KShs. B)
8.310.9
25.7 26.6
Q1 17 Q1 18 H1 17 H1 18
Number of Transactions (M)
7.76.2
6.9 6.3
Q1 17 Q1 18 H1 17 H1 18
Av. Transaction/ active customer/mobile
17
10% growth in the average value per POS transaction
11 12
22 24
Q1 17 Q1 18 H1 17 H1 18
Volume of Transactions(KShs B)
214 230
451 470
Q1 17 Q1 18 H1 17 H1 18
POS Revenue
18
4% growth in ATM volumes Performance
36 39
74 77
Q1 17 Q1 18 H1 17 H1 18
Volume of Transactions(KShs. B)
3.3 3.3 3.3 3.4
Q1 17 Q1 18 H1 17 H1 18
Ave.Trns'/ATM p.m
3.7 3.7
7.4 7.7
Q1 17 Q1 18 H1 17 H1 18
Number of Transactions (M)
19
Channel Development
167 176 179 190 194 198 203 203
59 62 63 65 66 60 60 60
226 238 242 255 260 258 263 263
2012 2013 2014 2015 2016 Jun-17 2017 Jun-18
Branches
Kenya Intl. Businesses Group
342 360 366 370 374 374 373
419 443 455 460 461 453 441
2013 2014 2015 2016 H12017
2017 H12018
ATMs
Kenya Group
6,085
9,958 11,784 12,883
14,832 14,668 16,172 6,085
10,102 11,948
13,258 15,246 15,082
16,678
2013 2014 2015 2016 H12017
2017 H12018
Agents
Kenya Group
1,805 2,050 3,165
4,200 4,605
6,000 5,531 1,805 2,050
3,280
4,460 4,760
6,476 5,839
2013 2014 2015 2016 H1 2017 2017 H1 2018
Merchant/POS
Kenya Group
15% 1%
438 470
451 470
199
239
192
193 27
45
H1 2017 H1 2018
Mobile Merchant POS Agency ATMs Internet
KShs: M
20
Over KShs 1.4B in revenue from non-branch channels
Non-Funded Income Mix
4,506 5,494 5,179 5,159 5,482
1,163
1,350 1,294
2,051 1,294 2,220
2,014 1,576
2,645 2,824
2,500
2,411
2,351
1,633 1,881
Q2 14 Q2 15 Q2 16 Q2 17 Q2 18
Other Fees & Commission Lending Fees Exchange Income Other Income
10,389
11,269
10,400
11,488 11,481
KShs: M
21
OUR FINANCIALS
Group Asset Portfolio up
6%
KShs: 668B
Net Loans and advances
up 4%
KShs: 421B Investment in Govt.
Securities down 3%
KShs: 113B
Cash and Balances with Central Bank
and other Financial
Institutions
Up 17%
KShs: 87BFixed and
other Assets up 40%
KShs: 47B
KCB Bank Kenya Asset Portfolio up
8%
KShs: 583B
Net Loans and advances
up 3%
KShs: 387B Investment in Govt.
Securities down 5%
KShs: 97B
Cash and Balances with Central Bank
and other Financial
Institutions up 58%
KShs:60BFixed and
other Assets up 49%
KShs: 39B
Total Assets growth of 6% despite impact of IFRS 9
23
KCB Group KCB Bank Kenya
Diversified loan portfolio
24
419
449 14
13 2
Jun-17 Retail Corporate Mortgage Jun-18
* Group gross loans KShs.B
25.1%
15.8%
12.6%
4.6%
19.1%
3.3%
7.7%
2.5%
5.2%
3.7%
0.5%
35.2%
17.8%
10.7%
8.3%
8.4%
5.7%
4.6%
3.3%
3.4%
2.9%
0.3%
Personal/Household
Real estate
Manufacturing
Building and construction
Trade
Financial Services
Transport and communication
Tourism, restaurants and hotels
Energy and water
Agriculture
Mining and Quarrying
Industry Dec 2017 KCB Jun 18
Sectoral loan book comparison
82%
18%
LCY
FCY
NPL Migration and Concentration
25
1.0% 1.0% 1.0% 1.5%0.6%
0.4%
7.9% 7.9% 8.0%8.5%
9.8%
8.4%
Q1 2017 Q2 2017 Q3 2017 2017 Q1 2018 Q2 2018
CoR NPL Group
3.2%
7.3%
10.4%
15.5%
3.3%
7.8%
11.0%
16.4%
3.2%
7.4%
14.8%16.3%
3.2%
7.8%
11.6%
15.2%
CHECK OFF MORTGAGE CORPORATE SME & MICRO
Q3 2017 Q4 2017 Q1 2018 Q2 2018
92%
8%
LCY FCY
21,721 24,183
32,978 33,249
43,775
37,628
68.6%71.8%
69.2%
75.4%
56.9%
75.0%
44.0%45.7%
33.9%
37.5%
61.0%
72.6%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Q2 14 Q2 15 Q2 16 Q2 17 Q1 18 Q2 18
Gross NPL CBK Coverage Ratio IFRS Coverage Ratio
26
Good Improvement in coverage
GroupLiabilities and Equity up 6%
KShs: 668B
Deposits up 9%
KShs: 525Balances to banks and
Debt
Down 9%
KShs: 29B
Equity up 1%
KShs: 99B
Other Liabilities
down 16%
KShs: 15B
KCB Bank Kenya
Liabilities and Equity up 8%
KShs: 583B
Deposits up 11%
KShs: 470BBalances to banks and Debt down
14%
KShs: 17B
Equity up 1%
KShs: 83B
Other Liabilities
down 13%
KShs: 12B
Healthy funding from deposits
27
KCB Group KCB Bank Kenya
Balanced deposit mix
Deposits by Type H1 2017
63%
5%
26%
6%
Demand Savings Term Call
Deposits by Type H1 2018
42% 50% 51% 52%
55% 47% 46% 46%
2% 3% 3% 2%
2015 2016 2017 H1 2018
Corporate Retail Other
28
66%5%
22%
7%
89%
11%
LCY FCY
Currency Mix
Strong capital position
Core Capital to RWA Total Capital to RWA
10.5% 10.5% 10.5% 10.5%
17.4%15.4% 15.1% 15.7%
H1 2017 2017 Q1 2018 H1 2018
14.5% 14.5% 14.5% 14.5%
18.7%16.6% 15.3%
17.2%
H1 2017 2017 Q1 2018 H1 2018
29
Group Group
10.5% 10.5% 10.5% 10.5%
14.3%14.9% 15.0% 14.8%
H1 2017 2017 Q1 2018 H1 2018
14.5% 14.5% 14.5% 14.5%
17.2%16.1% 15.0%
16.4%
H1 2017 2017 Q1 2018 H1 2018
Kenya Kenya
Resolute strategy delivers 6% balance sheet growth
KShs Billions
KCB Group KCB Bank Kenya
Actual H1 2017
ActualH1 2018
Y-O-Y Change
Actual H1 2017
ActualH1 2018
Y-O-Y Change
Cash and balances with central bank 29.9 37.3 25% 25.3 34.7 37%Balances with other institutions 44.7 49.8 11% 12.7 25.4 100%Investments in Government & Other securities
115.8 112.5 (3%) 101.8 96.8 (5%)
Net loans and advances 407.0 421.5 4% 373.8 386.6 3%Fixed assets 9.6 10.5 9% 6.1 7.4 22%Other assets 23.6 36.0 53% 20.3 31.9 57%Total Assets 630.6 667.7 6% 540.0 582.7 8%
Customer Deposits 482.8 524.9 9% 423.7 470.3 11%Balances due to other banks 15.4 8.6 (44%) 8.2 0.3 (97%)Other liabilities 17.3 14.5 (16%) 13.7 11.9 (13%)Long-term debt 16.7 20.7 24% 12.0 17.1 43%Total Liabilities 532.3 568.7 7% 457.6 499.5 9%Shareholders’ Equity 85.7 98.1 14% 70.8 83.2 17%Statutory loan loss reserve 12.6 0.9 (93%) 11.6 - (100%)Total Liabilities and Equity 630.6 667.7 6% 540.0 582.7 8%
30
18% Growth in Earnings
KShs Billions
KCB Group KCB Bank Kenya
Actual H1 2017
ActualH1 2018
Y-O-Y Change
Actual H1 2017
ActualH1 2018
Y-O-Y Change
Interest Income 30.4 32.2 6% 27.2 28.9 6%
Interest Expense (7.2) (8.1) 12% (6.0) (6.9) 16%
Net interest income 23.1 24.1 4% 21.2 21.9 3%
Foreign exchange income 2.6 2.8 7% 1.5 1.3 (16%)
Net fees and commissions 7.2 6.8 (6%) 5.3 5.4 2%
Other income 1.6 1.9 15% 1.0 1.7 64%
Total other operating income 11.5 11.5 0% 7.9 8.4 6%
Total other operating expenses (17.9) (17.7) (1%) (13.7) (13.8) 0%
Provisions for bad debts (2.0) (0.8) (59%) (1.6) (0.7) (55%)
Profit before tax 14.8 17.1 16% 13.8 15.8 15%
Tax (4.5) (5.0) 11% (4.1) (4.7) 13%
Profit after tax 10.3 12.1 18% 9.6 11.1 16%
31
32
25% growth in International Business PBT
KShs. M Net loans & Advances PBT
KCB BankSouth Sudan
KCB BankBurundi
KCB BankUganda
KCB BankRwanda
KCB BankTanzania
H1 2017 H1 201812,964
14,650
11,707
12,505
224246
1,797
1,918
107 283
164%
226
371
64%
247 310
25%
317
100
33 100
203%
5% growth in
Total Subsidiary Net loans
and Advances
(68%)
6,475
5,610
Overview of Key Financial Ratios
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
19.5% 20.2%
46.2% 48.3%
8.5% 9.8%
75.4% 56.9%
14.0% 22.6%
32.2% 32.7%
3.0% 3.2%
8.9% 8.2%
1.5% 0.6%
85.1% 84.3%
10% 6%
11% 9%
23.5%
48.2%
8.4%
75.0%
20.9%
32.3%
3.0%
8.3%
0.4%
85.5%
4%
9%
Q2 17 FY17 Q1 18 KENYA GROUP
23.6%
51.8%
7.8%
75.4%
14.5%
33.5%
2.9%
8.4%
1.0%
86.9%
19%
16%
26.1%
45.4%
8.5%
72.9%
20.6%
27.7%
3.0%
8.4%
0.4%
87.7%
7%
11%
33
Interim Dividend
34
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, 30 November, 2018, to shareholders registered at the close
of business on Monday 3 September, 2018.
