Transcript Investor-Briefing-presentation- 2013-Financial-Performance-18

CO-OPERATIVE BANK OF KENYA LTD
2013 GROUP FINANCIAL PERFORMANCE
Contents
Macro Economic Overview
The Co-operative Bank of Kenya Story
Pillars of our Strategic Growth
Financial Performance Update
Macro Economic Overview
Macro Economic Overview
Kenya is now a frontier economy in similar ranks with
Nigeria. This is mainly due to improved performance due
to changes in political, economic and social landscape.
It offers great banking and business opportunities with
now 67% of kenyan’s having formal financial access from
any provider (Fin access 2013 Survey).
With heavy investment in roads network and standard
gauge railways and telecommunications is expected to
propel economic growth.
Macro Economic Overview
Kenya’s minerals, oil and gas offers good deals in the
medium and long term
- Commercial production of titanium at the Coast
region has already started
- Commercial reserves have been confirmed for crude
oil in Northern Kenya
- coal in Mui Basin in Kitui has also been confirmed.
Production expected in 2016/2017.
Geothermal power by GDC and Kengen expected to
lower cost of power to the business community.
Macroeconomic Overview
Kenya’s FDI flow is projected above Sub-Saharan
average in 2014
The country’s Foreign Direct Investment is forecast
at 3.2% of GDP in 2014.
This compares favorably to Sub-Saharan average of
2.9% and Middle-income countries average of 2.2% of
GDP (IMF , October 2013)
Macroeconomic Overview
The private sector remains vibrant and very
attractive to FDI
The private sector provides better linkages between
formal and informal segments of the economy.
This provides growing markets and good banking
business opportunities.
Macroeconomic Overview
Kenya’s Debt level is still sustainable
The country’s Public Debt to GDP ratio stood at
51.8% in December 2013 and is projected to touch
53.3% in June 2014.
The IMF has been carrying out Kenya’s debt
sustainability analysis since 2010 and indicates that
our country’s debt is sustainable (IMF Debt
Sustainability Analysis, April 2013 review).
Macroeconomic Overview
Kenya’s economy is now stronger to withstand external
vulnerability
The country’s gross foreign exchange reserves
averaged 4.3 months worth of import cover. This
compares favorably with 3.1 months for COMESA and
3.9 months import cover for EAC.
The 2011-2013 IMF’s Extended Credit Facility has
resulted in a stable money and forex market.
Macro Economic Overview
Gross Domestic Product (GDP)
Kenya’s external position has strengthened substantially in the
recent years.
The current account deficit, which averaged over 10% of GDP
in 2011 and 2012, narrowed to 7.5% of GDP in September
2013.
With the successful completion of the IMF’s Extended Credit
Facility (ECF), Kenya now stands stronger to withstand
external shocks.
Kenya’s economic growth rate has recovered steadily from 1.5%
in 2008 to 4.4% in Q3 2013 and an estimated 5.0% for the whole
of 2013.
This growth in 2013 is commendable given Kenya’s history of
very low economic growth in an election year.
Macro Economic Overview
Source: Kenya National Bureau of Statistics
Macro Economic Overview
Inflation
Kenya’s inflation rate is stable and within single digit level.
Inflation rate averaged 5.72% in 2013 and was within targeted
upper band of 7.5% by the National Treasury.
For January and February 2014, inflation has averaged 7.04%
which is within the National Treasury targets and is expected to
remain relatively at that range.
Interest Rates
Interest rates have been stable in 2013 resulting from a stable
inflation environment.
CBK have managed to keep the macroeconomic environment
stable resulting in a stable money market.
Macro Economic Overview
Foreign Exchange
KES has been stable against major trading
currencies in 2013
KES exchanged at an average of KES 86.125 to the
USD in 2013 and KES 86.275 in January and
February 2014 which indicates high currency
stability.
No significant volatility is expected on the KES
against other major currencies.
Macro Economic Environment
South Sudan
• Banking business opportunities remain attractive;
Less than 3% of the population has access to formal
financial services (Bank of South Sudan).
Forex business and trade finance is vibrant
Untapped agribusiness providing great potential
Number of formal SMEs has grown by over 1700%
since 2006 according to the World Bank.
The Co-operative Bank of Kenya
A rich heritage, a confident future
A rich heritage, a confident future
Predominantly owned by the Co-operative Movement
through Co-op Holdings Co-operative Society with a 65%
stake.
Kenya has the largest co-operative movement in Africa
and the 7th in the world with over 12,000 co-operative
societies, 7,000 of which are Sacco's.
There are over 10 million members in the co-operative
movement with a strong track record.
Unique wholesale/ retail bread banking model.
Growing network now with 134 branches in Kenya
Regional expansion now with a presence in South
Sudan.
Pillars of our strategic growth
Pillars Of Our Strategic Growth
1. Successful financial deepening and business diversification
2. Strong transaction income base
3. Strong risk management framework
4. Robust technology and service delivery channels
5. Strong investment in human capital
6. A powerful brand
7. Strong capital base
8. Strong & sustainable partnerships with Development Partners
9. Social investment that inspires self reliance
10. Heavy investments for future growth
Successful financial deepening and
business diversification
Retail Banking
Regional
Expansion
Co-operatives
Banking
- Co-op Bank of
South Sudan
Subsidiaries:Corporate &
Institutional
Banking
- Co-opTrust
- Kingdom Securities Ltd
Associates:CIC Insurance
- Co-op Consultancy & Ins.
Agency
- Co-op Bank Foundation
Successful Financial Deepening and Business
Diversification
We deliver a diversified product offering
To cover SME, Retail, Co-operatives, Corporate, Agribusiness,
Mortgage, Asset Finance & Micro Credit
Has linkages with all sectors of the economy - Financial,
Agriculture, Energy, Transport, Housing , Manufacturing
A diversified product offering increases the bank’s coverage
and fulfillment of customer needs, boosting wallet size
growth.
Successfully build an account base of over 4.1 Million accounts
Excellent cross selling opportunities with a customer base of
over 4.1 million accounts ; 76% with only 1 account
Linkages with Saccos expands this mass retail base, boosting
sales retail offerings; Sacco link.
26% stake in CIC Insurance Group
Remarkable growth in account numbers
4,500
4,100
4,000
Account
numbers,
thousands
3,200
3,500
3,000
2,300
2,500
2,000
1,600
1,200
1,500
1,000
695
500
0
2008
2009
2010
2011
2012
2013
Growing borrowing customer base
Number of borrowers, thousands
400
Strong
growth in
borrowing
customer
numbers
continues to
boost asset
growth and
the bottom
line
349
350
300
250
248
259
2011
2012
200
150
112
125
150
100
50
0
2008
2009
2010
2013
2. Strong Transaction Income Base
1. Built a vast capability to drive non-funded commissions
2. Strong growth in commissions as customers enjoy convenient access via
the service outlets of their choice.
3. ATMs, over 535
4. Agency Banking, 7,099 live sites, 15,000 by close of 2014
5. Branch network, 134 and growing
6. M-banking, 1.32 Million customers
7. Sacco Link Customers – 631,487
8. Forex income of Kes. 1.47B in 2013
9. Subsidiaries businesses
10.Associates
3. STRONG RISK MANAGEMENT FRAMEWORK
Proactively managed our NPL
High level of Governance; Risk & Finance Committee of the Board.
A robust credit management framework
o Enforcement of prudent credit risk management policy
o Well diversified portfolio
o Adequate provisioning policy
A sound risk & compliance framework
A well-diversified asset portfolio
Loan Distribution in 2013 (Kshs Billions)
Sacco ; 29 B
21%
SME; 11.8 B; 9%
Agribiz ;
4.2 B ; 3%
Personal, Card
and other retail;
52B; 38%
Corporate; 17.1
B; 13%
Asset Fin.; 6.1
B; 4%
Asset portfolio diversification
Corporate
Asset Fin.
Micro-credit;
3.8 B ; 3%
Sacco
M ortgage
Personal, Card and other retail
Mortgage; 12.8
B; 9%
Agribiz
M icro-credit
SM E
4. Robust Technology & Service Delivery Channels
•
Sustained investment in world-class technologies and service channels to
optimize operational efficiency while providing unrivalled service
•
Banking on the latest Bank Fusion Universal Banking (BFUB) core banking
platform from Misys with a world-class support structure with the
following:
o Latest 6 IBM P7 series servers
o Tier 3 Data centre
o Fiber connection
o MPLS technology on data movement between head office and
branches.
•
Investment in specialized systems: Opics (Treasury System) and Trade
Innovation for Trade Finance
Robust technology and service delivery channels
Branch and ATM network
600
Strong focus
on county
banking
strategy
Continued
focus on
customer
delivery
channels
535
492
500
426
377
400
300
200
100
Branches
ATMs
260
182
51
79
85
92
114
134
0
2008
2009
2010
2011
2012
2013
5. Strong Investment In Human Capital
The Bank is undoubtedly an employer of choice in the industry
We have a clear and functional organization and leadership
structure
We have enshrined a performance-based culture and the Balanced
Score Card system
We have a vibrant workforce with a good mix of age and skill sets.
Runs own Leadership & Management Centre; center of excellence in
banking training.
Includes training for Sacco's management.
6. A Powerful Brand
Co-op Bank is the face of Kenya. We embody the legacy of a
successful enterprise by indigenous Kenyans, represented by the Cooperative movement.
Our brand speaks to the character of the Kenyan people, as engrained
in our tagline ‘we are you’ and BoD Declaration of the ‘Kingdom
Bank’
We are a successful African story, being the number one Co-operative
Bank in Africa
A reputable Board of Directors; A track record of a most successful
business and operational restructuring from a huge loss of Kes 2.3Bn
in Year 2001
Co-op Bank wins the ‘Most Green Bank’ Award
2013 Energy Management Awards
CITATION
Willingness to take risk in new area of
financing (clean energy banking)
Actively promotes ‘green energy’
among our clients
Fastest turnaround time for Renewable
Energy (RE) & Energy Efficiency (EE)
financing for SME and large enterprises.
Currently have the highest
achievement in AFD Clean Energy credit
line.
Bank with the largest pipeline of
projects seeking clean energy
financing.
World Recognition
7. Strong capital base
40
37
35
29
Kshs. in Billions
30
25
20
15
14
21
21
2010
2011
16
10
5
0
2008
2009
2012
2013
7. Strong capital base
• Steady and consistent growth in shareholders equity
• Ability to double our deposit base within statutory
requirements
• Ability to lend up to Kshs 9.2 B to a single customer
• Capital retention strategy to grow business.
–Progressive dividend payout as our earnings grow
–Long term plan of deepening shareholder value
–Affordable means of funding growth
Strong return on investment
2.5
• Progressive
dividend
payout as
our earnings
grow
2.18
2
1.84
1.54
1.5
1.31
EPS
• Critical focus
of deepening
shareholders
value
1
0.5
0
DPS
0.85
0.4
0.4
2010
2011
0.5
0.5
2012
2013
0.2
2009
8. Strong and Sustainable Partnerships With
Development Partners
Leveraged on our strong balance sheet to secure longterm debt from developmental partners for over 18
billion as hereunder:
– IFC US$ 60 million (Kshs.5.1 billion)
– EIB Euro 70 million (Kshs.8 billion)
– AFD Euro 10 million (Kshs.1.2 billion)
– DEG US$ 52.5 million (Kshs.4.51 billion)
Strong and Sustainable Partnerships With
Development Partners
Senior debt has enhanced asset-liability match
Mitigated our shilling exposure
Diversified our asset portfolio
Expanded our client base to export-led sectors
Boosted our competitive position on account of
affordable lending rates
9. Social Investment that Inspires Self Reliance
Social
investment
philosophy:
empower
institutions
and
individuals so that in future they don’t need to be helped again.
Board of Directors went out of its way to incorporate a full
consultancy company - Coop Consultancy Services - with 20
consultants to support Sacco’s and related community benefit
institutions.
Capacity building for Sacco’s making them more competitive.
Carried out over 500 mandates in 3 years.
Supports Sacco’s to establish FOSA’s
Social Initiatives
Co-op Bank Foundation:one of the main pillars of the Co-op Bank Social
Responsibility program
The bank will have sponsored in 4 years, over 2,800
needy but bright students to pursue Secondary,
University & College education.
9. Social Investment That Inspires Self Reliance
• Supported the establishment of Kenya Co-operative
Coffee Exporters Ltd to help coffee farmers maximize
return on their business and take greater control of
the coffee value chain.
• Our social investment has greatly boosted our
corporate image and brand visibility.
10. Heavy Investments for future revenue growth
In line with the County Governance Structure, we have opened
over 60 branches in the last 3 years;
– Leveraging on these branches to be key banker to most of
the county governments.
– Around 20 of these branches will contribute positively to our
profits from this year (Kshs226 million loss in year 2013)
South Sudan operations: we opened our doors for customers from
September.
2013. This strategic joint venture (Co-op bank 51% / GOSS 49%),
is expected to contribute positively to our profits from this year.
(Us$3.2 million loss in 2013).
The unique joint venture guarantees quick turnaround of our
business.
Financial Performance Update
A Growing Bank
2013
2012
Total Assets
231.2
200.8
% Change
(Year on
Year)
15%
Loan book (NET)
137.1
119.1
15%
Government securities
39.3
33.4
18%
Total Deposits
181.2
163.3
11%
Borrowed Funds
10.3
4.6
124%
Number of Accounts
( Millions)
4.1
3.2
28%
Branch Network
134
114
18%
KES Billions
Optimal Investment in earning assets
Property &
equipment;
11.4B ; 5%
Cash & shortterm
funds;31.1B;
13%
Balance sheet : Asset distribution
Others;
10.7B;5%
Net loans &
Advances; 137B;
59%
Securities &
investments;41B
; 18%
Net loans & Advances
Property & equipment
Securities & investments
Others
Cash & short-term funds
Strong Balance Sheet ratios
2013
2012
Core Capital / Total Deposits
18.2%
18%
NPL / Total Loans
4.3%
5%
Total Capital / Total Risk Weighted
Asset
21.1%
23.8%
Liquidity
32.6%
35.5%
75%
73%
Loans to Deposits
Strong Balance Sheet Growth
250.0
231.2
200.6
200.0
Kshs in Billions
154.3
150.0
129.2
110.6
100.0
83.5
92.5
181.2
168.3
163.1
144.5
137.1
119.1
109.4
86.6
67.2
62.3
50.0
52.9
0.0
2008
2009
Net Loans & Advances
2010
2011
Customer Deposits
2012
2013
Total Assets
Strong Profitability Growth
KES Billions (except for Earnings per
share)
Interest Income
Interest Expense
Net Interest Income
Fees & Commissions
Forex Income
Total Income
Loan Loss Provision
Operating Expenses
PROFIT BEFORE TAX
PROFIT AFTER TAX
Earnings per Share
2013
2012
24.54 24.36
5.92
8.68
18.63 15.68
7.14
6.05
1.5
1.3
% Change
(Year on
Year)
1%
-32%
19%
18%
15%
27.89
0.78
17.4
23.85
1
14.2
17%
-22%
22%
10.87
9.11
9.98
7.72
9%
18%
2.19
1.84
19%
Sustainable Profitability
12.00
10.00
Kshs. in Billions
8.00
6.00
4.00
2.00
0.00
Profit before Tax
Key Profit & Loss Ratios
Cost to Income
2013
59%
2012
55%
Non - Funded to Total Income
33.3%
34%
FX to Non Funded income
16% 15.9%
Average Return on assets
4.2%
4.2%
Average Return on Equity
27.4%
31%
Conclusion
We are pleased with the strong balance sheet and P&L
growth with the Profit before tax of Ksh. 10.87B for the
year ended 31st December 2013 representing a 9 %
growth over the 2012 PBT of Kes. 9.98B
With the major investment in the branch network, ICT
infrastructure and new operations in South Sudan, we
expect the growth momentum to be sustained and
better profitability in 2014
Conclusion
The Board of Directors has recommended subject to
AGM and Capital Market Authority approval the
following;
A dividend payment of Ksh.0.50 per every ordinary
share held in order to retain more funds for
expansion.
A bonus share issue of one (1) new ordinary share for
each six (6) ordinary shares held.
Thank you for your continued support.
God bless you.
Dr. Gideon Muriuki, MBS
Group Managing Director & CEO