CO CO-OPERA OPERATIVE IVE BANK NK OF OF KENYA A LTD HALF F YEAR R 2015 5 INVEST STORS ORS BRIEFI EFING 1
Macroeconomic Environment 2
Favorable Macro-economic Environment in 2015 Gross Domestic Product Kenya’s economy remains resilient supported by increasing infrastructure • investments, lower energy prices and a dynamic private investment environment. Quarter1 2015 GDP numbers released in June 2015 indicate that the • economy expanded by 4.9%. • Continued infrastructure spending is likely to accelerate growth in second half 2015. Key focus issues in the 2 nd half of the year may revolve around, the • strengthened US dollar, need to improve export earnings and rising interest rates. Overall Inflation Overall rate averaged 6.42% in first half 2015 compared to 6.9% in a similar • period in 2014. • A marginal rise in inflation is projected in the second half 2015 on account of imported inflation with a strengthening US Dollar. 3
Favorable Macro-economic Environment in 2015 Kshs. Exchange and the interest rates • The exchange rate has stabilized at around Ksh.101 supported by the increasing interest rates with CBR increasing from 8.5% to 10% on 9 th June 2015 and again to 11.5% in early July 2015 • Kenya Banks Reference Rate (KBRR) has increased in tandem from 8.54% to 9.87%. • Interbank rate averaged at 7.38% in first 4-months of 2015 indicating market liquidity while the last 2-months had tight liquidity with interbank averaging 11.5% within a spike to over 20% last few weeks. Fiscal Outlook • Good focus by the Government on security enhancement and infrastructure development notably SGR, road network, port modernization, agriculture, health, education and capacity-building. • Positive outlook by the international investors with the US president visit / Global Entrepreneurship Summit (GES) in July 2015. We expect these initiatives, among others to present business opportunities for the • economy. 4
The Co-operative Bank of Kenya story Listed in Nairobi Securities Exchange in December 2008. 3 rd Largest bank by asset size of Kshs. 325 Billion; Nation-wide Brand that speaks to the character of the Kenyan people. 5 th largest company by market capitalization on the Nairobi Securities Exchange (NSE) at over Kshs. 100B from the 4,889,316,844 (of Kshs. 1 each) shares issued to date. Branch network of 143 branches (60 opened in the last 5 years in line with devolved government structure) with a total work force of 3,824 staff. A unique model for financial deepening with a customer base of over 5.4 million account holders and a wholesale banking to over 15,000 cooperative societies. Included in the MSCI Frontier markets index in 2014 increasing the bank’s visibility in the international arena. Embarked on regional expansion starting with South Sudan in a strategic Joint Venture with the Government of South Sudan. 5
Successful financial deepening & business diversification Universal Banking Model Retail Banking Subsidiaries: Corporate & Regional Co-operatives Associates: -Micro Credit -Co-op-Trust Institutional Expansion Banking Banking ( Investment -CIC -Small -Co-op Bank services) - Large Saccos Insurance Medium -Corporate of South (26% owned) Enterprises -Housing banking -Kingdom Sudan (SME) Securities Saccos -Government -Personal -Agri Banking -Co-op Banking Consultancy Business - Trade (mass & (Advisory -PSV/ Finance affluent) services) & Transport - NGO’s Insurance -Diaspora Saccos Agency Banking - Investment -Co-op Bank -Banking the Saccos Foundation youth ( Yea & Jumbo - Banc Junior) Assurance - Asset Finance 6
Successful Financial Deepening & Diverse delivery channels Innovative customer delivery platforms ATMs, over 567 Subsidiaries businesses Sacco Link 774,755 Customers & over 550 FOSAs 143 branches, Over 8,700 Agency Banking live sites, leading issuer of debit cards Unique M-Coop Cash, All Telco, all products mobile platform with over 2.17 Million customers 12 M Member Coop Movement, 5.4 M & growing direct account holders 7
The Soaring Eagle Transformation Agenda In 2014, the bank embarked on a ambitious transformation journey in order to sustain and put the group on a new trajectory for growth and market competitiveness. The review was specifically focused on the following pillars; o A lean and functional structure. o A competitive cost to income operating model. o Innovative customer delivery platforms. o Optimization of alternative banking channels. o A cutting edge performance based reward culture (KPI’s) . o Sales force effectiveness riding on our strong customer base of over 5.4 million account holders. o Digitization and automation of the key processes. o Enhanced and robust customer relationship management, data analytics and management reporting. o Strengthened risk management framework. 8
The Soaring Eagle Transformation Agenda This year has perhaps been one of the most exciting year in the bank wherein we have scaled new frontiers notably on the following; • Optimal structure o Implemented a functional / customer centric structure in December 2014. o Released over 160 staff mainly in management cadre. o We have a freeze on new recruitment with staff numbers now at 3,824 compared to 4,078 last year. o Growth opportunities for the young and energetic team with 92% being under 40 years Creation of a shared service centre • o All support services grouped and centralized under COO o Appointment of a Chief Operating Officer o Centralization of released staff in branches to focus on sales o Improved efficiency in operations o Improved system uptime 9
The Soaring Eagle Transformation Agenda Creation of Transformation Office • o Appointment of a Director Transformation o Follow up and seamless implementation of all the transformation initiatives. o Co-ordination and alignment of transformation initiatives. • Branch Transformation and channel migration o Re-organized the branch set up for better customer service o Introduced seating arrangements for our customers. o Drastic customer queue-time reduction o Introduction of critical services mainly Queue management systems, cheque / cash drop boxes, free call center lines at the branch, ATM’s in branch for ease of access. o Introduction of customer service champions to assist customers. o Optimal use of our alternative channels by migrating customers o Increased sales at the branch level o Increased cross selling opportunities 10
The Soaring Eagle Transformation Agenda Sales force effectiveness and enhanced front line productivity • o Implemented a customer centric model from the initial product centric o Relationship managers now sell full basket of products to one customer. o Clear 360 degree view of the customer. o Use of account plans thus increasing product penetration to as many as 13 products per customer. o Significant cross selling opportunities with over 5.4M account holders of whom 71% have only one account. o Staff trained on use of sales force tools and efficiency in sales. • Cost rationalization o Optimal staffing o Renegotiated contracts with vendors. o Reviewed procurement processes and procedures, including frequent retenders with significant savings. o Focused more on electronic delivery channels thus reducing brick and mortar costs o Cost to income ratio now at 51%. ( 2014 – 62.6%) 11
The Soaring Eagle Transformation Agenda • Performance Management o KPI based performance management and reward system. o Focused training across teams Data Analytics and reporting • o Implementation of the Customer relationship management systems (CRM) o Enhanced lead / sales generation capabilities o Development of dash boards to measure performance at all levels o Improved management reporting through: In house development of reporting tools. Specialized finance business partners to guide business performance o Focused review of road map for the next 3-5 years Digitization and automation of the key processes • o Digitized several customer delivery processes i.e. paperless deposits o Automating the loan origination process o A robust credit management framework o Enhanced collection of loans and advances 12
The Soaring Eagle Transformation Agenda • Key Milestones o As at 30 th June 2015, cost to income ratio has dropped to 51% from a high of 62.6% in December 2014. o Year on year despite a huge 22% growth in the Asset base of the bank to over Ksh.325 Billion, the operating expenses have reduced by 4% o Return on Equity has improved to 29% o Return on Assets up to 4.2% o Customer Queue time has reduced drastically by up to 50% in the transformed branches o Over 65% of transaction are being processed through alternative channels o Increased product sales performance by at least 40% o Through cross selling number of customers with one account has reduced from 75% to 71%. o Customer service has greatly improved. Most customers just drop their cash and or cheques and are informed of the deposit within one hour. o Overall Significant growth in profitability 13
Other Key Highlights 14
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