Investor Presentation 8 April 2020 1
Table of Contents Part 1: Economic Overview Part 2:Group Consolidated Performance: FY 2019 Part 3: Subsidiary Performance: FY 2019 Part 4: Appendices 2
Part 1: Economic Overview 3
Economic Overview • Global economic financial conditions volatile and constricted in 2019 ; marked by US-China trade war, Brexit, tensions in the Middle East, protests in Hong Kong, climate change concerns, natural calamities leading to weak economic growth estimated to be 2.9% for 2019 . • In Sub Saharan Africa: high nonperforming loans & weaknesses in public financial management systems resulted in large national deficits. • Previous estimates of sustained economic growth in East Africa region with growth projected at 6.1% in 2020 no longer possible following the COVID-19 pandemic. • Pandemic impact - supply side disruptions leading to shortage of raw materials (imports) and supplies and price increases on consumption commodities. As earnings in the different sectors dwindle, banks are likely to see asset quality deteriorate and increases in provisions for non performing loans. • A survey by McKinsey estimates a likely drop of 3%- 8% decline in Africa’s GDP under different scenarios though too early for a full assessment and impact of the pandemic. • Kenya’s GDP growth could decline by between 3pp and 10pp depending on the scenario and likely to be driven by reduction in household consumption and supply chain disruptions. Manufacturing and tourism affiliated sectors to be most impacted by the outbreak 4
Part 2: Group Consolidated Part 3: Group Consolidated Performance: FY 2019 Performance 5
I&M Holdings PLC – Income Statement Highlights Dec-17 Dec-18 Dec-19 19 vs 18 Dec -15 Dec-16 Particulars Y-Y % ▲ Kshs Mn Kshs Mn Kshs Mn Kshs Mn Kshs Mn 12,647 15,522 15,554 15,594 15,510 -1% Net Interest Income 4,592 4,973 5,763 7,597 8,285 9% Non Funded Income 23,795 3% Total Operating Income 17,239 20,495 21,317 23,191 6,412 7,379 7,833 8,481 9,461 12% Operating Expenses Profit before Loan Loss 10,827 13,116 13,484 14,710 14,334 -3% Provisions 636 -83% Loan Loss Provisions 983 2,957 4,144 3,807 Profit before Share of JV 9,844 10,159 9,340 10,903 13,698 26% 905 52% Share of Profit from JV 323 444 555 595 Profit Before Tax 10,167 10,603 9,895 11,498 14,603 27% 3,023 7,760 7,264 8,503 10,769 27% Profit After Tax 12.47 30% Earnings per Share 8.56 8.81 8.18 9.62 Dividends per Share 1.75 1.75 1.75 1.95 2.55 31% 6
I&M Holdings PLC – Balance Sheet Highlights Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 19 vs 18 Particulars Y-Y % ▲ Kshs M Kshs Mn Kshs Mn Kshs Mn Kshs Mn Cash & Bank Balances 9,948 11,084 11,880 14,867 15,386 3% Investments & Placements 44,118 52,783 57,226 85,832 97,587 14% 127,824 134,675 153,018 166,737 175,329 5% Loans & Advances (net) 9,767 12,000 17,988 21,086 26,989 28% Other Assets 315,291 9% Total Assets 191,657 210,542 240,112 288,522 Customer Deposits 132,981 146,514 169,282 213,139 229,737 8% 14,071 13,314 12,662 13,756 10,856 -21% Borrowings 13,836 29% Other Liabilities 10,844 11,208 11,153 10,753 254,429 7% Total Liabilities 157,936 171,036 193,097 237,648 Shareholders' Funds 33,721 39,506 47,015 50,874 60,862 20% 7
I&M Holdings Plc - Ratio Analysis 2015 2016 2017 2018 2019 40% Cost/Income Ratio 37% 36% 37% 37% 34% 37% 36% 47% 46% Liquidity Ratio 96% 92% 90% 78% Loan to Deposit Ratio 76% 18% 21% 20% 15% 17% Return on Equity Return on Assets 3.7% 3.7% 3.0% 2.9% 3.4% Capital Adequacy 19% 22% 18% 18% 21% Ratio 8
GROUP CONTRIBUTION DECEMBER 2019 TOTAL ASSETS KSHS ‘BN PBT KSHS ‘BN 254 12.0 Total Assets Contribution PBT Contribution 77.1 1.0 18.7 0.5 Kenya : 87.4% Kenya : 69.5% Mauritius : 6.7% Mauritius : 21.1% 15.8 0.3 Rwanda : 4.0% Rwanda : 5.1% Tanzania : 2.0% Tanzania : 4.3% 9
NFI [Kshs Mn] Fee/Cost vs Fee/Income +9% 8,286 Fee/Cost Fee/Income 7,597 +5% 1,867 1,778 90% 88% +0.4% 2,578 73% 2,567 67% -1% 2,126 2,159 35% +57% 33% 1,714 27% 1,094 24% 2018 2019 2016 2017 2018 2019 Fees & Commissions on Loans FX Income Continued growth in Non Funded Income as a Other Fees & Commissions result of quality service offering and value Other Income propositions. 10 Fee implies Non Funded Income [NFI]
Consolidated Loans & Advances and NPLs Income Statement (Kshs Mn) Balance Sheet (Kshs Mn) Interest on Advances Coverage Ratio Gross NPLs +8% -5% 22,364 59% 22,492 20,674 54% 21,310 2018 2018 2019 Loan Loss Provisions Cost of Risk -83% 2% 3,807 2018 0.4% 636 2019 2018 2019 11% Gross NPA 13% 2018 2019 Net NPA 6% 7% 11
Sectorial Distribution of Loans & Advances DEC 2018 KSHS '000' DEC 2019 KSHS '000' Mining & Quarrying; *Others; 6% 1% Mining & Quarrying; *Others; 10% 1% Manufacturing; Finance & Insurance; Manufacturing; 27% 1% Finance & Insurance; 23% 2% Business Services; Business Services; 13% 7% Transport & Transport & Communication; Communication; 5% 5% Real Estate; Real Estate; 18% Wholesale 18% Wholesale and and Retail Building and Retail Trade; Building and Trade; 19% Agriculture; Construction; 21% Agriculture; 3% Construction; 2% 9% 9% *Others includes – Consumer durables, Social & Community Services, International Organisations and Non residents. 12
Segmental Distribution – Dec 2019 Customer Deposits Customer Loans & Advances 6% 19% 19% 14% 67% 75% Corporate Business Banking Retail Corporate Business Banking Retail 13
Trend Analysis Trend Analysis 14
Performance Trend Analysis Total Assets (Kshs Bn) Deposits (Kshs Bn) CAGR +13% CAGR +15% +9% +8% +26% +20% +14% +15% 315 230 +10% +11% 213 289 240 169 211 147 192 133 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Loans (Kshs Bn) PBT (Kshs Bn) CAGR +8% CAGR +9% +27% +5% +9% +13% +16% +5% 175 14.6 +4% 167 -7% 153 11.5 135 128 10.6 10.2 9.9 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 15
Value to Shareholders Return on Equity Dividend Payout (Kshs Mn) CAGR +11% +31% +11% 21% +5% 0.0% 2,108 20% 18% 17% 1,612 15% 1,447 1,447 1,373 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Return on Assets Earnings Per Share CAGR +10% +30% +18% 3.7% 3.7% 12.47 +3% -7% 3.4% 3.0% 2.9% 9.62 8.81 8.56 8.18 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 16
Value to Shareholders NAV per Share (Kshs) NAV/Share vs Price/Share NAV Kshs 74 Historical share prices have been indexed (0.5x) to reflect the Closing Price bonus issue 1:1, effected on 10 May 2019 64 62 50 50 +20% +8% +13% +17% 74 57 54 62 57 50 45 43 43 43 2015 2016 2017 2018 2019* 70 57 65 65 58 2015 2016 2017 2018 2019 12 Month Highs [Price] Price to Book Value Ratio Price to Earnings Ratio -23% +25% +52% -43% -38% 1.2 7.7 -13% 1.1 +6% -2% 0.9 5.8 5.1 0.7 0.7 4.4 4.3 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 * -Price per share: As at 31 December 2019 17 -NAV: Net Asset Value; As at 31 December 2019
Group Highlights: FY2019 Improved Governance Framework • Creation of a new position of Regional Director supporting. Effective implementation of I&M Group’s long term vision. Increasing Brand Value and Visibility Effecting coordination within the Group building synergies for key strategic initiatives • Further strengthening of the Board with appointment on a seasoned risk professional as an independent Director • Introduction of Integrated Report demonstrating I&M’s value add to its community Expansion of Digital Value Proposition • Leveraging technology and digital innovations focused on improving customer experience and operational efficiencies. • Implementation of an upgraded core banking system - Finacle 10 across each of the banking entities in the Group • Operationalization of the Innovation hub – iCube. iCube is the Group’s Digital Factory set up to digitize the business through automation, process reengineering and improved use of alternate banking channels to drive sales, use of data and advanced analytics to make better informed decisions, and more generally fostering an innovation culture. • Introduction of Multiple Channel platform for Mobile banking enhancing the secured experience for customers while transacting from their mobile phone 18
iCube Initiatives : FY2019 • Approximately 13,000 new accounts were opened through this online Customer onboarding application solution • Enabled focus on next best products and customer retention Advanced analytics • Resulted to better understanding of customer behavior • Subsidiary websites were enhanced Redesign of Subsidiary websites on their appeal and utility. • This has enabled translating ideas into innovative services that create value for Launch of the Cultivating our customers I&Magination Innovation • 4 innovation concepts are at various Framework stages of development in readiness for customer launch. 19
Part 3: Subsidiary Performance Trend Analysis 20
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