Absa Bank Kenya Plc · NSEKE:ABSA
Absa Bank Kenya — FY2021 Earnings Presentation
33 slides from Absa Bank Kenya's earnings presentation, Mar 15, 2022
Slide 1: 2021 Earnings
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Slide 2: Table of Contents
Table of Contents Business Financial Overview Performance Outlook In Summary
Slide 3: Business Overview
Business Overview Jeremy Awori – Chief Executive Officer
Slide 4: Operating Environment: uncertain operating environment with addressable risks and opportunities
Operating Environment: We are navigating an uncertain operating environment with addressable risks and opportunities Inflation remained well anchored within the Government Head winds Kenya’s GDP growing above SSA average medium-term target. However, we are mindful of risks ahead 1. Elections Kenya 9
Slide 5: Absa today: Business Transformation
Business Transformation: Over time, our business has evolved towards a full financial services group driven by a broader proposition set Timiza for Business Retail Banking Timiza for Banc- SME assurance China Retail Corridor Banking Corporate Lending Absa SME Banking 2011 FX Sales today Trade Financ
Slide 6: Key Operating Outcomes
Business Transformation: With 2021 results, our business has achieved significant transformation over the last 10 years (In KES bn unless stated otherwise) 2011 2021 10-year change Revenue 26bn 37bn 10bn+ Outcomes Financial Cost to Income Ratio 53% 45% 8% improvement Total Assets 166bn 429bn 2.6x Ca
Slide 7: Supporting our customers through COVID-19
Supporting our customers: In 2020 and 2021, our business remained responsive in supporting our customers recover from COVID-19 2020 2021 2021 of loans gross lending in of total assets restructured 2021 Representing 30% of the loan Lending to customers Support to businesses and book. 95% of restructu
Slide 8: Product Innovation
Product Innovation: We continue to innovate to bring easier, faster and better services to our customers First in the market WhatsApp Launched scalable Digital Women in Business proposition Banking Finance platform 700+ Agency Banking outlets Novo FX for foreign currency Market-leading transaction i
Slide 9: Building the Absa Brand
Building the Absa Brand: We continue to build our new brand for local relevance Brand Awareness Score 92% 82% 28% 2019 2020 2021 Other scores #2 72% 75% Second most Colleague Customer reputable Bank in Brand Love Experience Kenya score Index score
Slide 10: Building a great place to work
Building a great place to work: We are building Absa as a fun, vibrant and inspirational place to work Won 2022 Employer of Choice Enabled by: Award
Slide 11: Creating shareholder value
Creating shareholder value: We continue to deliver returns for our shareholders (1) 2017 2018 2019 2020 2021 Dividend KES 5.4bn KES 6bn KES 6bn - KES 6bn Dividend Yield 9% 11% 10% - 9% Dividend Yield Rank #2 #2 #1 - #1 (Financial Sector) Total Returns 20% 26% 33% (28%) 32% 1. Took decisive actions t
Slide 12: Sustainability
Sustainability: We continue to embed sustainability at the core of our strategy Delivering our Role in Society through four pillars Environment Education and Skills • 1st Bank to be recognized by Kenya Development Green building society for • ~200,000 youths trained through championing initiatives t
Slide 13: Awards and Recognitions in 2021
Awards and Recognitions in 2021: Our efforts have been recognized by external stakeholders Brand Awareness: Top rated as the brand that has become #2 Brand in Kenya for Brands Transforming Lives by most accessible over 2020 – 2021 By One-Pulse Business Monthly East Africa CIO Awards - “Best Tech Ove
Slide 14: Financial Performance
Financial Performance Yusuf Omari – Chief Finance Officer
Slide 15: 2021 Financial Results: Growth in balance sheet across all business segments
2021 Financial Results: Growth in balance sheet across all business segments (In KES bn unless stated otherwise) and Advances Deposits YoY +12% YoY +6% Dec 20 Mar 21 Jun 21 Sep 21 Dec 21 Dec 20 Mar 21 Jun 21 Sep 21 Dec 21 ▪ LDR of ▪ Focus is on attracting to lower the ▪ Growth driven by Trade Loans,
Slide 16: 2021 Financial Results: Revenue up 7%
2021 Financial Results: Revenue up 7% with growth in both NII and NFI despite compressed margins (In KES bn unless stated otherwise) and NFI functional diversification 7% Markets 11.7 11.1 5% Corporate NFI Retail BB 25.2 23.4 NII 8% 2020 2021
Slide 17: 2021 Financial Results: Central Bank Rate remained stable
2021 Financial Results: Central Bank Rate remained stable in 2021 Yield vs Central Bank Rate movement (%) 11.8 As a 11.4 11.3 responsible 10.7 10.3 10.2 financial 9.6 9.5 9.6 9.7 partner, we have been 9 9 8.5 repricing the book and 7.25 7 7 7 7 7 7 passing on the benefits to our customers. Dec 18 Ju
Slide 18: 2021 Financial Results: Prudent cost management
2021 Financial Results: Prudent cost management and transformational investments leading to cost drop of 16% (In KES mn unless stated otherwise) (1) Cost : 2020 – 2021 per channel: 2021 (16%) Branch, 10% 19.8 bn POS, 9% of all transactions outside Branch Staff Cost ATM, 11% 16.7 bn Digital, 70% Staf
Slide 19: 2021 Financial Results: Improvement in quality of credit portfolio
2021 Financial Results:Improvement in quality of credit portfolio (In KES bn unless stated otherwise) (3) (2) Industry (1) (4) Industry Notes 2020 1. MEV – Macro Economic Variables 2021 2. SICR – Significant Increase in Credit Risk 3. Data as at Q4 2021 : source CBK 19 4. Industry Data at Q3 2021
Slide 20: 2021 Financial Results: All key financial measures showing improvement
2021 Financial Results: All our key financial measures showing marked improvement (In KES bn unless stated otherwise) Indicators 2021 2020 Comment Income 36.9 34.5 7% Net Interest Income 25.2 23.4 8% P&L Non Funded Income 11.7 11.1 5% Operating Costs (16.7) (19.8) (16%) Impairment (4.7) (9.0) (48%)
Slide 21: 2021 Financial Results (Key Ratios): Cost Income Ratio improvement
2021 Financial Results (Key Ratios): Cost Income Ratio showing marked improvement with Loan Loss Ratio improving indicating quality of our portfolio Indicators 2021 2020 Cost to Income Ratio 45% 48% Marked improvement (300 bps) Marked improvement in underlying portfolio Loan Loss Rate 2.0% 4.3% qual
Slide 22: Key Ratios: Strong capital and liquidity ratios
Financial Results (Key Ratios): Strong capital and liquidity ratios to support future growth and returns recovery Ratio Ratio Ratio Core Capital Ratio Regulatory Minimum Total Capital Ratio Regulatory Minimum Liquidity Ratio Regulatory Minimum 18. 0% 17. 5% 17.5% 17.1% 17. 5% 38.7% 16. 5% 38.3% 17.
Slide 23: Outlook
Outlook Moses Muthui - Chief Strategy Officer, Absa Finance Director, Absa Corporate and Investment Bank
Slide 24: Clear Strategic Direction: Growth, Transformation and Returns
Clear Strategic Direction: Sharpening our focus on Growth pillar of our Growth, Transformation and Returns (GTR) Strategy We are sharpening our GTR focus on Growth in 2022/23 while sustaining new-found levels of Achieved Transformation and Returns goals of our Transformation and Returns 2018-2023 St
Slide 25: CAPEX Investments: Accelerated CAPEX for a Digitally Powered Business
CAPEX Investments: Accelerated CAPEX to deliver a Digitally Powered Business (In KES bn unless stated otherwise) The dominant change of our business today is to transform our company digitally Forward Catalyst: CAPEX Predominantly focused on Front-end digital transformation mainly in our consumer fi
Slide 26: OPEX Re-Investments
OPEX Re-Investments: Applying excess cost capacity to re-invest for topline growth Previous Cost Philosophy CIR (1) at 45% If to target CIR (1) Forward Cost Philosophy at mid-40%’s: Increase costs to the extent Holding underlying the P&L can afford (+ve Cost OPEX flat Additional Cost cost capacity J
Slide 27: Operating and Financial Leverage
Operating and Financial Leverage: Sustaining Efficiency and Returns levels through the medium-term 55% 54% 51% Multiplier Effect: Looking Ahead 48% 45% Mid 40%s Sustaining mid 40%s CIR (1) while growing revenue creates additional cost capacity for re- investment 2017 2018 2019 2020 2021 2022 2023 Su
Slide 28: Dynamic Capital Management: Dividend Payment
Dynamic Capital Management: Pivoting from capital preservation to capital precision (In KES bn unless stated otherwise) Multiplier Effect 14.7% 14.6% 13.9% Post dividend capital Dividend buffer at 2.6% (or KES 1.9% 2.7% Payment 2.6% 3.3bn) higher than Buffer Buffer Buffer pre-covid 2019 12% 12% Paym
Slide 29: Revisiting our Risk Playbook: Loan Loss Ratio corridor
Revisiting our Risk Playbook: We have intentions to expand our Loan Loss Ratio corridor to capture expanded risk adjusted margins Pre-COVID19 COVID19 Normalization Expansion Multiplier effect Targeting LLR(2) corridor 9.9% Risk 9.2% adjusted expansion in Wholesale and NIMs(1) Retail Banking supporte
Slide 30: In Summary
In Summary Jeremy Awori – Chief Executive Officer
Slide 31: 2021 Outcomes and 2022 Priorities
2021 Outcomes 2022 Priorities Sharpening our focus on Growth Long-term Transformation on pillar of our strategy while course sustaining the new-found levels of Transformation and Returns Delivered 2 of 3 pillars of our 2023 Strategy ahead of time Three Growth pillars: 1. Build new pioneering Record
Slide 32: Disclaimer
Disclaimer Forward-looking statements Certain statements in this document are forward looking that relate to, among other things, the plans, objectives, goals, strategies, future operations and performance of Absa Bank Kenya PLC . Words such as “anticipates”, “estimates”, “expects”, “projects”, “bel
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