Absa Bank Kenya Plc · NSEKE:ABSA
Absa Bank Kenya — FY2020 Earnings Presentation
42 slides from Absa Bank Kenya's earnings presentation, Mar 24, 2021
Slide 1: 2020 Earnings Pack
2020 Earnings Pack 24 March 2021
Slide 2: Table of Contents
Operating 2020 Financial Strategy Execution Environment Performance Page Page Page of Contents Outlook 2021 Priorities Page Page 2
Slide 3: Jeremy Awori – Chief Executive Officer
Jeremy Awori – Chief Executive Officer 3
Slide 4: Operating Environment: COVID response and uncertain environment
Operating Environment COVID Response: We are navigating an uncertain operating environment, as we transition through COVID Estimated at 1% Kenya Shilling with Estimated at 4.7% mid- tens level Reduced to recover from (20% more than in 2019) effects of the Transactional pandemic fees High un- employm
Slide 5: Operating Environment: Employee safety and wellness
Operating Environment COVID Response: Employee safety and wellness has been a top most priority Wellness support partnering with wellness players for care calls to staff on overall wellbeing and help manage anxiety levels Daily Self Screening of colleagues completed by colleagues to fast track treat
Slide 6: Operating Environment: Customer support program
Operating Environment COVID Response: We rolled out a comprehensive support program for our customers and clients Wholesale loans 2% Credit Cards 37% Accounts of loans Gross lending to restructured restructured Personal economy Loans 60% Mortgages 1% 56% to business Repayment holiday extended to Rep
Slide 7: Operating Environment: Business continuity
Operating Environment COVID Response: We elevated our focus on operations to ensure uninterrupted business continuity Technology and cyber Uptime on surveillance to Sev1 improvement in our Alternate Branch NPS Channels Score to 52 improvement in rotational working arrangement for back- of branches o
Slide 8: Operating Environment: Force for good efforts
Operating Environment COVID Response: We focused our force for good efforts to protect lives and livelihoods 50m Absa in involvement and 13m shilling for shilling WEMA Force for Good contribution to COVID-19 fund colleague fund Food donation: 1. Laikipia county-over 600 families 2. Eliud Kipchoge Fo
Slide 9: Operating Environment: Building the brand
Operating Environment We continued to build our new brand for local relevance and awareness despite of COVID19 performance on brand metrics Brand Awareness 72% 65% 66% 53% 28% 1 2 3 4 5 2019 Dec Q3 2020 9
Slide 10: Operating Environment: Product launches
Operating Environment Product launches : We keep innovating to bring easier, faster and better services to Kenya First-in-market Revamped the Business An account that rewards you Market leading investments Absa vertical debit and credit Banking proposition • No minimum balance requirement instrument
Slide 11: Jeremy Awori – Chief Executive Officer
Jeremy Awori – Chief Executive Officer 11
Slide 12: Execution: Part of a leading Pan African financial institution
Execution We are part of a leading Pan African financial Institution with global reach 14 countries with Absa 38,472 employees More than 1,000 presence around Africa branches around Africa Around 9,763 ATMs More than 115,000 Kes11.4 Trillion Total around Africa POS devices around Assets Africa Since
Slide 13: Our Strategy: Growth, Transformation and Returns
Execution Our Strategy : Growth, Transformation and Returns (“GTR”) Our ambition is to become the best bank in customer experience as an enabler for sustainable growth. Bring your possibilities to life Purpose Transformation Returns Growth Automation and simplification Optimization of our Protect co
Slide 14: Business transformation to date: revenue and balance sheet build-up
Execution Business transformation to date: We have been executing our growth strategy with significant revenue and balance sheet build-up In Kes ‘billions‘ unless stated otherwise revenue 1.2X despite rate caps our balance-sheet ~2x ~2x 1.2x Interest rate caps Customer Deposits Customer Assets 2013
Slide 15: Business transformation: evolving propositions
Execution Business transformation to date: We have been evolving our business with new propositions towards a full a full financial services group. We want our future growth to be driven by a broader proposition set Pre 2013 (and 2021 – 2023 Plan) 2021-2023 Propositions Business Self Entry Markets B
Slide 16: Business transformation: optimized structural costs
Business transformation to date : We have optimized our structural costs; reducing FTE by 1,009 or 34% Execution (19%) (20) (34%) (1,009) 27 104 3,001 84 Branches and Sales centers 1,992 Branches FTE FTE 2013 2020 2013 2020 22% 174% 16 35 27 9 2013 2020 2013 2020 16
Slide 17: Business transformation: investing in digital banking through Timiza
Execution Business transformation to date : Investing in Digital banking through Timiza and migrating transactions to alternate channels We launched Timiza as the first step towards building a fully fledged digital bank with impressive response from our Customer s including Timiza Customer Transacti
Slide 18: Business transformation: embedded sustainability
Execution Business transformation to date: We have embedded sustainability in our business Increase portfolio and capital allocation by at least 10% in sustainable initiatives Achieve 30% diversity in the supply chain focusing on Women, Youth and Persons with disability Train 1 Mn youth through our
Slide 19: Yusuf Omari – Chief Finance Officer
Yusuf Omari – Chief Finance Officer 19
Slide 20: 2020 Financial Results: Balance sheet growth
performance 2020 Financial Results: Growth in balance sheet across all business segments (In KES bn unless stated otherwise) and Advances Deposits YOY 7% YOY 7% ` Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 LDR of Focus is on attracting to lower the Government securit
Slide 21: 2020 Financial Results: Income growth and NFI diversification
performance 2020 Financial Results: Income growth boosted by Non Funded Income (32% of total revenue) driven by strong markets and insurance performance (In KES bn unless stated otherwise) and NFI diversification 2% Markets, 12% 10.6 11.1 5% Corporate, NFI 17% Retail, 54% Business, 23.2 23.4 17% NII
Slide 22: 2020 Financial Results: CBR drop impacting yields
performance 2020 Financial Results: CBR drop impacting our yields.. Over 110bps drop affecting our revenues growth CBR movement (%) 11.8 11.4 11.3 As a responsible 10.7 financial 10.3 10.2 partner, we have been repricing the book and 9.00 9.00 passing on the 8.50 benefits to our customers. 7.25 7.00
Slide 23: 2020 Financial Results: Prudent cost management
performance 2020 Financial Results: Prudent cost management driving a 4% Yoy cost drop (In KES bn unless stated otherwise) Cost : 2019 – 2020 rate: 2020 at 5.4% (4%) 17.3bn 16.6bn 6.40 6.06 Staff Cost Staff Cost 5.80 9,762 5.62 10,158 5.47 5.36 Rental Cost 5.16 Rental Cost 93 4.96 124 124 Depr. & am
Slide 24: 2020 Financial Results: Pre-Provision profit growth
performance 2020 Financial Results: 8% growth in our Pre-Provision profit to KES 17.9 billion, supported by contained cost and growth in revenue (In KES bn unless stated otherwise) and Operating cost: 2020 ratio: 2020 at 48% Income Income 55% 53% 54% 51% 16.6 (4%) Operating cost 17.3 48% 2016 2017 2
Slide 25: 2020 Financial Results: Impairment key drivers
performance 2020 Financial Results: Impairment key drivers (In KES bn unless stated otherwise) Kes 2.6 bn KES 9.0 bn +1.2% Kes 1.80 bn 4.3% +0.8% Kes 0.34 bn Kes 4.2 bn +0.1% Kes 4.49 bn COVID-19 Overlay 2.2% 25 MEV – Macro-economic variables
Slide 26: 2020 Financial Results: Credit charge and profit before tax
2020 Financial Results: Credit charge main driver of reduced normalized Profit Before Tax performance (In KES bn unless stated otherwise) (28%) Impairment 26
Slide 27: 2020 Financial Results: Revenue and Pre-Provision profit
performance 2020 Financial Results: Revenue grew by 2% with Pre-Provision profit growing by 8% Financial Results 2020 (In KES bn unless stated otherwise) Indicators 2020 2019 Comment Income 34.5 bn 33.8 bn 2% growth NII 23.4 bn 23.2 bn 1% growth NFI 11.1 bn 10.6 bn 5% growth P&L Normalized Cost (16.
Slide 28: 2020 Financial Results: Key Ratios
2020 Financial Results (Key Ratios): CIR showing marked improvement, with industry-wide performance margins under pressure, loss loan ratio impacted by Covid 19 environment Key ratios performance Indicators 2020 2019 B/(W) vs. PY Normalised Cost to Income Ratio 48% 51% Marked improvement (300% bps)
Slide 29: 2020 Financial Results: Capital and liquidity ratios
performance 2020 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% 39.8% 17 .5% 38.7%
Slide 30: Moses Muthui - Chief Strategy Officer & Head of CIB
Moses Muthui - Chief Strategy Officer & Head of CIB finance 30
Slide 31: Outlook 1. Growth Diversification
Outlook 1. Growth Diversification: Revenue diversification towards a 50/50 Retail/Wholesale split could provide a more predictable financial profile during the transitionary cycle (In KES bn unless stated otherwise) (and growth contribution) by business 2019 vs 2020 distribution 2020 +29% -3% +10% W
Slide 32: Outlook 2. Returns: Correction of ROE
2. Returns: Correction of ROE’s anticipated – only – into the medium term (2021+) Outlook Absa actual ROE for 2020 at 14% Industry revenues reduced by 3% in 19.9% Revenues year 1 and grew single digits thereafter partly offset by increase in fee revenue (2.1%) 17.8% 17.5% Broadly neutral impact gi
Slide 33: Outlook 3. Approach to provisions
3. Approach to (and level of) provisions and correlation between NPLs and LLRs A case of trade-off between short-term profitability and medium-term resilience Outlook (In KES mn unless stated otherwise) Up 28% (10% excluding single Impact on P&L for both specific and Covid overlays name exposure)
Slide 34: Outlook 4. Capital Strength
Outlook 4. Capital Strength: Stress Testing capital to re-position for medium-term growth, rather than medium-term survival (1) 16.00% 305,000,000 13.73% 14.76% 13.93% 13.78% 13.89% • We are well capitalized 14.00% 285,000,000 4.3% (KES12.6 bn) with sufficient buffer of 12% 12% 12% 12% 12% buffer on
Slide 35: Outlook 5. Timing the growth and investment cycle
Outlook 5. Timing the growth and investment cycle: Through deliberate financial options on cash and capital (In KES bn unless stated otherwise) Building a stronger operating leverage for exit from COVID19 cycle ( Technology related) Sustained new 19.8 (3.2) investments beyond transition (1.1) invest
Slide 36: In Conclusion: Drivers of valuation may shift
In Conclusion: The drivers of valuation may shift during the transitionary cycle Outlook (Timing portfolio stress) (Securing broader balance sheet strength) (Timing the recovery and growth cycles) 36
Slide 37: Jeremy Awori – Chief Executive Officer
Jeremy Awori – Chief Executive Officer 37
Slide 38: Our Key priorities for 2021
Our Key priorities for 2021 conclusion (Timing the growth cycle) Risks In customer Experience our business model Our core franchise (Transformation) 38
Slide 39: Repositioning our business model: investing in a digital future
Repositioning our business model: We are investing significantly to drive a digital future conclusion during the transition to Absa (2019-2020) towards digital transformation Securities Banca Trading Digital wallet Assurance App Digitization Front-end and digital Automation assets 91 Cloud Systems C
Slide 40: Growth outlook: Protecting core franchise and pursuing new growth areas
Growth outlook: Protecting our core franchise and pursuing new growth areas conclusion during the transition to Absa (2019-2020) Digital Finance Industry pool Consumer Payments Asset Management Industry pool (Retail and Institutional) Expand our Corporate Investment Bank into new areas 40
Slide 41: 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 of Kenya. Words such as “anticipates”, “estimates”, “expects”, “projects”, “believes”, “inte
Slide 42: (absa)
) (absa) (