Co-operative Bank Of Kenya Ltd. · NSEKE:COOP
Co-operative Bank Of Kenya — Q3 2023 Earnings Presentation
58 slides from Co-operative Bank Of Kenya's earnings presentation, Nov 21, 2023
Slide 1: Co-operative Bank of Kenya Group Financial Results Q3 2023
Co-operative Bank of Kenya Ltd Group Financial Results | Q3 2023 1
Slide 2: Key Highlights
Key Highlights We are Growing We are Resilient We are Agile 2
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. 661.3 Billion in Total Assets 5249 Skilled, Motivated Staff Members 3
Slide 4: We are Growing: Creating Value
We are Growing: Efficient, Profitable Business Model Creating Value 30.0 45.8% 46.4% 50% 40% 25.0 30% Continued focus on optimizing opportunities 20% 20.0 24.7 22.7 10% for growth through an innovative array of financial solutions. 15.0 0% Q32022 Q32023 Profit Before Tax (Kshs B) Cost to Income Rati
Slide 5: We are Resilient: Protecting Value
We are Resilient: Protecting Value Profitable Bank Kshs. 24.7 Billion Strong Capital Buffers Total Capital to RWA 22.1% (Regulatory 14.5%) Continued gains from our institutionalized Proactive Enterprise Risk Management Framework. Transformation seeking efficiency and growth. Proactive provisioning f
Slide 6: New Core Banking System
New Core Banking System On June 12 th , We went Live on Finacle Core Banking System (Rated No. 1 Globally by Gartner Rating Agency) A ‘Good to Great’ Transformation Journey, with the following key benefits: Improved business agility and flexibility A modern, robust and scalable Core Enhanced custome
Slide 7: We are Agile: Fast | Adaptable
We are Agile: Fast | Adaptable ▪ New Core Banking System goes Live Expected Key benefits include enhanced; • Business agility & Innovation • Customer experience Operational efficiency with • Cost management • Analytics • Process automation & Digitization 91% ▪ Successful customer migration to Omnich
Slide 8: Macroeconomic Highlights
Macroeconomic Highlights Global Economy Kenya’s Economic Growth Inflation and Interest Rate Foreign Exchange Rate 8
Slide 9: Global Economic Activities Have Weakened in 2023
GLOBAL ECONOMIC ACTIVITIES HAVE WEAKENED IN 2023 REAL GDP GROWTH • Global economy has weakened in 2023 relative to 2022 with ACTUAL Projections growth seen at 3% from 3.5%. Difference • This trend is projected to continue into 2024 with global growth Oct. 2023 from July expected to remain weak at 2.
Slide 10: Recovery in Agricultural Sector Anchors Economic Activity in Kenya
RECOVERY IN AGRICULTURAL SECTOR ANCHORS ECONOMIC ACTIVITY IN KENYA REAL GDP GROWTH BY SECTOR (%) SECTOR 2022 2022 2022 2023 2023 • Recent data on the Kenyan economy indicates a strong growth in 2Q 2023 at 5.4% compared to 5.2% in a comparable Q2 Q3 Q4 Q1 Q2 period in 2022. Agriculture -2.4 -1.3 -0.9
Slide 11: Inflation Firmly Within Target, Upward Pressure on Interest Rates
INFLATION FIRMLY WITHIN TARGET, UPWARD PRESSURE ON INTEREST RATES • Overall inflation is now firmly within the Central bank target range after 13 months above the Central Bank’s upper band, largely reflecting base effects and retreating food inflation. • In Q3 2023, Food inflation averaged 8% compar
Slide 12: Foreign Exchange Rate
FOREIGN EXCHANGE RATE • The Kenyan shilling has continued to face pressure in the foreign exchange market in 2023. Foreign Exchange Rate of Kenyan Shilling against US Dollar, 2019-2023 144 160 10.0% 137 126 140 122 8.0% 119 116 114 8.5% 112 110 109 109 108 108 106 103 120 103 102 101 101 6.0% 100 5.
Slide 13: 6 Strategic Themes 2020–2024 Corporate Plan
6 Strategic 2020 – 2024 Corporate Themes Plan Strategic PURPOSE VISION MISSION To be the dominant bank in Kenya and the region, To offer a wide range of innovative financial solutions A financial institution predominantly riding on the unique Co-operative Model providing leveraging on our heavy inve
Slide 14: 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%)
Slide 15: A Successful Universal Banking Model
A Successful Universal Banking Model Corporate Government & Retail and Business Banking Institutional Banking (Kshs. (Kshs.255.3 Billion Loan Book) 112.5 Billion Loan Book) Leasing: Co-operatives Banking (Kshs. Coop Bank Fleet Africa Ltd 36.9 Billion Loan Book) (Kes.142.8Mn YTD) Funds under manageme
Slide 16: Our Presence
Our Presence 18000+ Co-op Kwa Jirani 24hr Contact 193 Branches Agents Centre 21K Diaspora 5M Omni Channel 5249 Staff Banking Customers Customers 608 ATMs & Cash 484 Sacco Front New Core Deposit Machines offices Banking System (CDMs) Branch Network 16
Slide 17: "Soaring Eagle" Transformation
“Soaring Eagle” Transformation The Soaring Eagle Transformation Agenda continues to focus on; 1. Branch Transformation 2. MSME Transformation 3. Sales Force Effectiveness 4. Shared Services & Digitization “The Digital Bank” 5. NPL Management & Credit Processes 6. Cost Management 7. Data Analytics 8.
Slide 18: "Soaring Eagle" Transformation: Key achievements
“Soaring Eagle” Transformation: Key achievements E-CREDIT FOCUS: KSHS.336.3B DISBURSED SO FAR Short-term tenor Average disbursement of Ksh.6.6B per month. 91% of total transactions are on Alternative Channels. 73% Consumer Based that is on salary checkoff deductions at source. Low credit risk PROACT
Slide 19: "Soaring Eagle" Transformation: Key achievements (MSME)
“Soaring Eagle” Transformation: Key achievements MSME Transformation Customers onboarded Customers Trained MSME Gold, Silver, Bronze 42,413 193,426 Non-Financial Services 107 Webinars 160 Clinics Government of Kenya Credit Guarantee Scheme 35 networking forums https://msme.co- 5 International Busine
Slide 20: "Soaring Eagle" Transformation: Key achievements
“Soaring Eagle” Transformation: Key achievements Sales Force Effectiveness for Corporates and Cooperatives Advanced data analytics Sector focus; Tailor-made go-to-market strategies for different sectors. Supporting Data-led sales, reporting and Scale up value chain business decision making Leasing-
Slide 21: 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 22: Credit Review Implementation Project: Key Achievements
Credit Review Implementation Project Project Kilele Key Achievements Roll out of new Application For Facility forms. Underwriting process Improving Turn Around Time for facilities. optimization Auto disbursements. Reclassification of sectors and sub-sectors Business Process Management System optimiz
Slide 23: 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 24: Our ESG Framework
Our ESG Framework Our aim is to have positive impact on 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 acti
Slide 25: ESG Performance: Governance
ESG Performance: Governance • Governance values founded on the pillars of responsibility, TCFD Regulatory Reporting accountability, fairness, and transparency, aligned to CMA’s code • The Bank has published its first TCFD (Task Force on Climate-related Financial of Corporate Governance Disclosures)
Slide 26: ESG Impact
ESG Impact IMPACT AREAS MSME Financing Affordable Basic Infrastructure KES 37.4 Billion Renewable Energy Green Buildings Green 33%, Energy Efficiency Portfolio of loans Food Security above USD 1 million KES 12.3 B Access to Essential Services Employment Generation Social 67%, Affordable Housing Affi
Slide 27: Sustainability Awards
Sustainability Awards o Overall Winner of KBA’s 2023 Catalyst Award o Financing Commercial Clients- 1st Most Sustainable Bank o Most Innovative Bank – 1st in Kenya 2023 o Promoting gender inclusivity- 1st Won the overall Award 4 times in 6 years o Promoting PWD (People With Disability) – 1st o Best
Slide 28: Awards: MSME Transformation
Awards: MSME Transformation ✓ Affirms our MSME Transformation strategy, developing co-created solutions catering to the needs of MSMEs. ✓ We are passionate about transforming their aspirations into https://msme.co- concrete milestones opbank.co.ke/knowledge -hub/webinars/ 28
Slide 29: 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 18th ENERGY MANAGEMENT AWARDS (EMA) 2022 Programs. Electricity Savings
Slide 30: Regional Business
Regional Business (Kshs. Millions) Q32022 Q32023 8,684 • 4 Branches in Juba 6,703 • 5 Non-oil collection centers 5,514 • Owns 31% of CIC Africa 3,807 3,392 Ltd- South Sudan 1,453 Total Assets Total Deposits Loans And Advances Q32022 Q32023 1,019 975 820 630 333 170 190 43 Total operating Total Opera
Slide 31: Channel Performance
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Slide 32: 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 9% ATM & Agency Branch Digital Channels CDM 32
Slide 33: 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 34: Omnichannel Banking
Omnichannel Banking We have successfully migrated our customers to the Omni- channel integrating accessibility and user experience. Our omnichannel interfaces online banking through personal computers, mobile phones and USSD availing our services to all customers through their preferred channel yet
Slide 35: 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.336.3B disbursed to Date. • Kshs. 6.6 Billion disbursed per month on average. • Consumer based salary checkoff hence lower credit risk. • Short term tenure
Slide 36: E-credit
E-credit A superior product for our customers that Cumulative Mcoop Cash Loan Customer Numbers ( In '000’) 10,291 continues to scale and is a key revenue 8,774 source 6,577 Kshs. 59.4B Disbursed YTD 4,641 2,924 1,389 694 E-Credit – Key Growth Focus 28 183 388 E- Flexi Unsecured Business Plus FY 2014
Slide 37: Agency Banking
Agency Banking Growing Co-op Kwa Jirani Agency Banking No. of Agents Total No. of Transactions Deposits Generated by Agents (Millions) (Ksh.Bn) 146 18,197 27 17,653 22 115 Q32022 Q32023 Q32022 Q32023 Q32022 Q32023 Agency Banking Sept '22 Oct'22 Nov'22 Dec'22 Jan '23 Feb '23 Mar '23 Apr'23 May'23 Jun
Slide 38: Agency Banking
Agency Banking Transaction Type (%) Q32022 Q32023 43.3% 45.7% 28.1% 28.8% 14.2% 13.5% 14.4% 12.0% Deposits Withdrawals Balance Inquiry Others Transaction Value distribution (%) Growing Co-op Kwa Jirani Agency Banking Q32022 Q32023 63.2% 63.2% ✓ Key deposit mobilization channel 27.8% 29.5% ✓ Higher d
Slide 39: Financial Highlights
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Slide 40: Strong Financial Position (Kshs. Billion)
Strong Financial Position (Kshs. Billion) Total Assets Net Loan book 661.3 378.1 335.2 622.1 Q32022 Q32023 Q32022 Q32023 Total Deposits Shareholder's Funds 108.1 450.5 442.5 100.9 Q32022 Q32023 Q32022 Q32023 40
Slide 41: Strong Financial Position (Kshs. Billion)
Strong Financial Position (Kshs. Billion) Balance Sheet Ksh. Billions Q32023 Q32022 % Growth Total Assets 661.3 622.1 6.3% Net Loan book 378.1 335.2 12.8% Government Securities 185.1 182.4 1.5% Total Deposits 450.5 442.5 1.8% Borrowed Funds 65.6 41.9 56.5% Shareholder's Funds 108.1 100.9 7.1% 41
Slide 42: 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. Q22023 Q32023 48.7% 47.6% 26.
Slide 43: Diversified loan book across sectors
Diversified loan book across sectors Q32023 Mining & Quarrying 0.0% Q32022 0.0% Tourism, Restraurant… 0.6% 0.7% 1.0% 50.0% in Personal Building & construction 1.5% consumer which is Agriculture 1.5% performing well 1.8% Energy & Water 1.6% Low relative exposure in 2.3% 3.3% high-risk sectors Manufac
Slide 44: Portfolio Trends – Sector NPL
Portfolio Trends – Sector NPL Q32023 Q32022 Mining & Quarrying 0.0% 0.0% Energy & Water 4.6% 0.2% Financial services 6.5% 6.8% Personal consumer 6.6% Sector is 50.0% of our loan book 5.4% Agriculture 13.0% 10.0% Transport & Communication 13.9% 10.2% Manufacturing 18.3% 54.3% Tourism, Restraurant & H
Slide 45: Improving Non-Performing loan book
Improving Non-Performing loan book The bank’s NPL has trended below industry levels of 15% Q32022 Q32023 14.9% 15.0% 14.2% 14.2% Bank’s NPL below Industry level 13.6% Supported by; • Proactive Credit Management Strategies. 12.6% • Business Growth. • Consumers and Businesses resilience amid tight eco
Slide 46: Adequate Coverage
Adequate Coverage Cost of risk has improved to 1.6% in Q32023 compared to 2.4% in Q32022. Cost of Risk IFRS Coverage Coverage with security 2.4% 108.1% 77.0% 69.1% 1.6% 105.7% Q32022 Q32023 Q32022 Q32023 Q32022 Q32023 Inclusive of the Discounted Value of Securities, our coverage is at 108.1% 46
Slide 47: Well-diversified Liability Portfolio
Well-diversified Liability Portfolio Q32023 Q32022 Term Deposits Accounts Transaction Accounts Current Accounts Call Deposits 7.0% Savings Accounts Sacco and Agri-Business 9.5% 11.9% Corporate Banking 9.0% 7.6% 10.7% 12.9% 27.7% Government Banking 9.5% 14.6% Institutional Banking 18.1% 24.8% 27.4% M
Slide 48: Strong capital to support future growth
Strong capital to support future growth Capital buffers for sustainable growth Core capital/Total Deposits Core capital/Total risk weighted Total capital/Total risk weighted 23.1% assets assets 19.7% 17.9% 22.1% 15.7% 16.8% 14.5% 10.5% 8.0% Q32022 Q32023 Q32022 Q32023 Q32022 Q32023 Core capital/Tota
Slide 49: An Optimally balanced Kenya Shilling asset & funding book
An Optimally balanced Kenya Shilling asset & funding book LOCAL VS. FOREIGN CURRENCY FUNDING LOAN BOOK: LOCAL VS. FOREIGN LCY Funding FCY Funding FCY Borrowings CURRENCY Local Currency Foreign Currency 7.5% 8.5% 11.3% 84.0% 88.7% 49
Slide 50: Optimal Asset and Funding Mix
Optimal Asset and Funding Mix Q32023 Q32022 8.5% Net Loans 8.9% Net Loans 6.3% 7.9% Government Government Securities Securities Asset 28.0% 57.2% Cash and Cash 53.9% Cash and Cash Equivalent 29.3% Equivalent Categories Other Assets Other Assets Q32023 Q32022 5.6% 6% 10.0% Deposits 7% Deposits Shareh
Slide 51: Strong Liquidity to Support Investments
Strong Liquidity to Support Investments Liquidity Ratio Loans /(Deposits+Borrowed Funds) 52.1% 50.3% 73.2% Q32022 Q32023 Total Loans to Total Deposits 83.9% 69.2% 75.7% Q32022 Q32023 Q32022 Q32023 51
Slide 52: Sustainable Profitability Growth
Sustainable Profitability Growth Q32023 Q32022 YoY Change Total Interest Income 49.4 43.7 12.9% Total Interest Expenses 16.5 11.7 41.3% Net Interest Income 32.8 32.0 2.5% Fees and commissions on loans and advances 9.1 8.4 8.2% Other Fees and commissions 8.5 7.9 7.4% Foreign exchange trading income 2
Slide 53: Subsidiary Contribution
Subsidiary Contribution Q32023 Q32022 Growth Growth KShs '000' KShs '000' KShs '000' % Co-operative Bank of Kenya Ltd 22,735,316 20,834,066 1,901,250 9.1% Co-operative Bank of South Sudan 43,448 190,393 (146,945) -77.2% Co-opTrust Investment Services Ltd 154,509 141,030 13,479 9.6% Co-op Consultancy
Slide 54: Key Ratios
Key Ratios Return on Average Assets Return on Average Equity Earnings per share, Ksh 3.82% 23.5% 4.2 3.75% 23.3% 3.9 Q32022 Q32023 Q32022 Q32023 Q32022 Q32023 54
Slide 55: Key Ratios
Key Ratios Average Return of Interest Earning NIM on Loans NIM on earning Assets Assets 8.3% 11.9% 7.8% 7.5% 7.5% 11.1% Q32022 Q32023 Q32022 Q32023 Q32022 Q32023 55
Slide 56: Key Ratios
Key Ratios CIR - Group CIR - Bank 56.8% 56.4% 54.3% 53.1% 45.8% 46.4% 44.3% 44.8% Q32022 Q32023 Q32022 Q32023 With provision Without provision With provision Without provision 56
Slide 57: Key Ratios
Key Ratios Non-Funded to Total Operating Income Cost of Customer deposits 4.1% 38.6% 38.5% 3.2% Q32022 Q32023 Q32022 Q32023 57
Slide 58: Thank You.
[e y CO-OPERATIVE BANK We are you Thank You.
Co-operative Bank of Kenya — Q3 2023 Earnings Presentation on 6ix