Co-operative Bank Of Kenya Ltd. · NSEKE:COOP
Co-operative Bank Of Kenya — Q2 2023 Earnings Presentation
58 slides from Co-operative Bank Of Kenya's earnings presentation, August 2023
Slide 1: Co-operative Bank of Kenya Ltd Group Financial Results Q2 2023
Co-operative Bank of Kenya Ltd Group Financial Results | Q2 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. 664.9 Billion in Total Assets 5109 Skilled, Motivated Staff Members 3
Slide 4: We are Growing: Creating Value
We are Growing: Creating Value Continued focus on optimizing opportunities for growth through an innovative array of Non-Funded Income 4.0% financial solutions. Net interest Income 2.3% Total Operating Income 3.0% Profit Before Tax 7.4% 4
Slide 5: We are Resilient: Protecting Value
We are Resilient: Protecting Value Profitable Bank Kshs. 16.4 Billion Strong Capital Buffers Total Capital to RWA 20.5% (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. Key Benefits: Improved business agility and flexibility A modern, robust and scalable Core Enhanced customer experience and Banking solution, enhancing the Bank’s Easy to use system: service delivery: response to ch
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 South Sudan 8
Slide 9: Global Economic Activities Slowing in 2023
GLOBAL ECONOMIC ACTIVITIES SLOWING IN 2023 REAL GDP GROWTH • Global economic activities are projected to fall from 3.5% in 2022 to 3% in 2023 and remain at the same level ACTUAL 2023 PROJECTION in 2024 (IMF’s world economic outlook -July 2023) DIFFERENCE • The forecast for July, is however, 0.2 perc
Slide 10: Kenya's Economy Has Remained Resilient
KENYA’S ECONOMY HAS REMAINED RESILIENT 2022 2023 SECTOR Q1 Q2 Q3 Q4 Q1 • Data from the KNBS indicates that the Kenyan economy 1.0 Agriculture -1.7 -2.4 -1.3 -0.9 5.8 remained resilient in Q1 2023 registering a growth of 5.3% 2. Non-Agriculture (o/w) 8.2 7.1 5.3 4.6 5.2 relative to 6.2% in Q1 2022. 2
Slide 11: Inflation Trending Downwards, Interest Rates Remain Tight
INFLATION TRENDING DOWNWARDS, INTEREST RATES REMAIN TIGHT • Overall inflation registered a significant decline in July 2023 to 7.3%, within the CBK’s target band for the first time since May 2022, from 7.9% in June. • Food inflation declined to 8.6% from 10.3% in June 2023 on lower vegetable prices
Slide 12: Foreign Exchange Rate
FOREIGN EXCHANGE RATE • The Kenyan shilling has continued to face pressure in the foreign exchange market in 2023. • The depreciation of most currencies within the Sub-Saharan Africa region that started in 2022 against the US dollar has continued in 2H2023. • Global commodity prices, though moderate
Slide 13: South Sudan
SOUTH SUDAN • The outlook for the Economy of South Sudan has changed since the beginning of the year with downside risks to the economy becoming more pronounced than earlier projected; • Sudan War is having challenges on the economy of South Sudan on several fronts: ✓ Added inflationary pressures in
Slide 14: Strategic Focus
Strategic Focus 2022 – 2024 Strategic Themes PURPOSE 1 Aggressive deepening of our dominance in the Kenya Market A financial institution predominantly owned by the Kenyan Co-operative movement, Transforming lives Dominant provider of financial services to the Co-operative 2 Movement in Kenya and the
Slide 15: 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%) C
Slide 16: A Successful Universal Banking Model
A Successful Universal Banking Model Corporate Government & Institutional Retail and Business Banking Banking (Kshs. 107.1 Billion Loan (Kshs.250.2 Billion Loan Book) Book) Leasing: Co-operatives Banking (Kshs. 34.8 Coop Bank Fleet Africa Ltd Billion Loan Book) (Kes.78.1Mn YTD) Funds under managemen
Slide 17: Our Presence
Our Presence 17000+ Co-op Kwa Jirani 24hr Contact 191 Branches Agents Centre 21K Diaspora 5M Omni Channel 5109 Staff Banking Customers Customers 484 Sacco Front 546 ATMs offices Branch Network 17
Slide 18: "Soaring Eagle" Transformation Initiative
“Soaring Eagle” Transformation Initiative Key Sales Force Pillars Data Analytics Effectiveness Branch Transformation: Shared Services Growth Customer & Digitization ‘The Digital Experience & Bank’ Retail SFE Efficiency NPL MSME Management & Transformation Credit processes Staff Cost Productivity Man
Slide 19: "Soaring Eagle" Transformation: Key achievements
“Soaring Eagle” Transformation: Key achievements E-CREDIT FOCUS: KSHS.318.2B DISBURSED SO FAR Short-term tenor. Average queue time of below 15 Minutes. Average disbursement of Ksh.6.9B per month. 91% of transactions on alternative channels. Consumer Based that is on salary checkoff deductions at sou
Slide 20: "Soaring Eagle" Transformation: Key achievements
“Soaring Eagle” Transformation: Key achievements MSME Transformation Customers onboarded Customers Trained MSME Gold, Silver, Bronze 38,000 185,000 Non-Financial Services 98 Webinars 155 Clinics Government of Kenya Credit Guarantee Scheme 30 networking forums https://msme.co- 4 International Busines
Slide 21: "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 22: 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 23: Credit Review Implementation Project
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 24: 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 25: 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 26: ESG Performance: Governance
ESG Performance: Governance TCFD Regulatory Reporting • Governance values founded on the pillars of responsibility, accountability, fairness, and transparency, aligned to CMA’s • The Bank has published its first TCFD (Task Force on Climate-related Financial code of Corporate Governance Disclosures)
Slide 27: 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 28: Sustainability Awards
Sustainability Awards Most Sustainable Bank in Kenya Most Innovative Bank Best in financing Commercial Clients 1ST Runners up – Best in Sustainable Finance 1ST Runners up – Best in Covid 19 response 28 2ND Runners Up – Best in Financing MSME 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 Programs. • Education Scholarship Program 18th ENERGY MANAGEMENT AWARD
Slide 30: Regional Business
Regional Business Q22022 Q22023 (Kshs. Millions) 7,441 5,743 4,743 3,224 2,949 1,410 Total Assets Total Deposits Loans And Advances Q22022 Q22023 689 725 4 Branches in Juba 532 477 5 Non-oil collection centers 182 123 56 (36) Owns 31% of CIC Africa Ltd- South Sudan Total operating Total Operating Ne
Slide 31: Channel Performance
Channel Performance 31
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 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 r
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.318.2B disbursed to Date. • Kshs 6.9 Billion disbursed per month on average. • Consumer based salary checkoff hence lower credit risk. • Short term tenure
Slide 36: E-credit
E-credit Cumulative Mcoop Cash Loan Customer Numbers ( In '000’) 9,819 8,774 6,577 A superior product for our customers that continues to scale and is a key revenue source 4,641 2,924 Kshs 41.3B Disbursed YTD 694 1,389 28 183 388 E-Credit – Key Growth Focus FY 2014 FY2015 FY 2016 FY2017 FY2018 FY201
Slide 37: Agency Banking
Agency Banking Growing Co-op Kwa Jirani Agency Banking No. of Agents Total No. of Transactions Deposits Generated by 17,789 (Millions) Agents (Kshs. Bn) 16,857 18 87.3 78.2 15 Q22022 Q22023 Q22022 Q22023 Q22022 Q22023 Agency Banking Jun '22 July '22 Aug '22 Sept '22 Oct'22 Nov'22 Dec'22 Jan '23 Feb
Slide 38: Agency Banking
Agency Banking Transaction Type (%) Q22022 Q22023 46.5% 43.2% 28.0% 29.8% 14.2% 13.6% 14.6% 10.0% Growing Co-op Kwa Jirani Agency Banking • Key deposit mobilization channel Deposits Withdrawal Balance Inquiry Others • Higher deposit than withdrawal Transaction Value distribution (%) Q22022 Q22023 61
Slide 39: Financial Highlights
Financial Highlights 39
Slide 40: Strong Financial Position (Kshs. Billion)
Strong Financial Position (Kshs. Billion) Total Assets Net Loan book 365.4 664.9 330.1 603.9 Q22022 Q22023 Q22022 Q22023 Total Deposits Shareholder's Funds 108.3 467.5 96.7 433.9 Q22022 Q22023 Q22022 Q22023 40
Slide 41: Strong Financial Position (Kshs. Billion)
Strong Financial Position (Kshs. Billion) Q22023 Q22022 YoY Change Total Assets 664.9 603.9 10.1% Net Loan book 365.4 330.1 10.7% Government Securities 188.5 183.2 2.9% Total Deposits 467.5 433.9 7.7% Borrowed Funds 59.4 41.4 43.6% Shareholder's Funds 108.3 96.7 11.9% 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. Q22022 Q22023 48.5% 48.0% 26.
Slide 43: Diversified loan book across sectors
Diversified loan book across sectors Mining & Quarrying 0.0% 0.0% Tourism, Restraurant & Hotels 0.5% 0.7% 1.4% 50.8% in Personal Building & construction 1.6% consumer which is Agriculture 1.6% performing well 1.3% Energy & Water 1.7% 2.2% Low relative exposure in Manufacturing 3.3% 2.5% high-risk se
Slide 44: Improving Non-Performing loan book
Improving Non-Performing loan book The bank’s NPL has trended below industry levels of 14.5% Q22022 Q22023 14.7% 14.5% 14.3% Bank’s NPL below Industry level 13.7% 13.5% Supported by; • Proactive Credit Management Strategies. 12.5% • Business Growth. • Consumers and Businesses continued recovery from
Slide 45: Adequate Coverage
Adequate Coverage Cost of risk has improved to 1.6% in Q22023 compared to 2.1% in Q22022. Cost of Risk IFRS Coverage Q22022 Q22023 2.1% 73.6% 71.1% 72.0% 70.0% 1.6% Q22022 Q22023 Bank Group Inclusive of the Discounted Value of Securities, our coverage is at 113% 45
Slide 46: Portfolio Trends – Sector NPL
Portfolio Trends – Sector NPL Q22023 Q22022 Mining & Quarrying 0.0% 0.0% Energy & Water 0.3% 0.3% Personal consumer 6.3% Sector is 50.8% of our loan book 5.1% Financial services 6.6% 6.5% Agriculture 12.7% 13.3% Transport & Communication 13.1% 9.3% Manufacturing 17.2% 53.5% Tourism, Restraurant & Ho
Slide 47: Well-diversified Liability Portfolio
Well-diversified Liability Portfolio Q22023 Q22022 Savings Accounts Transaction Accounts Current Accounts Term Deposits Accounts 8.3% Call Deposits Sacco and Agri-business 9.5% 9.9% Corporate Banking 9.6% 7.5% 16.1% 10.9% Government Banking 8.4% 25.1% 17.4% Institutional Banking 20.5% 17.2% 26.5% MS
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 assets assets 21.2% 16.5% 19.7% 15.5% 20.5% 16.6% 10.5% 14.5% 8.0% Q22022 Q22023 Q22022 Q22023 Q22022 Q22023 Core capital/Tota
Slide 49: An Optimally balanced Kenya Shilling asset & funding book
An Optimally balanced Kenya Shilling asset & funding book FUNDING: LOCAL VS. FOREIGN CURRENCY LOAN BOOK: LOCAL VS. FOREIGN LCY funding FCY Deposits FCY Borrowing CURRENCY Local Currency Foreign Currency 7.1% 5.5% 10.9% 87.4% 89.1% 49
Slide 50: Optimal Asset and Funding Mix
Optimal Asset and Funding Mix Q22023 Q22022 8.0% 8.0% Net Loans Net Loans 8.7% 7.0% Government Government Securities Securities Asset 55.0% Cash and Cash 54.7% Cash and Cash 28.3% 30.3% Equivalent Equivalent Categories Other Assets Other Assets Q22023 Q22022 4.5% 5.3% 8.9% Deposits 6.8% Deposits Sha
Slide 51: Strong Liquidity to Support Investments
Strong Liquidity to Support Investments Liquidity ratio Loans /(Deposits+Borrowed Funds) 52.3% 69.4% 69.4% 50.8% Q22022 Q22023 Total Loans to Total Deposits 78.2% 76.1% Q22022 Q22023 Q22022 Q22023 51
Slide 52: Sustainable Profitability Growth
Sustainable Profitability Growth Q22023 Q22022 YoY Change Total Interest Income 32.0 28.6 12.0% Total Interest Expenses 10.4 7.5 38.9% Net Interest Income 21.5 21.1 2.3% Fees and commissions on loans and advances 6.2 5.5 13.3% Other Fees and commissions 5.6 5.4 3.4% Foreign exchange trading income 1
Slide 53: Subsidiary Contribution
Subsidiary Contribution Q22023 Q22022 Growth Growth KShs '000' KShs '000' KShs '000' % Co-operative Bank of Kenya Ltd 15,125,220 14,032,110 1,093,109 8% Co-operative Bank of South Sudan (36,495) 55,526 (92,021) -166% Co-opTrust Investment Services Ltd 106,773 85,743 21,030 25% Co-op Consultancy & Ba
Slide 54: Key Ratios
Key Ratios Return on Average Assets Return on Average Equity Earnings per share, Ksh 24.2% 4.1 23.7% 3.9% 3.8% 3.9 Q22022 Q22023 Q22022 Q22023 Q22022 Q22023 54
Slide 55: Key Ratios
Key Ratios Average Return of Interest Earning NIM on Loans NIM on Interest earning Assets Assets 8.5% 7.9% 7.9% 11.4% 7.2% 11.1% Q22022 Q22023 Q22022 Q22023 Q22022 Q22023 55
Slide 56: Key Ratios
Key Ratios CIR - Group CIR - Bank 55.8% 55.3% 54.1% 52.8% 46.0% 46.0% 44.2% 44.2% Q22022 Q22023 Q22022 Q22023 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 3.6% 39.1% 3.1% 38.7% Q22022 Q22023 Q22022 Q22023 57
Slide 58: Thank You.
[e y CO-OPERATIVE BANK We are you Thank You.
Co-operative Bank of Kenya — Q2 2023 Earnings Presentation on 6ix