Co-operative Bank Of Kenya Ltd. · NSEKE:COOP
Co-operative Bank Of Kenya — Q1 2023 Earnings Presentation
57 slides from Co-operative Bank Of Kenya's earnings presentation, May 2023
Slide 1: Co-operative Bank of Kenya Ltd Group Financial Results Q1 2023
Co-operative Bank of Kenya Ltd Group Financial Results | Q1 2023
Slide 2: Key Highlights
Key Highlights We are Growing We are Resilient We are Agile
Slide 3: A Transformational Bank
A Transformational Bank Largest Co-operative Bank in Africa, 15 Million Members Successful Universal Banking Model, Increased Dominance in Kenya Growth, Resilience and Agility Kshs. 631.1 Billion in Total Assets 5061 Skilled, Motivated Staff Members
Slide 4: We are Growing: Creating Value
We are Growing: Creating Value Continued focus on optimizing opportunities for growth through an innovative array of Forex Trading Income 43.9% financial solutions. Non-Funded Income 10.8% Net Interest Income 3.9% Total Operating Income 6.5% Profit before Tax 4.6%
Slide 5: We are Resilient: Protecting Value
We are Resilient: Protecting Value Profitable Bank Kshs. 8.1 Billion Strong Capital Buffers Total Capital to RWA 17.2% (Regulatory 14.5%) Proactive Enterprise Risk Management Framework. Continued gains from our institutionalized Proactive provisioning for NPL: Kshs. 1.5B in Q12023. NPL Coverage now
Slide 6: We are Agile: Fast | Adaptable
We are Agile: Fast | Adaptable ▪ Enhanced digitization of internal bank processes and engagement platforms ▪ New Core Banking Platform implementation on track. Expected Key benefits Operational efficiency with include enhanced; • Business agility & Innovation • Customer experience 91% ▪ • Cost manag
Slide 7: Macroeconomic Highlights
Macroeconomic Highlights Economic Growth Inflation and Interest Rate Credit Growth and Exchange Rate South Sudan
Slide 8: Kenya's Economic Growth Path
KENYA’S ECONOMIC GROWTH PATH • Recent official GDP numbers indicate that Kenya’s 2023 economy expanded by 4.8% in 2022 compared to a SECTOR 2019 2020 2021 2022 PROJECTION growth of 7.6% a year earlier. Agriculture 2.7 4.6 -0.4 -1.6 4.4 • Growth was anchored on strong performance of Mining & Quarryin
Slide 9: Inflation and Interest Rates
INFLATION AND INTEREST RATES • Headline inflation decreased to 7.9% in April 2023 from 9.2% in March 2023. • Food inflation declined to 10.1% from 13.4% in March 2023 on lower vegetable prices while fuel inflation was marginally down to 13.2% from 13.4% due to higher electricity prices over the peri
Slide 10: Foreign Exchange Rate
FOREIGN EXCHANGE RATE • In the foreign exchange market, the Kenya shilling has ceded ground by 8% against the US dollar. • The high import bill due to relatively high commodity prices and the tighter financial conditions in the advanced markets that started in 2022 has resulted in a mismatch in fore
Slide 11: South Sudan
SOUTH SUDAN • South Sudan’s real GDP is projected to expand by about 5.6% in 2023 from an estimated growth of 6.6% in 2022. Higher global oil prices are expected to boost government revenues and spending. • Headline inflation rate is forecast to increase to 27.8% in 2023 on higher food prices from t
Slide 12: Strategic Focus
Strategic Focus 2022 – 2024 Strategic Themes PURPOSE 1 Aggressive deepening of our dominance in the Kenya Market A financial institution predominantly owned by the Kenyan Co-operative movement, Transforming lives Dominant provider of financial services to the Co-operative 2 Movement in Kenya and the
Slide 13: Co-operative Bank Group Structure
Co-operative Bank Group Structure Co-operative Bank of South Sudan Ltd (51%) 15M Member Co-operative Movement Co-op Consultancy and Bancassurance Intermediary Ltd (100%) Co-optrust Investment Coop Holdings Coop Society Ltd Services Ltd (100%) 64.56% Strategic Ownership Kingdom Securities Ltd (60%) C
Slide 14: A Successful Universal Banking Model
A Successful Universal Banking Model Corporate Government & Institutional Retail and Business Banking (Kshs. Banking (Kshs. 105.4 Billion Loan 246.5 Billion Loan Book) Book) Leasing: Co-operatives Banking (Kshs. 35.3 Coop Bank Fleet Africa Ltd Billion Loan Book) (Kes.73.2Mn YTD) Funds under manageme
Slide 15: Our Presence
Our Presence 17000+ Co-op Kwa Jirani 24hr Contact 187 Branches Agents Centre 21K Diaspora 5M Omni Channel 5061 Staff Banking Customers Customers 484 Sacco Front 543 ATMs offices Branch Network
Slide 16: "Soaring Eagle" Transformation Initiative
“Soaring Eagle” Transformation Initiative Key Sales Force Pillars Data Analytics Effectiveness Branch Transformation: Shared Services Growth Customer & Digitization ‘The Digital Experience & Bank’ Retail SFE Efficiency NPL MSME Management & Transformation Credit processes Staff Cost Productivity Man
Slide 17: "Soaring Eagle" Transformation: Key achievements
“Soaring Eagle” Transformation: Key achievements E-Credit Focus: Kshs.296.1B Disbursed so far 1. Short-term tenor. 2. Average disbursement of Ksh.6.4B per month. 3. Consumer Based that is on salary checkoff deductions at source. 4. Low credit risk • Average queue time of below 15 Minutes. • 91% of t
Slide 18: "Soaring Eagle" Transformation: Key achievements
“Soaring Eagle” Transformation: Key achievements MSME Transformation: o 36,517 trained customers. o 174K+ on board on the new packages (Gold, Silver, Bronze). o Supply chain financing o Non-Financial Services (NFS): 86 Webinars, 174 Physical Clinics, 4 International Business trips o Government of Ke
Slide 19: "Soaring Eagle" Transformation: Key achievements
“Soaring Eagle” Transformation: Key achievements Sales Force Effectiveness for Corporates and Digitization – New Core Banking System (expected to go Cooperatives; live in 2023),Omnichannel platform (5Million+ customers) and Business Process Management System. • Sector focus; Tailor-made go-to-market
Slide 20: Credit Review Implementation Project
Credit Review Implementation Project Project Kilele Comprehensive diagnostic review on each area of credit risk, including: • Credit risk management framework with a key focus on risk governance, credit risk E2E assessment of credit risk appetite, origination and underwriting process, credit approva
Slide 21: Credit Review Implementation Project
Credit Review Implementation Project Project Kilele Key Achievements • Underwriting process optimization • Reclassification of sectors and sub-sectors • NPV (Net Present Value) Restructuring • Roll out of new Application For Facility forms. Model • Improving Turn Around Time for facilities. • Early
Slide 22: Environmental Social and Governance (ESG) Policy Statement
Environmental Social and Governance (ESG) Policy Statement Introduction Co-operative Bank of Kenya Ltd was formed by Co-operators through their Co-operative Societies in 1968 to ensure delivery of affordable financial services to the Co-operative movement for maximum benefit of the societies’ member
Slide 23: Our ESG Framework
Our ESG Framework Our aim is to have positive impact on the economy, society, and the environment Environmental Social Governance Bolster environmental health through Contribute to inclusive economic outcomes through our Build enterprise resilience sustainable financial products & services business
Slide 24: Our ESG Performance
Our ESG Performance Governance Social Environment • Well Diversified Board Skillset Financial & Economic Inclusion • Development of a Group wide ESG Policy • Progressive Governance 47.5B : Economic value distributed (FY’22) framework Framework 157M: Digital channels transactions (FY’22) • Board comm
Slide 25: Climate Change
Climate Change Implementation of the CBK guidance on Climate-related risk management.” Defined climate oversight responsibilities Review and through the Successful Senior development of review of BOD, Management ESG BOM, Terms of the Bank’s ESG Establishment of Climate-related Brainstorming Policy t
Slide 26: Co-op Foundation
Co-op Foundation Total Students Sponsored on 10,264 Scholarship Program Empowerment of Youth in Transport Sector (Boda-Boda) GIZ grant funded program in Eastern, Central and Coastal Program. Education USA A University Scholarship Program funded by USAID. KES 135M Community Service Program Value adde
Slide 27: Award-Winning Brand
Award-Winning Brand KBA CUSTOMER SATISFACTION SURVEY DIGIBANK SUMMIT 2022 Best Overall in Satisfactory Customer Experience. Excellence in Customer Experience 33000 respondents from 38 member Banks Best Women and Youth empowerment Programs. • Education Scholarship Program 18th ENERGY MANAGEMENT AWARD
Slide 28: Sustainability Awards
Sustainability Awards Most Sustainable Bank in Kenya Most Innovative Bank Best in financing Commercial Clients 1ST Runners up – Best in Sustainable Finance 1ST Runners up – Best in Covid 19 response 2ND Runners Up – Best in Financing MSME 28
Slide 29: Regional Business
Regional Business (Kshs. Millions) Q12022 Q12023 6,432 5,191 4,655 3,513 2,258 1,192 Total Assets Total Deposits Loans And Advances Q12022 Q12023 4 Branches in Juba 414 342 255 211 5 Non-oil collection centers 72 74 44 (71) Owns 31% of CIC Africa Ltd- South Sudan Total operating Net Interest Total O
Slide 30: Channel Performance
Channel Performance
Slide 31: Growing Digital Channels
Growing Digital Channels 91% of our Transactions are on alternative Channels providing opportunities for efficiency. Digital Channels Vs Branch (%) 91% Mobile Internet ATM Agency 9% Branch Digital Channels Omnichannel Platform
Slide 32: MCo-op Cash Mobile Wallet
MCo-op Cash Mobile Wallet A unique Offering MCo-op Cash is an all-telco, all products mobile banking service that enables customers to enjoy access to a variety of banking services, money transfer and payment services. It’s a virtual account with a simple menu where the customers mobile number acts
Slide 33: Omnichannel Banking
Omnichannel Banking We have successfully migrated our customers to the Omni-channel Successful offering continues to scale: integrating accessibility and user experience. Our omnichannel interfaces online banking through personal Commissions - Millions computers, mobile phones and USSD availing our
Slide 34: Digital lending focus E-credit
Digital lending focus E-credit A superior product for our customers that continues to scale and is a key revenue source • A key focus area, Kshs.296.1B disbursed to Date. • Kshs 6.4 Billion disbursed per month on average. • Consumer based salary checkoff hence lower credit risk. • Short term tenure
Slide 35: E-credit Q1 2023
E-credit Cumulative Mcoop Cash Loan Customer Numbers ( In '000’) 9,267 8,774 A superior product for our customers that 6,577 continues to scale and is a key revenue source 4,641 2,924 Kshs. 19.2B Disbursed YTD 1,389 28 183 388 694 FY 2014 FY2015 FY 2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 Q120
Slide 36: Agency Banking
Agency Banking Growing Co-op Kwa Jirani Agency Banking ▪ Deposits mobilized through Agency banking up by 16.8% Total No. of Transactions Total Revenue (Millions) Deposits Generated by (Millions) 115 Agents (Ksh.Bn) 100 48 9.2 8.9 41 Q12022 Q12023 Q12022 Q12023 Q12022 Q12023 Agency Banking Jan '22 Fe
Slide 37: Agency Banking
Agency Banking Transaction Type (%) Q12022 Q12023 45.2% 40.0% 29.2% 28.4% 15.0% 13.9% 15.8% 12.5% Growing Co-op Kwa Jirani Agency Banking Deposits Withdrawal Balance Inquiry Others • Key deposit mobilization channel Transaction Value distribution (%) Q12022 Q12023 • Higher deposit than withdrawal 58
Slide 38: Financial Highlights
Financial Highlights A: |
Slide 39: Strong Financial Position (Kshs. Billion)
Strong Financial Position (Kshs. Billion) Total Assets Net Loan book 631.1 360.1 597.0 324.5 Q12022 Q12023 Q12022 Q12023 Total Deposits Shareholder's Funds 441.5 112.6 417.2 102.7 Q12022 Q12023 Q12022 Q12023
Slide 40: Strong Financial Position (Kshs. Billion)
Strong Financial Position (Kshs. Billion) Q12023 Q12022 YoY Change Total Assets 631.1 597.0 5.7% Net Loan book 360.1 324.5 11.0% Government Securities 179.2 183.4 -2.3% Total Deposits 441.5 417.2 5.8% Borrowed Funds 48.4 43.3 11.8% Shareholder's Funds 112.6 102.7 9.7%
Slide 41: Diversified loan book
Diversified loan book • Diversified across segments. • Highest book is in Personal Banking; • Check off; deductions are done at source. • Diversified across various Government/quasi-government employees. • Appraisal of both employer and employee for optimal risk-return. Q12022 Q12023 48.2% 47.7% 26.
Slide 42: Diversified loan book across sectors
Diversified loan book across sectors Q12023 Q12022 Mining & Quarrying 0.0% 0.0% 0.5% 50.3% in Personal Tourism, Restraurant & Hotels 0.7% consumer which is 1.4% Building & construction 1.6% performing well Agriculture 1.8% 1.6% Low relative exposure in Energy & Water 1.9% 2.2% high-risk sectors Manu
Slide 43: Improving Non-Performing loan book
Improving Non-Performing loan book The group’s NPL is below industry level of 14% Q12022 Q12023 14.0% 14.0% Bank’s NPL below Industry level 13.7% 13.3% 13.1% Supported by; • Proactive Credit Management Strategies. 12.0% • Business Growth. • Consumers and Businesses continued recovery from the impact
Slide 44: Adequate Coverage
Adequate Coverage • Kshs. 1.5 Billion loan loss provision in Q12023 (Kshs. 1.5B Q12022) • Cost of risk has improved to 1.8% in Q12023 compared to 2% in Q12022. Cost of Risk IFRS Coverage (Bank) 2.0% 72.8% 71.7% 1.8% Q12022 Q12023 Q12022 Q12023 Inclusive of the Discounted Value of Securities, our cov
Slide 45: Portfolio Trends – Sector NPL
Portfolio Trends – Sector NPL Q12023 Q12022 Energy & Water 0.3% 0.3% Personal consumer 6.0% 4.9% Sector is 50.3% of our loan book Financial services 6.5% 6.4% Agriculture 9.0% 11.5% Transport & Communication 12.2% 9.0% Manufacturing 18.2% 53.9% Sector is 3% of our loan book Tourism, Restraurant & Ho
Slide 46: Well-diversified Liability Portfolio
Well-diversified Liability Portfolio Q12023 Q12022 Current Accounts Transactions Accounts Fixed Deposits Call Deposits Sacco and Agri- Savings Accounts 7.4% business 9.8% Corporate banking 8.4% 9.8% 5.2%, Government Banking 10.7% 15.5% 27.6% 9.0% Institutional Banking 17.6% 16.0% Retail Banking 26.3
Slide 47: An Optimally balanced Kenya Shilling asset & funding book
An Optimally balanced Kenya Shilling asset & funding book FUNDING: LOCAL VS. FOREIGN CURRENCY LOAN BOOK: LOCAL VS. FOREIGN LCY Funding FCY Deposits FCY Borrowing CURRENCY Local currency Foreign Currency 4.9% 9.4% 10.8% 85.7% 89.2%
Slide 48: Strong capital to support future growth
Strong capital to support future growth Capital buffers for sustainable growth Core capital/Total deposit Core capital/Total risk Total capital/Total risk liabilities weighted assets weighted assets 22.7% 16.3% 19.8% 15.3% 16.6% 17.2% 14.5% 10.5% 8.0% Q12022 Q12023 Q12022 Q12023 Q12022 Q12023 Core c
Slide 49: Optimal Asset and Funding Mix
Optimal Asset and Funding Mix Q12023 Q12022 Net Loans 7.3% 7.9% 7.2% 7.0% Government Securities Asset Cash and Cash 28.4% 57.1% 30.7% 54.4% Equivalent Categories Other Assets Q12023 Q12022 Deposits 4.5% 5.7% 7.7% 7.2% Shareholders Funding funds 17.8% 17.2% Categories Borrowed funds 70.0% 69.9% Other
Slide 50: Strong Liquidity to Support Investments
Strong Liquidity to Support Investments Liquidity ratio Loans/(Deposits+Borrowed Funds) 54.1% 50.6% 73.5% 70.5% Q12022 Q12023 Total Loans to Total Deposits 77.8% 81.6% Q12022 Q12023 Q12022 Q12023
Slide 51: Sustainable Profitability Growth
Sustainable Profitability Growth Q12023 Q12022 YoY Change Total Interest Income 15.6 14.0 11.2% Total Interest Expenses 4.8 3.6 32.2% Net Interest Income 10.8 10.4 3.9% Fees and commissions on loans and advances 3.4 2.6 30.9% Other Fees and commissions 2.5 2.8 -10.1% Foreign exchange trading income
Slide 52: Subsidiary Contribution
Subsidiary Contribution Q12023 Q12022 Growth Growth Kshs. '000' Kshs. '000' Kshs. '000' % Co-operative Bank of Kenya Ltd (COBK) 7,478,370 7,141,121 337,249 4.7% Co-operative Bank of South Sudan (COBSS) (71,346) 43,882 (115,228) -262.6% Co-opTrust Investment Services Ltd (CISL) 51,145 53,724 (2,580)
Slide 53: Key Ratios
Key Ratios Return on Average Assets Return on Average Equity Earnings per share Q12022 Q12023 Q12022 Q12023 Q12022 Q12023 4.1% 4.0% 23.8% 4.2 22.7% 4.0 Q12022 Q12023 Q12022 Q12023 Q12022 Q12023
Slide 54: Key Ratios
Key Ratios Average Return on Interest NIM on Loans NIM on Interest Earning Earning Assets Assets 11.5% 8.3% 7.9% 7.7% 7.5% 11.1% Q12022 Q12023 Q12022 Q12023 Q12022 Q12023
Slide 55: Key Ratios
Key Ratios CIR - Group CIR - Bank 53.8% 54.9% 53.4% 53.7% 46.3% 44.6% 43.6% 44.3% With provision With provision Without Without provision provision Q12022 Q12023 Q12022 Q12023
Slide 56: Key Ratios
Key Ratios Non-Funded to Total Operating Income Cost of customers deposits 39.7% 3.8% 3.3% 38.2% Q12022 Q12023 Q12022 Q12023
Slide 57: Thank You.
[e y CO-OPERATIVE BANK We are you Thank You.
Co-operative Bank of Kenya — Q1 2023 Earnings Presentation on 6ix