Investor Briefing & Q1 2016 Performance April 2016
Presentation Outline 1. Macro-economic overview 2. Governance & leadership structure 3. Regional expansion and diversification 4. Digital bank 5. SME strategy 6. Qualitative analysis 7. Performance of core business (intermediation) 8. Financial performance 2
Presentation Outline 1. Macro-economic overview 2. Governance & leadership structure 3. Regional expansion and diversification 4. Digital bank 5. SME strategy 6. Qualitative analysis 7. Performance of core business (intermediation) 8. Financial performance 3
Foreign Exchange Rate - Kenya The Kenya Shilling has appreciated by 1.0% on a YTD basis against the USD USD / KES 106.0 105.3 105.0 103.9 104.0 102.5 103.0 102.3 102.3 102.1 101.8 101.7 102.0 101.3 101.1 +1% 0.0 Jul ’15 Aug ’15 Sep ’15 Oct ’15 Nov ’15 Dec ’15 Jan ’16 Feb ’16 Mar ’16 Apr ’16 Stability in the foreign exchange market continues to be supported by an improved forex reserves currently at USD 7.6 billion (equivalent to 4.96 months of import cover) and a narrowing current account deficit largely due to the following: - A lower import bill for petroleum products - Recovery in tourism, tea and horticulture exports - Slowdown in consumer imports - Strong diaspora remittances. 4 4
KES vs East African Currencies USD vs. USH,TSH, RWF, KSH The Kenya Shilling maintained stability against the regional currencies in 2016 2015 2016 40.0 35.2 35.0 35.0 34.0 35.0 33.3 33.3 32.9 33.0 33.0 33.0 -1% KES / USHS 30.0 25.0 21.7 21.5 21.6 21.4 21.4 21.2 21.1 20.6 20.6 20.5 KES / TSHS +5% 20.0 15.0 10.0 7.5 7.4 7.3 7.3 7.3 7.3 7.3 7.0 7.0 6.8 KES / RWF +9% 5.0 0.0 Jul ’15 Aug ’15 Sep ’15 Oct ’15 Nov ’15 Dec ’15 Jan ’16 Feb ’16 Mar ’16 Apr ’16 5 5
FX Reserves - Kenya FX reserves have risen to five months of import cover giving a significant cushion to the shilling Reserves currently stand at $7.62 billion amounting to 4.96 months of import cover. 5.0 5.0 4.7 4.6 4.6 4.4 4.3 4.5 4.3 4.3 4.3 4.1 Months of Import Cover 4.0 Desired Minimum 0.0 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Apr-16 Key reasons for increase in reserves are: Lower oil prices i. Falling current account deficit (currently 8.2% of GDP) ii. Increased exports and inflow from tourism iii. 6 6
Current Account balance as a % of GDP - Kenya In Percent 2010 2011 2012 2013 2014 2015 2016 0 -1 -2 -3 -4 -5 -5.9 -6 -7 -8.2 -8.2 -8.4 -8 -8.9 -9.1 -9 -10.4 -10 -11 7
Inflation - Kenya The latest inflation figure as at end of April was 5.3% (down from 6.45% in March) due to - Food prices (food index is down due to the rains) - Low fuel prices 10 8.0% 7.8% 8 6.8% 6.5% 5.3% 6 4 2 0 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 8
Interest Rates Due to the high liquidity in the market, interest rates have been dropping since the beginning of February 2015 2016 Political and Economic review in the region Sep-Oct Sep Jul Peak Dec Jan Apr Aug Oct Nov Feb Mar 12.89% 18.81% 19.84% 25.84% 14.87% 8.77% 5.19% 6.13% 4.51% 4.09% 4.05% Interbank rate 11.33% 11.51% 18.61% 21.35% 22.13% 9.21% 10.41% 11.76% 9.32% 8.41% 8.77% 91 Days T. Bill 182 Days T. Bill 12.15% 12.36% 14.55% 21.61% 22.29% 10.09% 12.34% 14.18% 11.93% 10.66% 10.69% 12.53% 13.82% 16.30% 21.50% 22.36% 11.93% 12.75% 14.92% 13.25% 11.91% 11.80% 364 Days T. Bill On March 21 st 2016, the MPC met and retained the CBR Rate at 11.5% (keeping it at the same level for the last 9 months) The MPC had earlier also retained the KBRR at 9.87% (on Jan 20th 2016) 9
Kenya’s Resilient Economy Kenya’s GDP growth rate maintained an upward growth rate with an increasing momentum while Africa is experiencing declining growth rate. Kenya’s Gross Domestic Product (GDP) is estimated to have expanded by 5.6% in 2015 which was a slight improvement compared to a 5.3% growth in 2014. Kenya’s GDP growth rate is projected to rise to 5.9% in 2016 and 6.1 % in 2017 predicated on infrastructure investments. Fiscal consolidation is expected to ease pressure on domestic interest rates and increase credit uptake by the private sector. The contraction in the current account deficit will continue to be supported by declining commodity prices and rising exports of tea. 6.1 5.7 5.6 5.3 4.6 2011 2012 2013 2014 2015 10 10
Economic growth drivers Kenya Tourism showing positive signs of recovery with enhanced security with Kenya registering the highest growth of 27% in Hotel Bookings For The Period May To July In Africa. Government incentive on reduction of park entry fees from $90 to $60 and More chartered airlines from Europe to Mombasa, have boosted the sector. Kenya recorded the fastest rise in foreign direct investments (FDI) in Africa and the Middle East, at 47%. A total of 84 projects worth Sh102 billion from real estate, renewable and geothermal energy as well as roads and railways provide a huge chunk of new jobs for Kenyans. Kenya was ranked 3rd in terms of numbers of projects initiated after the United Arab Emirates (UAE) at 298 and South Africa at 118. Kenya’s Agriculture Experiencing Renewed Growth As A Result Of Improved Weather And Rainfall Pattern. According to the KNBS economic Survey , Agriculture value added rose from 3.5% in 2014 to 5.6% in 2015. Total value of marketed production at current prices increased by 11.3% from KSh 333.2 billion in 2014 to KSh 371.0 billion in 2015. Total earnings from crop sales increased by 15.5% to KSh 271.8 billion in 2015. 11 11
Macro-economic Indicators – East Africa 12 12
Macro-Economic Indicators Summary (East Africa) DRC Uganda Rwanda Tanzania 91 Days T-Bill 15.56% 5.89% 9.02% 4.7% 16.28% 6.21% 17.67% 5.4% 182 Days T-Bills 16.19% 8.35% 18.81% 8.1% 364 Days T-Bills 16.0% 12.0% 12.0% 6.5% Central Bank Rate 6.2% 5.8% 5.4% 4.5% Inflation 13
Presentation Outline 1. Macro-economic overview 2. Governance & leadership structure 3. Regional expansion and diversification 4. Digital bank 5. SME strategy 6. Qualitative analysis 7. Performance of core business (intermediation) 8. Financial performance 14
2 Strong Governance & Leadership Structure CBK CMA Rating Agencies NSE Equity Group Holdings Limited Shareholders Subsidiary Boards Subsidiary Boards Group Board Group Board CEO’s office Board Committee Board Director Chief Officer, Director Committees Committees Governance, Finance, Brand, CEO Strategy, Legal, Innovation, Culture and Subsidiary Subsidiary Group Internal Company Secretary Payments HR Internal Audit Internal Audit Auditor Non-Banking Banking Corporate Subsidiaries Office Subsidiaries* Group Chief Operating Officer Equity Group Equity Bank Foundation Kenya Group Director, Group Director, Payments Finance Equity Bank Equity Rwanda Chief Technology & Risk and Investment Bank Information Officer Compliance Officer Equity Bank Tanzania Equity Insurance Group Director Group Director, Agency Strategic Relations Equity Bank Treasury &Partnerships Uganda Consulting Group Director, Group Director, Equity Bank Special Projects Corporate Banking South Sudan Infrastructure Group Director, Equity DRC Group Director, Services SME Banking (Pro Credit Bank) Analytics Each subsidiary with own Board of Directors compliant with local regulations 15
Presentation Outline 1. Macro-economic overview 2. Governance & leadership structure 3. Regional expansion and diversification 4. Digital bank 5. SME strategy 6. Qualitative analysis 7. Performance of core business (intermediation) 8. Financial performance 16
Regional Expansion – Key Metrics for Banking Subsidiaries 3 KES “Billion” Regional Regional Regional Contribution Contribution Tanzania Rwanda Uganda S. Sudan DRC Total Q1 2016 Q1 2015 22% 21% 12.8 10.5 12.5 Deposits 10.5 20.7 67.0 1% 31% Deposits Growth 23% 21% -61% 14% 8.6 15.4 7.0 17% 13% Loan 0.4 14.2 45.5 Loan Growth 71% 21% -1% -89% 37% 56% 21.0 21% 20% 13.9 14.4 28.8 Assets 17.0 95.0 Asset Growth 21% 19% 12% -57% 49% 23% PBT 0.08 0.09 0.02 0.07 5% 0.06 10% 0.32 PBT Growth -12% -50% 2% -95% -41% -45% 17
Regional Subsidiaries – Size and Contribution 3 (Assets and PBT contribution by countries) Total Assets split by Country PBT split by Country 100.0% 100.0% 100.0% 100.0% 0.8% Rwanda 3.0% 3.1% Rwanda 1.9% 1.2% Uganda Uganda 4.0% 3.8% 1.4% 1.1% Tanzania 1.5% 1.5% Tanzania 4.6% 4.7% 0.2% 0.0% DRC 0.0% DRC S. Sudan 4.7% 6.4% S. Sudan 8.6% 3.2% 95.1% 79.8% 78.7% Kenya 90.5% Kenya Q1 2015 Q1 2016 Q1 2015 Q1 2016 18
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