CO-OPERATIVE BANK OF KENYA LTD FULL YEAR 2015 GROUP FINANCIAL RESULTS INVESTOR BRIEFING 1
Macro economic Environment 2
Economic Growth • The local economy is estimated to have expanded by 5.2% - 5.4% in 2015. • Recovery in tourism, agriculture, completion of some infrastructure projects and domestic consumption are expected to drive economic growth in 2016. IMF projects a growth of 5.7 % in 2016 • Inflation • Overall inflation rate was stable averaging 6.58% in 2015 down from 6.88% in 2014 supported mainly by declining fuel and food costs. Food security assured with good rains in 2016. • Based on the above, we do not foresee any major inflationary shocks and thus project a stable • inflation rate. 3
Liquidity & Interest Rates • The money market was volatile in Quarter2,2015 which saw interbank rate record a high of 25.8% in September 2015 before stabilizing at an average of 11.26% by end of year. The CBR was revised to 11.5% in July 2015 to manage liquidity and anchor inflationary expectations. • Stable bank interest rates. • Exchange Rate The KES depreciated against the dollar from KES 90.70 at the start 2015 to KES 102.31 at the close • of the year. In the first 2 months of 2016, the KES has been stable averaging KES 101/2. Low volatility is • anticipated in the remainder of 2016 on account of; Increased diaspora remittances by 20% in January 2016 compared to January 2015. Co-op Bank is • a key player. Low global fuel prices reduced Kenyan import bill by 13% year on year. ( 5 year average) • Upswing in tourism thus increase in foreign exchange. • 4
Kenya’s financial sector remains attractive • A sound financial sector. Investments in infrastructure. • Expanded regional markets / Nairobi is a regional hub • Stable political environment / good elections in the region. • Africa innovation hub; • Kenya was ranked position 1 in the world in 2015 for leveraging technology to drive inclusion by • Brookings Financial and Digital Inclusion Project (FDIP). • The capital market industry was voted the most innovative Capital Market industry in Africa in 2015 by Africa Investor. The 25% local ownership restriction for local players for listed companies on NSE was removed thus • placing our capital markets in line for a Global Financial Centre ranking. 5
A Successful Universal Banking Model Corporate & Co-operatives Institutional Banking Retail Banking Regional Expansion Associates: Subsidiaries: Banking -Micro Credit -Corporate banking -Co-op Bank of South -CIC Insurance (26% -Co-op Consultancy - Large Saccos Sudan owned) (Advisory services) & Insurance Agency( - Regional expansion -Small Medium -Government Banc assurance) -Housing Saccos to South Sudan, Enterprises (SME) Banking -CIC Africa South Uganda and Malawi Sudan(31% by Co- opBank South Sudan) -Co-op-Trust -Agri Business -Personal Banking - Institutional Investment services (mass & affluent) Banking Ltd -PSV/ Transport Saccos -Diaspora Banking - Structured, Trade & -Kingdom Securities Commodity Finance Ltd - Investment -Banking the youth ( Yea & Jumbo Junior) - NGO’s Saccos -Co-op Bank - Asset Finance Foundation -Treasury 6
Innovative Customer Delivery Platforms E-Channe hannels; ls; Mcoop op Cash(Al h(All l Telco, o, all Product duct with 2.74 74 Million on Cust stome omers), s), Inter ternet net Banking( king(Corpora Corporate& & Retail il) 144 branche ches, s, Ove ver 8700 0 Agency cy Banking king ATMs Ms, ove ver 570 , leading ng issuer uer of debit cards s 13 M Member r Coop op Movem vement, nt, 5.9 9 M & growing ng direct t account unt holder ders 888, 8,487 487 Sacco o Link k Cust stom omers s & over ver 555 5 FOSAs As Subsidi sidiar aries s business nesses 7
“Soaring Eagle” Transformation Project A new exciting frontier for the Group! 8
The “Soaring Eagle” Transformation Project The bank in year 2014, embarked on an aggressive transformation agenda driven by the need to improve operational efficiency, reduce operating costs and reposition our customer delivery platforms; Key pillars; o Branch transformation. o Sales Force Effectiveness (SFE). o Digitization and Automation. o Enhanced Credit Management framework. o Staff Productivity. o Entrenched Transformation Function o Cost Efficiency and Management. 9
The “Soaring Eagle” Transformation Project Branch Transformation and channel migration • Key Strategies o Re-organized the Branch to offer greater Service experience o Drastic reduction of our queue and service wait times o Introduction of Service zones including Queue management systems and Sit-in waiting areas o Introduction of Self Service zones; cheque / cash drop boxes, free call center lines at the branch, ATM’s in branch for ease of access, Internet Booths. o Introduction of customer service champions to assist customers. o Increase usage of our convenient alternative channels by migrating customers from branches. 10
The “Soaring Eagle” Transformation Project Branch Transformation and Channel migration • Key Benefits / Gains Queue & Service time The queue and Service time dropped with an average of 74% to 8 minutes and below which • has improved customer service satisfaction. • Customers now seat and wait to be served Migration of Transactions • The percentage of transactions happening in branch reduced by over 60%. This has made us realize growth in our alternative channels utilization. o MCo-op cash transactions increased by 60% o Agent transactions grew by 31% in 2015 o A 287% increase in the Internet Banking transactions o Our customers can now access up to Kes. 200,000 from our ATMs vide the mobile phones 11
The “Soaring Eagle” Transformation Project Branch Transformation and Channel migration • Key Benefits / Gains Self Service initiatives Customers can now enroll to our mobile and internet banking channels on the one-stop self • service platform Our enhanced 24 hour call center now enables our customers to do all essential enquiries • and other account support services Free up time and process improvement initiatives Freed up 40% of our staff to focus on sales activities through migration to digital channels • and process improvements Sales growth • The number customers holding a single account has reduced from 75% to 70% having adopted a customer centric model that has enabled us improve cross selling This is with only 80 branches having been transformed. • The remaining branches 60 Branches to be transformed by 30 th June 2016 • 12
The “Soaring Eagle” Transformation Project CHANNEL TRANSACTIONS IN '000' No. of MCoop Cash Loans Disbursed(000) 29,623 Branch Banking 19,806 200.0 44,869 183.0 180.0 ATM 31,775 160.0 60 140.0 Internet Banking 134.7 238 120.0 100.0 11,087 95.9 Agency Banking 16,145 80.0 60.0 7,553 58.5 Mcoop cash 12,488 40.0 28.4 20.0 - 10,000 20,000 30,000 40,000 50,000 - 2014 2015 FY 2014 Q1 2015 Q2 2015 Q3 2015 FY 2015 Branch vs. Alternative Channels MCO-OP CASH L LOAN DISBURSEMENTS - IN MILLIONS 120% 1,800 1 00.0 1,644 644.0 100% 1,600 1 00.0 80% 1,331 331.0 1,400 1 00.0 68% 75% 60% 1 1,200 00.0 907. 07.0 1 1,000 00.0 40% 800. 8 0.0 20% 519. 19.0 32% 600. 6 0.0 25% 0% 4 400. 0.0 225. 25.0 2015 2014 2 200. 0.0 - - BRANCH ALTERNATIVE CHANNELS FY Y 2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 13
The “Soaring Eagle” Transformation Project Sales force effectiveness and enhanced front line productivity • o Need to leverage on our 5.9 million customers o 75% of the customers had only one account o Product Centric model o Limited view of the customer Key Benefits / Gains o Implemented a customer centric model o Use of accounts Planning for identification of more business and product penetration to as many as 13 products per customer. o Relationship managers now sell full basket of products to one customer. o Clear 360 degree view of the customer. o Morning huddles give a daily focus on business development and enhanced collaboration o Continued cross selling on the 5.9M account holders reducing those with one account to 70% so far. Still a significant opportunity. o Staff trained on use of sales force tools and efficiency in sales. o Collaboration between product houses and customer owners. o Growth in our loan book and commissions. 14
The “Soaring Eagle” Transformation Project • Digitization and Automation o Creation of a shared service center o Appointment of a Chief Operating Officer (COO) o All support services grouped and centralized under COO o Appointment of Chief Information Officer (CIO) o Modeled ICT into Plan, Build and Run o Identified 68 activities that were being done at the branch and should be digitized including several customer delivery processes i.e. paperless deposits, E-Loans o Creation of a data organization significantly improving data governance o Identification of 25 use cases to significantly improve reporting and analytics o New data architecture with superior capability i.e. Data Warehouse better insights o Appointment of data architect / in house developers boasting data analytics o Centralization of service released staff in branches to focus on sales o Improved efficiency in operations o Improved system uptime up to 98% 15
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