Equity Group Holdings Limited · NSEKE:EQTY
Equity — Q1 2018 Earnings Presentation
64 slides from Equity's earnings presentation, May 17, 2018
Slide 1: Investor Briefing Q1 2018 Performance
In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity Ratio (Kenya) 40% Investor Briefing Q1 2018 Performance 29% Date:17th May, 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 1
Slide 2: Equity Bank's repositioning to avoid the economic turbulence
Equity Group Holdings Plc Headquarters Equity Centre, Upperhill, Nairobi Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities 2
Slide 3: Equity Group's Philosophies
Equity Group’s Philosophies Equity Group’s Philosophies In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience Our Purpose We exist to transform the lives and livelihoods of our people socially and economically by availing them modern, inclusive fin
Slide 4: Strong Governance & Leadership Structure
Strong Governance & Leadership Structure CBK CMA SHAREHOLDERS NSE RATING AGENCY EQUITY GROUP HOLDINGS PLC Subsidiary Boards Group Board Subsidiary Boards Board Group Board Committees Board Committees Committees CEO’s OFFICE Group Director, Group Director, CEO Chief Officer, Executive Strategic Strat
Slide 5: Group Executive Management
Group Executive Management In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% James Mwangi, CBS Mary Wamae Bhartesh Shah Reuben Mbindu James Mutuku Brent Malahay Group Managing Director & Group Executive Director Chief Operations Off
Slide 6: Group Executive Management
Group Executive Management David Nyamu Samuel Kirubi Anthony Kituuka Addis Ababa Othow Hannington Namara Joseph Iha Director, Marketing Managing Director, Executive Director, Managing Director, Managing Director, Managing Director, Equity Bank Uganda Equity Bank Uganda Equity Bank South Sudan Equity
Slide 7: Macroeconomic Environment-Eastern Africa
In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity Ratio (Kenya) 40% 29% Macroeconomic Environment-Eastern Africa Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 7
Slide 8: 2018 Economic Outlook – East Africa
2018 Economic Outlook – East Africa 2018 Economic Outlook – East Africa Uganda a) Economic performance generally remained strong in 2017 and is projected to reach 5.9% in 2018, up from 4.8% in 2017. b) Both headline and core inflation declined to 2.1% and 1.7% respectively. c) The Bank of Uganda CBR
Slide 9: 2018 Economic Outlook – East Africa
2018 Economic Outlook – East Africa 2018 Economic Outlook – East Africa In uncertain times “cash is king”…trade off between Tanzania profitability and stability, soundness and resilience a) Tanzania's GDP growth slowed to 6.8 percent in the first half of 2017 from a 7.7 percent expansion in the 53%
Slide 10: Inflation – Selected East Africa Countries
Inflation – Selected East Africa Countries Inflation – Selected East Africa Countries % 12 11 10 9 8 7 Equity Bank’s repositioning to avoid the economic 6 turbulence and to exploit the silver lining 5 Kenya 4 Tanzania 3 2 opportunities Rwanda Uganda 1 0 Mar-18 Feb-16 Mar-16 Feb-17 Mar-17 Feb-18 Jul-
Slide 11: Interest Rates - Uganda
Interest Rates - Uganda Interest Rates - Uganda In uncertain times “cash is king”…trade off between % 91 Days 364 Days profitability and stability, soundness and resilience 182 Days 16 15 53% 14 13 48% 12 45% 11 40% 9.7 Liquidity 10 Ratio (Kenya) 9.3 9 8.7 8 7 6 29% 5 4 3 2 1 0 May Nov Aug Jul Dec A
Slide 12: Interest Rates - Rwanda
InterestRates Interest Rates --Rwanda Rwanda 91 Days 364 Days % 182 Days 10 9 8 7 6.5 6.3 6 Equity Bank’s repositioning to avoid the economic 5 5.3 turbulence and to exploit the silver lining 4 3 2 opportunities 1 0 May Nov Aug Jul Dec Apr Apr Mar Sep Oct Mar Jan Jun Jan Feb Feb 2017 2018 6 12
Slide 13: Macroeconomic Environment Indicators & Trends - Kenya
In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity Ratio (Kenya) 40% 29% Macroeconomic Environment Indicators & Trends - Kenya Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 13
Slide 14: Inflation – Kenya
Inflation –– Kenya Inflation Kenya • Inflation has been on a sustained recovery since mid 2017. Inflationary pressure now restrained and currently within the targeted range, inflation rate at a new low level of 3.73% • Inflation is expected to remain subdued due to the improved weather conditions in
Slide 15: Foreign Exchange – Kenya
Foreign Exchange – Kenya Foreign Exchange – Kenya In uncertain times “cash is king”…trade off between The Kenya Shilling appreciated by 2.3% against the US Dollar profitability and during the quarter and stability, 2.8% by endsoundness of Apr 2018, to and resilience close at Kshs 100.36, from Kshs 1
Slide 16: Foreign Reserves – Kenya
Foreign Reserves – Kenya Foreign Reserves – Kenya Although average prices of Crude Oil Crude Oil Prices in the international markets have significantly recovered since Jun 2017 Q1 2018 has registered a slow growth resulting to: • Improving the FX reserves • Aiding the Shilling to strengthen Kenya is
Slide 17: FX – Selected East Africa Countries
FXFX – Selected East Africa Countries – Selected East Africa Countries In uncertain times “cash is king”…trade off between KES has gained ground against her East African peers and against the USD YoY profitability and stability, soundness and resilience 53% +3% 104 103.2 48% 102 45% 100 KES/USD Liqu
Slide 18: Interest Rates - Kenya
Interest Rates - Kenya Interest Rates - Kenya The Monetary Policy Committee (MPC) met on 19th March and reduced the Central Bank Rate (CBR) by 50 basis point to 9.5% from 10.0% in a bid to support economic activity in the country and given the low inflation. % 91 Days 364 Days 182 Days CBR 11.5 11.1
Slide 19: Interbank Rates - Kenya
10 11 0 1 2 3 4 5 6 7 8 9 % 16-Jan-17 Liquidity 30-Jan-17 29% 13-Feb-17 Q1 2016 27-Feb-17 13-Mar-17 Ratio (Kenya) 27-Mar-17 10-Apr-17 24-Apr-17 Interbank Rate 08-May-17 40% 22-May-17 Q2 2016 05-Jun-17 19-Jun-17 03-Jul-17 17-Jul-17 31-Jul-17 14-Aug-17 28-Aug-17 45% Q3 2016 11-Sep-17 25-Sep-17 09-Oct-
Slide 20: Private Sector Credit Growth Trend
Private Sector Credit Growth Trend Private Sector Credit Growth Trend 21.0% 21.2% 20.8% 19.5% 18.7% 18.0% 17.0% 16.0% 15.5% 13.5% Equity Bank’s repositioning to avoid the economic 11.1% turbulence and to exploit the silver lining 8.6% 7.1% opportunities 5.3% 4.4% 4.6% 4.2% 4.1% 3.9% 3.5% 3.0% 3.9% 2
Slide 21: Debt to GDP
Debt to GDP Debt to GDP Inofuncertain Kenya recorded a government debt equivalent to 57.1 percent the country's times “cashProduct Gross Domestic is king”…trade in 2017. off between profitability and stability, soundness and resilience 53% 48% 57.1 45% 53.8 47.0 48.1 47.1 48.8 Liquidity Ratio 42.8 (
Slide 22: 2018 Economic Outlook
2018 Economic Outlook 2018 Economic Outlook Inflation • Kenya’s year-on-year inflation dropped to 3.73% in April from 4.18% in March, on the back of improved food production due to good rains and also the strengthening of the shilling against the dollar. Economists forecast inflation to average 5.4%
Slide 23: 2018 Economic Outlook
2018 Economic Outlook 2018 Economic Outlook Political climate In uncertain times “cash is king”…trade off between a) profitability Positive political environment after the President and of and the leader stability, soundness the opposition agreed and resilience to work together b) Enhanced and impro
Slide 24: Ring Fencing of the Budget Allocation for the Big Four
Ring Fencing of the Budget Allocation for the Big Four !"#$%&'()(*+'%,-./((0 • Manufacturers will be allowed an effective deduction of 130% on electricity costs. • Repealing of Section 33B of the Banking (Amendment Act) 2016. • Collaboration and co-operation between the President and the Opposition
Slide 25: Equity Bank Business Model & Strategy – Post Interest Rate Capping
Equity Bank Business Model & Strategy – Post Interest Rate !"#$%&'()(*+'%,-./((0 Capping (Adjusting and adapting to the new norm) In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience Focus areas: 53% 1. Non-funded income growth 48% 2. Treasury 45%
Slide 26: Focus Area 1: Non-funded income growth & contribution
Focus FocusArea Area 1: Non-funded 1: Non-funded income Income growth & Growth contribution In Kes Billion Loan Interest Income Total Interest Income Non Funded Income Contribution to Total Income Growth Trend Growth Trend Growth Trend -11% +10% -27% 12.9 16.5 12.7 Treasury Interest 15.6 11.3 1.6 15
Slide 27: Focus Area 1: Growth of Diversified Streams of Non-Funded Income
Focus Area 1: Growth of Diversified Focus Area 1: Non-funded streams income of Non-Funded Incomegrowth In Kes Million In uncertain Fees & Commissions times (Key Lines “cash is king”…trade off between - Kenya) Trade Finance profitability and stability, soundness Gross Merchant and resilience Mobile B
Slide 28: Focus Area 2: Treasury
Focus Area 2: Treasury Focus Area 2: Treasury In KES Billion In KES Billion In KES Billion Government Treasury Gross Income Treasury Income Mix Yield on Government Securities Securities Portfolio Contribution & Capital Gains 9% 13% Declining yields highly compensated by mark-to-market gains on 4.8 1
Slide 29: Focus Area 3: Geographical & business diversification
Focus Area 3: Geographical & Business Diversification Focus Area 3: Geographical & business diversification In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience Double digit growth in profitability across subsidiaries Enhanced PBT contribution
Slide 30: Transforming lives in Africa one Branch at a time
Focus Area 3: Geographical & Business Diversification Transforming lives in Africa one Branch at a time 283 Equity Bank’s repositioning to avoid the economic 32 17 turbulence and to exploit the silver lining opportunities 36,623 20,342 695 30
Slide 31: Focus Area 4: Strengthening liquidity position (Group)
Focus Focus Area4:4:Strengthening Area Strengthening Liquidity liquidityPosition position while Enhancing Balance Sheet Agility while enhancing balance sheet agility In KES Billion Funding Split In uncertain times “cash isAsset king”…trade Split off between Group Growth per profitability and stabili
Slide 32: Focus Area 4: Strengthening liquidity position (EBKL)
Focus Area 4:Area Focus Strengthening Liquidity Position 4: Strengthening while liquidity Enhancing position Balance balance while enhancing Sheet Agility sheet agility In KES Billion Funding Split Asset Split EBKL Growth per Growth per EBKL Asset Class Funding Type +2% +2% 402.2 393.9 -54% 402.2 3.
Slide 33: Focus Area 4: Strengthening Liquidity for future positioning
Focus AreaArea Focus 4: Strengthening liquidityfor 4: Strengthening Liquidity for future positioning future positioning In uncertain 56% of liquidity ratio makes the balance sheet agile fortimes “cash isgrowth opportunistic king”…trade off between & diversification profitability and stability, sound
Slide 34: Focus Area 5: Innovation and digitization
Focus Area 5: Innovation and Digitization Focus Area 5: Innovation and digitization Transformation from a place you go to; to something you do Transactions (Millions) • Agency acting as 110 108.8 Mobile a bridge between mobile and brick & 85.8 mortar • Transforming the 85 cost structure of 45.6 Agen
Slide 35: Focus Area 5: Leveraging Variable Cost 3rd Party infrastructure
Focus Area 5: Innovation and Digitization Focusoff Leveraging Area 5: Innovation Variable and Infrastructure Cost 3rd Party digitization 3 party infrastructure rd Variable cost channels In uncertain times “cash is king”…trade off between Fixed cost channels profitability Transaction and stability, s
Slide 36: Focus Area 5: Fintech Innovations in Merchant Banking
Focus Area 5: Innovations in Merchant Banking Focus Area 5: Fintech Innovations in Merchant Banking • The use of a Universal POS that converges Mobile Wallets, Cards & Digital payments Volume (Millions) Number of outlets in ‘000’ Commissions (Millions) +36% 17,203 +14% 12,651 Equity Bank’s repositio
Slide 37: Focus Area 5: Fintech Innovations in Diaspora Remittances
Focus Area 5: Fintech Innovations Focus Areain5:Diaspora FintechRemittances Innovations in Diaspora Remittances In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience +474% 18,627 53% 48% 45% Liquidity Ratio (Kenya) 40% +6% 3,247 3,050 29% 118 42 42
Slide 38: 97% of our Transactions outside the branch
Focus Area 5: Innovation and Digitization 97% of Focus Area 5: Innovation and digitization our Transactions Count Outside the Branch 97% of our Transactions outside the branch Q1 2018 Q1 2017 ATM Branch Branch ATM Merchants 3% 4% 4% Merchants 2% 5% 2% Agency 12% Agency 14% 43% Equitel Equity Bank’s
Slide 39: 54% of our Transactions Value outside the branch
Focus Focus Area Area 5:5:Innovation Innovation andand digitization Digitization 54% 54%ofofour ourTransactions Value Transactions outside Value the branch outside the branch Branches now handling high value transactions forInSME, corporates, uncertain timeswealth “cashmanagement & advisory is king”
Slide 40: 92% of our Loan Transactions via Mobile Channel
Focus Area 5: Innovatio FocusFocus Area 5:Area Fintech Innovation and 5: Innovation 22% of Digitization and our 92% Digitization of Loan Volumes 92%our ofLoan Transactions our Loan via Mobile Transactions Channel via Mobile Channel Branches now handling high value loa Q1 Q12018 2018Transaction Count
Slide 41: Agency model becoming a net deposit mobilizer
Focus Area 5: Fintech Innovation and Digitization Focus Area Agency 5: Fintech Model BecomingInnovation and a Net Deposit digitization Mobilizer Agency model becoming a net deposit mobilizer In uncertain times “cash is king”…trade off between Agent Deposits growing an increasingly higher rate than A
Slide 42: Focus Area 6: Efficiencies and cost optimization
Focus Area 6: Efficiencies and Cost Optimization Focus Area 6: Efficiencies and cost optimization Staff Cost Growth Trend Other Expenses Growth Trend Cost to Group Income Ratio Trend (excluding staff cost and Loan Loss Provision) (excluding Loan Loss Provision) EBKL EBKL EBKL 43.3% 42.7% 42.5% 12% 3
Slide 43: Focus Area 6: Efficiencies and cost optimization
Focus Area 6: Efficiencies and Cost Optimization Focus Area 6: Efficiencies and cost optimization In uncertain times “cash is king”…trade off between Group profitability and stability, soundness and resilience Net Interest Margin Yield on Interest Earning Assets 53% % % 8.4 8.5 8.6 8.5 8.4 48% 11.1
Slide 44: Focus Area 7: Asset quality (Group)
Focus Focus Area 7:Area 7:Quality Asset Asset (Group) quality (Group) NPL’s – Sector vs EGH Plc as at Q1 2018 NPL per sector as at Q1 2018 Sector (Kenya) Group 14.9% 10.7% 10.6% 9.9% 9.5% 9.1% 8.8% 8.4% 9.4% 7.7% 7.4% 7.1% 7.3% 6.8% 6.8% 6.3% 6.3% 6.0% 6.3% 5.8% 4.6% 3.8% 0.0% SME Consumer Micro Lar
Slide 45: Focus Area 7: Asset quality (Kenya)
Focus Area 7: Asset Quality (Kenya) Focus Area 7: Asset quality (Kenya) NPL’s – Sector vs EBKL as at Q1 2018 In uncertain times “cash NPL is king”…trade off between per sector as at Q1 2018 profitability and stability, 14.7% soundness and resilience Sector (Kenya) 10.7% 10.6% EBKL 9.9% 9.1% 9.5% 9.8
Slide 46: Focus Area 7: Adoption of IFRS 9
Focus Area 7: Asset Quality Adoption of IFRS 9 Focus Area 7: Asset quality Adoption of IFRS 9 Kes Dec-17 IFRS 9 Coverage per Subisdiary Loan Balances in Bn Provisions in Bn IFRS 9/Loans Subsidiary Kenya 221.0 8.91 4.0% 110.0% Uganda 14.5 0.20 1.4% 83.1% Equity Tanzania Bank’s repositioning 17.8 to a
Slide 47: Focus Area 7: Impact of IFRS 9 on Capital
Focus Area Focus 7: AssetArea 7: Impact Quality Asset of quality IFRS 9 on Capital Impact of IFRS 9 on Capital In uncertain Equity Bank times “cash is Equity (Kenya) Limited king”…trade off between Group Holdings Plc RATIOS profitability BANK and stability, soundness and resilience GROUP Before IFRS
Slide 48: Focus Area 8: Impact & Social Investment Programs
Focus Area 8: Impact & Focus Area Social 8: Impact Investment Investment Programs Impact & Social Investment Programs USD 334 M in Social Investment Programs Health Energy & Environment Conservation Agriculture Financial Education & Entrepreneurship 2% 6% 1% 3% Equity Leadership Bank’s Programreposi
Slide 49: Shared Prosperity Business Model and its Social Impact
Focus Area 8: Impact Investment SharedFocus Area Prosperity 8: Impact Business Investment Model and its Social Impact Shared Prosperity Business Model and its Social Impact In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% 48% 45% Liquidity
Slide 50: Business Validation
Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities Business Validation 50
Slide 51: Global Ratings and Accolades
Global Ratings and Accolades In uncertain times “cash is king”…trade off between profitability and stability, Equity Bank Credit Rating soundness and resilience National Rating: Aa3.ke/KE-1 Brand Global Rating: B2 Rating Outlook: Stable. 53% Same as the sovereign rating 48% Equity 45% Bank Credit Ra
Slide 52: Regional Awards and Accolades
Regional Awards and Accolades Equity Bank has been recognised for the last 10 years consecutive since 2007 as the Brand Top Banking Superbrand in Kenya and in East Africa in 2008 and 2009 EABC Chairman’s Award- Overall Best Regional Company Brand Best East African Company- CSR Equity Bank’s repositi
Slide 53: 2018 National Banking Awards and Accolades
2018 National Banking Awards and Accolades In uncertain times “cash is king”…trade off between 1. Overall Best Bank in Kenya 2018 profitability 2. Best Bank inand Tier 1stability, soundness and resilience Brand 3. Best bank in Sustainable Corporate Social Responsibility 4. The Most Customer-centric
Slide 54: 2018 National Banking Awards and Accolades
2018 National Banking Awards and Accolades Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities 54
Slide 55: Kenyan Banks Market Capitalization
Market Validation Kenyan Banks Market Capitalization In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience NSE Market Capitalization (Kes B) as of Apr 10 2018 53% 213 48% 45% Liquidity Ratio 167 (Kenya) 40% 116 29% 79 70 59 50 36 27 4 3 EQUITY KCB
Slide 56: Intermediation & Financial Performance
Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities Intermediation & Financial Performance 56
Slide 57: Balance Sheet
Balance Sheet Balance Sheet In uncertain times “cash is king”…trade EBKL Group off between profitability and stability, soundness and resilience KES (Billion) Q1 2017 Q1 2018 Growth Q1 2017 Q1 2018 Growth 53% Assets Net Loans 208.4 206.9 -1% 261.9 48% 271.1 4% Cash & Cash Equivalents 48.5 45% 29.5 -
Slide 58: 22% Growth in PAT (Group)
22% 22% Growth Growth in(Group) in PAT PAT (Group) KES (Billion) Q1 2017 Q1 2018 Growth Interest Income 11.5 12.7 10% Interest Expense (2.6) (2.9) 11% Net Interest Income 8.9 9.8 10% Non-Funded Income 6.3 6.7 6% Equity Bank’s repositioning to avoid the economic Total Income 15.2 16.5 9% turbulence L
Slide 59: RoAE and RoAA Trend
RoAE RoAEand RoAATrend and RoAA Trend RoAE 30.2% 31.1% In uncertain times “cash is king”…trade off between Q1 2017 Q1 2018 profitability and stability, 27.0% soundness and resilience 24.0% 53% 48% 45% Liquidity Ratio (Kenya) 40% EBKL Group 29% RoAA 4.6% 4.5% 4.2% 4.0% Q1 2017 Q1 2018 EBKL Group 59 Q
Slide 60: Ratios - Banking Subsidiaries
Ratios Ratios - BankingSubsidiaries - Banking Subsidiaries RoAE RoAA Subsidiary Q1 2017 Q1 2018 Subsidiary Q1 2017 Q1 2018 EBKL 30.2% 31.1% EBKL 4.2% 4.6% EBUL 41.1% 28.9% EBUL 5.1% 4.2% EBRL 12.5% 17.6% EBRL 2.2% 2.5% EBTL 11.3% 18.7% EBTL 1.4% 2.2% DRC 8.8% 18.0% DRC 1.4% 2.4% EBSSL -4.9% 7.6% EBS
Slide 61: Financial Ratios
Financial Ratios Financial Ratios In uncertain EBKL times “cash is king”…trade EBKL Group off Group between profitability and stability, Q1 2017 Q1 2018 soundness and resilience Q1 2017 Q1 2018 Profitability Yield on Loans 11.6% 11.7% 12.4% 12.8% 53% Yield on Government Securities 11.0% 10.7% 11.1%
Slide 62: 2018 Outlook – Group
2018 2018Outlook Outlook– Group – Group Group 2018 Outlook Q1 2018 Actual Loan Growth 10% - 15% 4% Deposit Growth 5% - 15% 9% Net Interest Margin 8.5% - 10% 8.4% Non Funded Income Mix 42% - 45% 41% Equity Bank’s Cost to Income Ratio repositioning to 48% avoid - 52% the 47.5% economic turbulence and
Slide 63: Our Inspiration
In uncertain times “cash is king”…trade off between profitability and stability, soundness and resilience 53% OUR INSPIRATION 48% 45% Liquidity Ratio (Kenya) That when years turn our vision dim and gray, 40% we shall still see beauty in the tired wrinkles of our faces and shall take comfort out of t
Slide 64: Equity Bank contact details
Equity Bank’s repositioning to avoid the economic turbulence and to exploit the silver lining opportunities Equity Centre, Hospital Road, Upper Hill, P.O. Box 75104-00200 Nairobi, Tel: + 254763 063 000, Fax: + 254-020-2737276, Info@equitygroupholdings.com, www.equitygroupholdings.com @KeEquityBank K
Equity Group Holdings — Q1 2018 Earnings Presentation on 6ix