Absa Bank Kenya Plc · NSEKE:ABSA
Absa Bank Kenya — H1 2021 Earnings Presentation
37 slides from Absa Bank Kenya's earnings presentation, Aug 26, 2021
Slide 1: 1H 2021 Earnings & Analysts Pack
1H 2021 Earnings _ Analysts Pack 26 August 2021
Slide 2: Table of Contents
Operating H1 2021 Financial Strategy Execution Environment Performance Page Page Page of Contents Forward Looking Insights 2H Priorities Page Page 2
Slide 3: Jeremy Awori – Chief Executive Officer
Jeremy Awori – Chief Executive Officer 3
Slide 4: Operating Environment
Operating Environment Operating Environment: We are navigating an uncertain operating environment with improving macro-economic stability Inflation remained well anchored within the Kenya’s GDP has grown above SSA economies: GDP growth Government medium-term target Kenya 8% Head winds 1. 4th wave of
Slide 5: COVID-19 Response: Supporting vulnerable members of society
Operating Environment COVID-19 Response: We continue to support vulnerable members of our society 2020 2021 support of mask and school bags Wholesale loans 2% Credit Cards 37% Accounts of loans restructured restructured Personal Loans 60% Mortgages Absa Managing Director Jeremy Awori alongside 1% Ed
Slide 6: Our Brand: Building brand relevance and awareness
Operating Environment Our Brand: We continue to build our new brand for local relevance and awareness despite of COVID-19 performance on brand metrics 82% 65% 66% 53% 28% 1 2 3 4 5 Q4 2019 Q2 2021 6
Slide 7: Product launches
Operating Environment Product launches : We are innovating to bring easier, faster and better services to our customers Women in Business She Account Re-Launch of Agency Banking WhatsApp Banking An account that rewards you with: Increased our service points to 642 We launched first in the market Wha
Slide 8: Jeremy Awori – Chief Executive Officer
Jeremy Awori – Chief Executive Officer 8
Slide 9: Part of a leading Pan African financial institution
Execution We are part of a leading Pan African financial Institution with global reach 3rd Largest bank in Africa as 14 countries Over 38,000 ranked by Top1,000 global banks employees More than 1,000 Over 9,000 ATMs KES11.9 Trillion Total branches Assets Since 1916 1,930 85 branches employees KES398
Slide 10: Our Strategy: Growth, Transformation and Returns
Execution Our Strategy: The Growth, Transformation and Returns pillars of our strategy remain valid Our ambition is to become the best bank in customer experience as an enabler for growth Bringing your possibilities to life above market growth rate. Purpose Sustainable Smart Accelerated Growth Trans
Slide 11: Strategic successes: balance sheet build-up
Execution Our strategic successes to date: In executing our growth strategy we have achieved a significant build-up of our balance sheet In KES ‘billions‘ unless stated otherwise deposits 2x our total asset book despite rate caps ~2.2x ~2.2x ~2x ~2x Customer Deposits Customer Assets Total Liabilitie
Slide 12: Evolving into a full financial services group
: We have evolved our business with new propositions towards a full Execution financial services group. We believe our future growth will be driven by a broader proposition set Pre 2013 (and 2021 – 2023 Plan) 2021-2023 Propositions Business Self Entry Markets Banking Employed Level Powered by Timiza
Slide 13: Strategic successes: structural costs and productivity
Our strategic successes to date: We have optimized our structural costs and improved our productivity 2-fold, effectively reducing our CIR to mid-40%’s Execution 2x 53% 18 9 45% 2013 H1 2021 2013 H1 2021 Growth: Absolute change in period under review 13
Slide 14: Technology investment and digital transformation
: We are making significant inroads with technology investment (KES 3.2 billion invested in 2019 and 2020) towards: 1. Digital transformation Digital Agency Wallet Banking WhatsApp Banking (Timiza Upgrade) expansion Digitization and Securities Automation of Cash Deposit Trading Automation backend th
Slide 15: Alternate channels uptake and Non-Funded Income
Execution : Significant progress in alternate channels uptake and Non-Funded Income contribution per channel (2013-2021) towards Non-Funded Income Increased contribution from payments and 33% of Total income driven by NFI New NFI businesses, up 38% (KES) Branch, 13% of all transactions POS, 9% outsi
Slide 16: Embedding sustainability into business strategy
Our strategic successes to date: We have embedded sustainability into our business strategy Execution Environment Education and Skills Development First bank in Kenya to be recognized by Kenya Green building society for championing initiatives that • 170,000 youths in Kenya through Ready to Work pro
Slide 17: Our efforts recognized by stakeholders
Execution Our strategic successes to date: Our efforts have been recognized by our stakeholders Brand Awareness 5 Think Business Awards • Agriculture Financing Top rated as the brand SME Banking that has become most Brand Reputation East Africa CIO Awards accessible over 2020 – • Islamic Banking 202
Slide 18: Yusuf Omari – Chief Finance Officer
Yusuf Omari – Chief Finance Officer 18
Slide 19: Growth in balance sheet across all segments
performance H1 2020 Financial Results: Growth in balance sheet across all business segments (In KES bn unless stated otherwise) and Advances Deposits YoY +8% YoY +6% Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 ▪ LDR of ▪ Focus is on attracting to lower the ▪ Growth driven b
Slide 20: Revenue up 6% with growth in NII and NFI
H1 2021 Financial Results: Revenue up 6% with growth in both NII and NFI despite thinning margins as well as COVID-19 impact on fees and volumes performance (In KES bn unless stated otherwise) and NFI functional diversification 6% Markets 5.8 5.5 6% Corporate NFI Retail BB 11.3 12.0 NII 6% H1 2020 H
Slide 21: CBR drop impacting our yields
performance H1 2021 Financial Results: CBR drop impacting our yields.. Over 80bps drop affecting our revenues growth CBR movement (%) 11.8 11.4 11.3 10.7 10.3 10.2 As a responsible 9.6 financial 9.5 partner, we have been 9 9 repricing the 8.5 book and passing on the 7.25 benefits to our 7 7 7 7 cust
Slide 22: Prudent cost management driving 3% cost drop
performance H1 2021 Financial Results: Prudent cost management driving a 3% YoY cost drop (In KES bn unless stated otherwise) Cost : H1 2020 – H1 2021 (1) : H1 2021 at 6.3% -3% 8.2 bn 8.0 bn 6.32 5.9 5.76 5.87 5.62 5.69 5.33 4.67 4.84 4,415 4.59 Staff Cost Staff Cost 4.36 4.36 4.2 5,020 Rental Cost
Slide 23: 14% growth in Pre-Provision profit
performance H1 2021 Financial Results: 14% growth in our Pre-Provision profit to KES 9.9 billion, supported by contained cost and growth in revenue; reducing our Cost to income ratio to 45% (In KES bn unless stated otherwise) H1 2021 H1 2021 at 45% Income Income 55% 53% 54% 51% 49% (3%) 8.0 48% Oper
Slide 24: All key financial measures showing improvement
performance H1 2021 Financial Results: All our key financial measures showing a marked improvement Financial Results H1 2021 (In KES bn unless stated otherwise) Indicators H1 2021 H1 2020 Comment Income 17.8 bn 16.8 bn 6% growth NII 12.0 bn 11.3 bn 6% growth P&L NFI 5.8 bn 5.5 bn 6% growth Operating
Slide 25: Key Ratios: CIR and loan loss ratio improved
performance H1 2021 Financial Results (Key Ratios): CIR showing marked improvement and loss loan ratio improved Key ratios Indicators H1 2021 H1 2020 Normalised Cost to Income Ratio 45% 49% Marked improvement (400 bps) Marked improvement in underlying portfolio Loan Loss Rate 1.8% 5.4% quality Inter
Slide 26: Strong capital and liquidity ratios
performance H1 2021 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% 17.3% 17. 5% 39.1% 16.
Slide 27: Moses Muthui - Chief Strategy Officer
Moses Muthui - Chief Strategy Officer Finance Director, Corporate and Investment Bank 27
Slide 28: Diversification: Retail/Wholesale revenue and earnings
Outlook 1. Diversification: Revenue and earnings diversification towards a 50/50 Retail/Wholesale split provide a more predictable financial profile during the transitionary cycle (In KES bn unless stated otherwise) (and growth contribution) by business H1 2021 vs H1 2020 distribution H1 2021 Revenu
Slide 29: Returns: ROE above pre-COVID-19 level
2. Returns: Correction of ROE’s to above pre-COVID-19 level and significantly above cost of equity. Outlook We believe above COE is sustainable through the cycle Levels through the strategy cycle (1) Absa actual ROE for H1 2021 at 22% ABK Tier 1 Industry 22% H121 3% (15%) (19%) 21% 2020 1% (17%) (21
Slide 30: Quality: Better than anticipated credit quality
Outlook 3. Quality: Better than anticipated credit quality and residual impairment allowance gives us confidence of low LLRs through the cycle (In KES mn unless stated otherwise) allowance as at H1, for potential dropped by 64% restructured loans regularized future releases 5,385 Total (64%) provisi
Slide 31: Strength: Net capital supply and capital buffer
Outlook 4. Strength: Net capital supply in 1Q and 2Q with an expanding balance sheet a sign of franchise strength. We have KES13.4 billion of capital buffer 16.00% 330 14.70% • We are well capitalized with 14.39% 14.74% 13.89% 13.73% 14.00% 310 sufficient buffer of 4.3% post 4.3% (KES13.4 bn) buffer
Slide 32: Aspirations: Re-investment for Smart Growth
Outlook 5. Aspirations: The next phase of our evolution focused on re-investment for Smart Growth After achieving our business transformation goals and a successful change program to Absa, we are focused on the third significant phase of our strategy ✓ Re-investment for Smart Growth Acceleration Gro
Slide 33: 2H 2021 guidance on drivers of valuation
Outlook 2H 2021: We believe the drivers of valuation are reverting to pre-COVID-19 Pre-COVID-19 period COVID-19 Transitionary period 2H 2021 guidance on pre- drivers of valuation drivers of valuation COVID-19 drivers of valuation Pre-provision Profits • Income growth: H1 • Income Growth momentum sus
Slide 34: Jeremy Awori – Chief Executive Officer
Jeremy Awori – Chief Executive Officer 34
Slide 35: Our Key priorities for 2H 2021
Our Key priorities for 2H 2021 conclusion (Timing the growth cycle) Risks In customer Experience our business model Our core franchise (Transformation) 35
Slide 36: Forward-looking statements
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”, “believes”, “in
Slide 37: (absa)
) (absa) (