Absa Bank Kenya Plc · NSEKE:ABSA
Absa Bank Kenya — H1 2020 Earnings Presentation
34 slides from Absa Bank Kenya's earnings presentation, Aug 27, 2020
Slide 1: 1H 2020 Earnings
1H 2020 Earnings 27 August 2020
Slide 2: Operating environment, financial performance, outlook, 2H 2020 priorities
Operating environment Financial performance Outlook 2H 2020 Priorities 2
Slide 3: Agenda
Agenda 01 02 03 04 1H 2020 2H 2020 Operating Outlook Financial Priorities Environment Performance 3
Slide 4: Operating Environment
Operating Environment Jeremy Awori Chief Executive Officer 01 4
Slide 5: COVID Response: Navigating an uncertain operating environment
Operating Environment COVID Response: We are navigating an uncertain operating environment, as we transition through COVID: 4 top of mind elements have emerged Subdued Global Macro Subdued Local (Kenya) Macro’s Therefore 4 things that we are mindful of… 2019 2020 2019 2020 Global $86,599bn GDP $89bn
Slide 6: COVID Response: 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 completed by colleagues to fast track treatment and of co
Slide 7: COVID Response: Support program for customers and clients
Operating Environment COVID Response: We have rolled out a comprehensive support program for our customers and clients ‘‘Bernard Chege – Vista Wholesale loans Packaging Getting a bank that 2% understands you, listens to their ‘‘ clients and tells you they have your back is really important at this t
Slide 8: COVID Response: Uninterrupted business continuity
Operating Environment COVID Response: We have elevated our focus on operations to ensure uninterrupted business continuity 8
Slide 9: COVID Response: Force for good efforts to protect lives and livelihoods
COVID Response: We have focused our force for good efforts to protect lives and livelihoods Food donation: 1. Laikipia county-over 600 families 2. Eliud Kipchoge Foundation-over 300 Athletes 9
Slide 10: COVID Response: Building our brand for local relevance
COVID Response: We have continued to build our brand for local relevance Key pillars of our brand building Absa Cares We are open for business-Customer at the center Consistent communication and thought leadership Customer at the center We are open for business –driving business imperatives (Absa on
Slide 11: Shifting from securing operations to repositioning long-term strategy
Operating Environment COVID Response: Our Focus is now shifting from securing our operations to repositioning our long-term strategy Business Continuity Strategy reset Employee Wellness Operations continuity 11
Slide 12: Strategy update: Transition programme concluded on time and on budget
Operating Environment Strategy update: We have successfully concluded the transition programme on time and on budget Strategy update (and principle measure 1H 2020) Transformation update up up Separating from Barclays PLC was one of our priorities this year and has been successfully concluded. Rel
Slide 13: 1H 2020 Financial Performance
1H 2020 Financial Performance Yusuf Omari Chief Finance Officer 03 13
Slide 14: Growth in balance sheet across all business segments
performance 1H 2020 Financial Results: Growth in balance sheet across all business segments (In KES bn unless stated otherwise) and Advances Deposits YOY 8% YOY 8% 249 239 238 203 202 230 195 187 Jun 19 Dec 19 Mar 20 Jun 20 Jun 19 Dec 19 Mar 20 Jun 20 LDR of Focus is on attracting to lower the
Slide 15: Income growth boosted by Non Funded Income and new revenue streams
1H 2020 Financial Results: Income growth boosted by Non Funded Income (33% of total revenue) and new revenue streams performance (In KES bn unless stated otherwise) and NFI contribution by business 1H 2020 3% Markets 12% 16.8bn 16.3bn Corporate 18% 16.8bn Retail 52% 5,287 5,509 4% BB 18% NFI 1H 2019
Slide 16: CBR drop impacting our yields
performance 1H 2020 Financial Results: CBR drop impacting our yields.. Over 100bps drop affecting our revenues growth Yield vs CBR movement (%) As a responsible financial 11.8 partner, we 11.4 11.3 have been 10.7 repricing the 10.3 book and passing on the benefits to our customers. 9.00 9.00 8.50 7.
Slide 17: Prudent cost management at 3% decline
performance 1H 2020 Financial Results: Prudent cost management at 3% decline (In KES bn unless stated otherwise) Cost : 1H 2019 – 1H 2020 rate: Q2 2020 at 4.6% (2.8%) 8.4bn 8.2bn 6.3 6.4 6.1 5.7 5.8 5.8 5.6 5.6 5.5 5.0 5.0 4.6 Staff Cost Staff Cost 3.8 4,871 5,120 Rental Cost Rental Cost 38 745 93 D
Slide 18: 9% growth in Pre-Provision profit to KES 8.6 billion
1H 2020 Financial Results: 9% growth in our Pre-Provision profit to KES 8.6 billion, supported by contained cost and growth in revenue performance (In KES bn unless stated otherwise) and Operating cost: Q2 2020 ratio: Q2 2020 at 49% Income Income 16.3bn 16.8bn 56% 54% 53% 51% 8,169 8,404 (2.8%) Oper
Slide 19: Loan Loss Ratios increased with adequate coverage
performance 1H 2020 Financial Results: Loan Loss Ratios increased with adequate coverage (In KES mn unless stated otherwise) Impairment: Q2 2020 228% 5,385 Retail 36% COVID-19 KES 2,964 Overlay 2.96bn 1,641 Wholesale 2,421 Normal 64% charge Impairment charges increased 3X reflecting 1H 2019 2,421
Slide 20: Impairment key drivers
performance 1H 2020 Financial Results: Impairment key drivers (In KES mn unless stated otherwise) LLR (%) +1.45% +1.49% 5.4% +0.6% Kshs 2.96 bn COVID-19 Overlay 1.8% 20
Slide 21: Revenue grew 3% with Pre-Provision profit growing 9.2%
performance 1H 2020 Financial Results: Revenue grew by 3% with Pre-Provision profit growing by 9.2% Financial Results 1H 2020 (In KES bn unless stated otherwise) Indicators 1H 2020 1H 2019 Comment Income 16.8 bn 16.3 bn 3% growth NII 11.3 bn 11.0 bn 2% growth NFI 5.5 bn 5.3 bn 4% growth P&L Normaliz
Slide 22: Key Ratios: CIR improvement, margins under pressure
performance 1H 2020 Financial Results (Key Ratios): CIR showing marked improvement, with industry-wide margins under pressure, loss loan ratio impacted by Covid 19 environment Key ratios performance Indicators 1H 2020 1H 2019 B/(W) vs. PY Cost to Income Ratio (adjusted)(1) 49% 51% Marked improvement
Slide 23: Key Ratios: Strong capital and liquidity ratios
1H 2020 Financial Results (Key Ratios): Strong capital and liquidity ratios to support future growth performance Ratio Ratio Ratio Core Capital Ratio Regulatory Minimum Total Capital Ratio Regulatory Minimum Liquidity Ratio Regulatory Minimum 18.0 % 17 .5% 17 .5% 38.7% 39.1% 16 .5% 17 .0% 16.5% 15.5
Slide 24: Outlook Key Insights
Outlook 5 Key Insights Moses Muthui Country Strategy Director and 04 CIB Finance Head 24
Slide 25: 1. Growth Diversification towards 50/50 Retail/Wholesale split
1. Growth Diversification: Revenue diversification towards a 50/50 Retail/Wholesale split could provide a more predictable financial profile during the transitionary cycle Outlook (In KES bn unless stated otherwise) (and growth contribution) by business 1H 2019 vs 1H 2020 distribution 1H 2020 +23% +
Slide 26: 2. Returns: Correction of ROEs anticipated into medium term
2. Returns: Correction of ROE’s anticipated – only – into the medium term (2021+) Outlook (1) 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 given focus on Industry averag
Slide 27: 3. NPLs: Steady NPLs a sign of portfolio resilience
Outlook 3. NPLs: Steady NPLs (with increased provisions) a sign of portfolio resilience: Total Gross NPLs broadly unchanged and phase 1 repayment holiday operations largely concluded (In KES bn unless stated otherwise) 15.7 bn 17.0 bn Retail, 44% CIB, 56% 1,244 Retail, 44% Retail, 47% KES 7.5bn 17.0
Slide 28: 4. Approach to provisions and correlation between NPLs and LLRs
4. 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) 18,000 : Gross Non-Performing Loans, Provisions and LLRs NPLs increased by 8%, mostly due to a
Slide 29: 5. Capital Strength: Stress testing capital
5. Capital Strength: Outlook Stress Testing capital to re-position for medium-term growth, rather than medium-term survival (1) Chart Title 15.0% 330,500,000 14.1% 13.9% • We are well capitalized 13.8% 13.8% 12.0% 12.0% with sufficient buffer of 13.0% 12.0% 12.0% 3.3% (KES9.8 bn) buffer 280,500,000
Slide 30: In Conclusion: Drivers of valuation may shift
In Conclusion: The drivers of valuation may shift during the transitionary cycle Outlook 30
Slide 31: 2H 2020 Priorities
2H 2020 Priorities Jeremy Awori Chief Executive Officer 05 31
Slide 32: Our Key priorities for 2H 2020
Our Key priorities for 2H 2020 Conclusion Risks our business model Our core franchise (Strategy Reset) 32
Slide 33: 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
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