Q1 2012 Performance · Capital raising – AfriCap, ... Core Tier 1 vs. Peer Countries 2011A 5....
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Investor Presentation 1 Q1 2012 Performance
Transcript of Q1 2012 Performance · Capital raising – AfriCap, ... Core Tier 1 vs. Peer Countries 2011A 5....
Investor Presentation
1
Q1 2012 Performance
2
Equity Bank at a Glance
The DNA of our Strategy
Accessibility Affordability Efficiency
Pillar I:
Unique
distribution
model
1 Leveraging innovation and technology to improve proximity and reduce costs for our customers
– 186 branches; 166% increase from 70 branches in 2007 to 186 in March 2012
– 3,991 agents; 144% increase from March 2011
– 1.55 MM mobile banking customers; 155% increase from March 2011
Pillar II:
Customer
centric
approach
2Broad customer base: high volume / low margin model
Equity Bank: 41.2% CAGR
2007 March 2012
1.8 million customers 7.5 million customers
2.
3
approach Equity Bank: 41.2% CAGR
Low Cost Deposit Diversified Loan Book High Transaction Income
1.8 million customers25% of Kenya’s banked population
7.5 million customers51% of Kenya’s banked population
Pillar III:
Culture
aligned
with
business
model
3
Most impactful brand on Kenyans and Highest Rated
Brand in Kenya AAA+
Formidable Brand
State of the Art
Technology
Leader in Innovation
Best Initiative in Support of SME’s & the Millennium
Development Goals
IT capability to process 300,000 transactions per minute and capacity to
hold 35 million customers
Uniquely combining shareholder value with social impact
Key Initiatives / Strategy
Continuing
Brand Development and Impact Investment
Bank has embarked on a number of initiatives to create brand awareness and develop the local economy Wings to fly program- 3,486 scholarships awarded to bright
needy students to date with a target of 10,000 by 2015
Financial Literacy Training (FIKA) Program- 314,952 people trained already with target
to train 1,000,000 people by 2014
The Bank embedded the agency model in 2011 which allows the Bank to leverage on third party infrastructure for cash transactions
No of Operational AgentsJan-11 to Mar-12 Growth Trend
2
1
2.
4
ContinuingRoll-out and
Embedding of Agency Banking
Enhancing Mobile Telecommunication
Solutions / ICT Investment
transactions Extremely successful initiative which has
seen the number of agents increase from just 875 at the beginning of the year 2011 to 3,991 agents by March 2012 (c.356% increase) – Agency banking now contributes more than
20% of all cash transactions
The Bank have made large investments in ICT and continue to enhance their mobile banking services / solutions
– Mobile banking customers have increased from 417,194 in January 2011 to 1,553,865 by end of March 2012 (c.272% increase)
– Eazzy-247 connected to all the 4 telcos
Number of EAZZY-247 Customers3
Our Regional Footprint: Traditional and Alternative Channels
Number of Customers Number of Branches
Number of ATMs Number of POS
Kenya
Date Established: 1984
MM
Rwanda
Date Established: 2011
Tanzania
Date Established: 2012
3.
6.2 7.5
Q1 2011 Q1 2012
163
186
Q1 2011 Q1 2012
5
Kenya89%
Uganda 5%
South Sudan
6%
Rwanda0%
Number of Staff Number of Agents
Date Established: 1984
No. of Branches: 135
Uganda
Date Established: 2008
No. of Branches: 38
South Sudan
Date Established: 2009
No. of Branches: 4
Date Established: 2011
No. of Branches: 7
Kenya85%
Uganda 5%
South Sudan
9%
Rwanda1%
Split by Geography
Total Assets: March 2012 Total Revenue: March 2012
Total:Kshs 208.9 Bn
Total:Kshs 9.0 Bn
Date Established: 2012
No. of Branches: 2
1,636
3,991
Q1 2011 Q1 2012
5,772 6,814
Q1 2011 Q1 2012
557611
Q1 2011 Q1 2012
2,614
6,000
Q1 2011 Q1 2012
Top Notch Corporate Governance and Management
Corporate History and Development
1984
1994-95
Management Team
Dr. James Mwangi, CBSChief Executive Officer & Managing Director– Holds a Bachelor of Commerce degree and is a Certified Public Accountant– Over 22 years of management experience
Equity Bank was founded as Equity Building Society in October 1984
Complete overhaul of firm’s strategy and operations in exchange for avoiding dissolution having been declared technically insolvent by Kenya Central Bank which led to the Bank’s rebirth
– Mission drift and re-engineering of the business model
– Focus on Bottom of the Pyramid – emphasis on savings
James Mwangi was hired as Finance Director and embarked on key initiatives which quickly contributed to the company’s turnaround
4.
1997-02
Capacity building in people, processes and procedures
Focus on Efficiency through computerization
Capital raising – AfriCap, 16% shareholding US$1.6 MM
Mary WamaeDirector of Corporate Strategy & Company Secretary
– LLB degree, Diploma in Law & Certified Public Secretary
– Over 13 years of experience in legal practice and joined the Bank in 2004
John StaleyDirector of Mobile Banking and Payment Innovations– MSc. in Applied and Computational Mathematics, BSc. in Physics; qualified Chartered Accountant– Over 22 years of experience
Dr. Maurice A Ewing, FRMChief Risk Officer– Has a PhD and MA in economics, a BA in economics and mathematics– Over 15 years of experience
Allan WaitituDirector of IT and Innovation Center
Paul NjagaChief Finance Officer– MBA (Finance), Bachelors degree (Hons) in Economics, and is a Certified Public Accountant– Over 16 years of banking experience
6
2004-06
2012
Corporate Governance
Board of Directors comprise of 11 Non–Executive Directors and 1 Executive Directors
All Board members are vetted before appointment to take into account professional
qualifications, integrity and track record
The Board conducts a self evaluation exercise in keeping with highest international
standards which focuses on the role and responsibility of the Board, structure, functions
and processes, meetings among other critical areas
The Board has established 7 committees to assist in guiding the direction of the Bank
– These are Audit, Credit, Risk Management & ALCO, Governance, Nominations and
Staff Remuneration, Tendering & Procurement, Strategy & Investment, Executive
Committees
– All the committees are governed by charters setting out their mandates and authority
James Mwangi appointed as CEO in 2004
Re-engineering and transformation to an inclusive financial services provider through conversion to a commercial bank
US$10 MM Private Placement – British American, 16%
Listing of Equity Bank on the Nairobi Stock Exchange, with an initial valuation of KSH6.3 Bn in August 2006
Transformation into retail bank considered as inspirational success story
- Received multiple accolades and awards globally
- James Mwangi named African Banker of the Year in 2010 and 2011, Best Bank in Kenya 2011 by Euromoney
2007-08
Consolidation through recapitalization – Helios EB (OPIC, IFC, George Soros, CDC) - US$185 MM
Diversification & Regional Expansion
Social entrepreneurship – Brand repositioning through social investments
Director of IT and Innovation Center– Graduate of Advanced Management Programme– Over 20 years experience in information technology and banking
Favorable Macro and Demographics Supporting Growth
Macro-environment & Demographics Supporting Growth
Increasingly positive outlook for the sector due to improved liquidity, higher net
interest margins, a more stable currency and new key Government initiatives to boost
the economy, which include:
Heavy infrastructure spending on roads & ports (building of second port road to
South Sudan and Ethiopia with access to a population of c.100 MM people)
Recent oil discovery in Northern Kenya expected to attract significant capital
inflows and investments
In Kenya, real GDP growth of 4.1% in 2011, with expected growth of 4.6% and 5.4%
in 2012 and 2013, respectively
Expected average real GDP growth (1) of countries where Equity Bank operates
is 6.3% and 6.8% in 2012 and 2013, respectively
Projected increase in GDP per Capita indicates wealth growth and thus a greater
2011 Nominal GDP per CapitaUS$ ‘000
0.6 0.9 1.74.4
1.50.5 0.80.5
8.1
12.5
5.4
13.2
3.80.6
8.2
0.0
8.0
16.0
Tanzania Uganda Rwanda Kenya Ghana Nigeria Angola SA India China Russia Brazil
Countries with Equity Bank Presence African Peers BRIC Average
Real GDP Growth: Countries with Equity Bank Presence (1)
5.6% 6.3% 6.8% 7.0% 6.9% 6.8%6.5%
0%
6%
12%
2010 2011 2012 2013 2014 2015 2016
%
Source: Global Insight, February 2012
5.
7
Notes
1. Calculated as the average of Kenya, Tanzania, Rwanda and Uganda; data unavailable for South Sudan
2. Calculated by taking a total population for Kenya, Tanzania, Rwanda and Uganda; data unavailable for South Sudan
Projected increase in GDP per Capita indicates wealth growth and thus a greater
need for banking services
GDP per capita of countries where Equity Bank operates expected to grow at a
CAGR of c.9.0% between 2010 and 2016 to $994 (1)
Banking penetration currently at c.67% in Kenya (and much lower in the wider East
Africa region) providing room for further improvement
Substantial upside potential with 2011 loans to GDP ratio of c.14% in the EAC
countries where Equity Bank operates, lower than peers in Africa (c.33%) and BRICS
(c.72%)
Access to population of c.145 MM in East Africa with strong winning demographics
(over 40% between 0-14 years)
Successful creation of South Sudan as Africa’s youngest state, with a population of
c.11 MM, has opened up further opportunities and access to markets for East African
businesses
Relentless pursuit of National Vision 2030
Regional Integration and Kenya’s positioning as a regional power house
Proposed Finance Bill to cap interest rates resolved.
137 141 145 149 153133
0
130
260
2011 2012 2013 2014 2015 2016
9% 12% 28% 15% 25%62%
6%30%
118%
45%76%
47%33%72%
14%
0%
80%
160%
Rwanda UgandaTanzania Kenya Ghana Nigeria Angola SA India Russia Brazil China
Countries with Equity Bank Presence African Peers BRIC Average
2011 Loans / GDP
Source: BMI, IMF Financial Access Data, EUROMONITOR
%
Source: Global Insight, February 2012
Countries with Equity Bank Presence African Peers BRIC Average
Population Forecast: Countries with Equity Bank Presence (2)
MM
Source: Global Insight, February 2012
Regulatory Reforms Improve Transparency and Reduce Risk
Robust Industry Practices
Number of key initiatives and developments which have strengthened credit risk management in the Kenyan banking sector. These include:
Introduction and operation of a Credit Reference Bureau where all banks have signed up
Monthly repayments on personal loans to salaried customers capped at 33.3% of Gross Pay
Core Tier 1 vs. Peer Countries
2011A
5.
12.6%14.7%
16.6%
19.7%
11.5%
0.0%
8.0%
16.0%
24.0%
LatAM South Africa MENA Kenya Nigeria
8
Central Bank of Kenya provisioning policy is more conservative than IFRS reporting requirements
Score Card Development
Automated origination, collection and arrears management system
Judicial and legal reform and robust structures
Loan / Deposit Ratio vs. Peer Countries
2011A
Source: Company Financials, Capital IQ
79.5% 79.9%88.2%
117.1%
63.9%
0.0%
70.0%
140.0%
Nigeria MENA Kenya South Africa LatAM
9
Business Overview
Deposit gathering drives lending
Mass market, “bottom of the pyramid”, banking model with 7.5 MM customers
Gathering large volumes of relatively small deposits resulting in low costs, stable funding
Short-term small loans minimise cost of risk – customers incentivised to repay and up-size
Generating high transaction volume at low cost for the customer
Diversified and highly efficient methods of attracting customers with focus to provide easy access of banking services to customers at a low cost
– Unrivalled mobile banking service (“EAZZY 24/7”) with multiple instant banking functions available on the mobiles
– Rollout of agency banking to get closer to customers in remote areas
Customer Evolution
‘MM
Savings Led Business Model …
5.917.15 7.52
10
Deposit Evolution
Kshs Bn
1.843.30
4.375.91
7.15
2007 2008 2009 2010 2011 Mar 2012
32 50
70 104
144 154
2007 2008 2009 2010 2011 Mar 2012
Agency Banking Transactions
Savings Led Business Model …
11
Number of Transactions (ATM, Branch, Agency)
Savings Led Business Model …
12
Eazzy 24/7 Transactions
…Driving Loans to The Following Segments
• Personal unsecured loans to salaried employees of selected employers .
• Employer a party to the loan agreement
• Repayment is deducted from employee’s salary and paid directly to the Bank by the employer
• General purpose loans for
Consumer Micro Enterprises
• Personal loans to individuals who may be in organized groups or to standalone individuals for income generating activities
• Lending to standalone individuals is secured by collateral e.g. household items
• For lending to individuals
Agriculture
• Loans to farmers for agricultural activities
• The funds are paid direct to farm input suppliers e.g. fertilizers
• Repayment is from an organized trading organization e.g. Kenya Tea Development Authority when produce is delivered to the
Small Enterprises
• Working capital facilities in the form of overdrafts but primarily term loans that match the trading cycle of the business secured against tangible commercial & residential property; with clear sources of repayment
• Average tenor 5 years
Medium Enterprises
• Similar business model to SME but with larger ticket balances
• Medium Enterprise is attracted through ‘banking the value chain’ model as the majority of the supplies and distributors of large corporates and Equity Bank SME customers
13
• General purpose loans for e.g. school fees, medical expenses, purchase of house hold appliances
• Average tenor 36 months
• For lending to individuals within a group, the whole group is responsible for the repayment of each loan – ‘peer pressure’
• Average tenor 6 – 12 months
produce is delivered to the factory
• Average tenor 6 – 12 months
Loan Composition
• Having the same bank improves the efficiency and security
• Average tenor 5 years
Consumer Banking Franchise
No. of Loans
‘000
Loan Value
Kshs Bn
520
529 532
551
27.63
34.29
42.56 40.90
14
2009 2010 2011 Mar 20122009 2010 2011 Mar 2012
Kshs Bn
Micro Enterprises and Agriculture
Loan Value Loan Value
Kshs Bn
Micro Enterprises Agriculture
10.86 9.60
14.47 13.82
1.96
2.64
3.32
3.80
15
‘000‘000
No. of Loans No. of Loans
173
141 137 137
2009 2010 2011 Mar 2012
70 75
88 82
2009 2010 2011 Mar 2012
2009 2010 2011 Mar 2012 2009 2010 2011 Mar 2012
Small & Medium Enterprises
Loan Value Loan Value
Kshs Bn
Small Enterprises Medium Enterprises
Kshs Bn
29.14 31.38
48.83 50.53
2.29
7.20
14.04 15.26
16
‘000’
No. of Loans No. of Loans
75
165
278
355
2009 2010 2011 Mar 2012
11 10
16
19
2009 2010 2011 Mar 2012
2009 2010 2011 Mar 2012 2009 2010 2011 Mar 2012
Board of Directors
– Primary risk supervisor, exercising its role through various board committees
– Delegates day-to-day operations to management but remains accountable for ensuring operations are carried out in compliance with applicable laws and that they are consistent with safe and sound banking practices
End-to-end, forward-looking risk management framework
– In line with the Central Bank regulations with a view to eventual, advanced Basel III compliance
– Risks actively owned and managed by the respective business units supported by an integrated risk management hierarchy which utilizes, among other tools, a comprehensive risk register that records all extraordinary events (positive or negative) occurring across all departments in all subsidiaries
– The risk register is then coupled with a risk control self-assessment platform that enables area experts across the Group to offer forecasts of risk; to be reconciled statistically with subsequently registered events, by risk function analysts
– The combination of a historical register and forward-looking assessment system enables the risk function’s predictive analytics team offer strategic guidance to the business function heads that leverages both operations and experience: blending quantitative and qualitative elements
Predictive risk analytics
State of the Art Risk Management Framework
17
– Further driven by the identification of key risk drivers, considered in the formulation of quarterly and yearly forecasts as well as in the creation of stress tests
– Provisions/ capital compared against plausible forecasts and stressed scenarios to ensure adequate allocation of financial cushioning in any market condition
– Sensitivity of the Bank’s financial position outlines the Bank’s risk profile; risk limits assessed to ensure alignment with business objectives and market conditions
– The Bank continues to strengthen the risk management team by creating a more comprehensive structure that now comprises a globally experienced (Princeton University PhD) Chief Risk Officer and a Board Risk Management Committee that works with specialized units as well as the rest of the Senior Management team
Risk function’s compliance assurance docket
– Reviews compliance framework and specific compliance issues by all business units and supports and follows up on implementation of Internal Audit, External Audit and regulators’ recommendations; the compliance enforcement team works with businesses to close gaps identified through audit and business reviews
Internal audit department
– Plays a vital role in keeping the Board and senior management aware of risk and control issues while also assessing the effectiveness of risk management
– Objectively and independently evaluates the existing risk and internal control framework and analyses business processes and associated controls
Technology and business continuity
– Continued investment in building operational resilience by deploying a state of the art technology and migrating to a tier 4 data centre that will ensure high system availability, security and redundancy capability
18
Financial Performance
Strong, Liquid Balance Sheet Total Assets, Loans and Deposits
• Despite strong total asset growth (36% in Q1 2012) and loan growth (41% in Q1 2012), robust Loan / Deposit ratio has been maintained
– Loan / Deposit ratio improved from 91% in 2009 to 79% in 2012
• Strong growth in deposits (34% in Q1 2012) driven by:
– Expansion in customer numbers, increasing from 6.2 MM to 7.5MM
– Focus on enhanced customer experience and improved access to banking services through agents and mobile phone enabled technology
• Robust liquidity maintained with 18.4% of assets in cash & cash equivalents
• Strong balance sheet allows Equity Bank to capture quality opportunities that arise
Robust, Liquid Balance Sheet
Kshs Bn
19
Strong ALM and Diversification Strong Capital and Liquidity Position
T1 Capital Ratio; Loan (2) / Deposit Ratio
1. Other Assets includes Finance lease receivables, Tax recoverable, Prepaid leases, Deferred tax assets, Investment securities, PP&E, Due from related parties, Investments in associates, Intangible assets & goodwill and “Other assets”; Other liabilities includes Borrowed funds and “Other liabilities”
2. Based on net customer loans
Kshs Bn
24% 22%15% 18%
91%
75% 79% 79%
2009 2010 2011 Mar 2012
Core Capital Ratio Loans to Deposit Ratio
Improvement in Asset Quality Improving NPL Ratio
• Consistently improving NPL ratio over past two years, reaching 2.7% at Q1 2012
– Improved NPL ratio despite retail lending model
– Largest customer base, largest volume of transactions, yet one of the lowest NPL ratios in the sector
• Reduction in NPL of 180 bps from 4.5% in 2010 to 2.7% in 2012 driven by:
– Conservative risk management framework
– Robust IT infrastructure allowing strong, rapid risk assessment
• Reduction in cost of risk to historically low levels of 0.7% in Q1 2012
• Conservative loan loss provisioning, with NPL coverage ratio at 72% in Q1 2012
Sound Asset Quality
Gross NPLs / Gross Customer Loans
4.5%
2.8% 2.7%
2010 2011 Mar 2012
20
Kshs Bn
72%39% 52%
Coverage Ratio
Net Non Performing Loans and Coverage Ratio Cost of Risk
Loan Loss Expense / Average Loans
2.6%
1.7%
0.7%
2010 2011 Mar 2012
2.213
1.570
0.914
2010 2011 Mar 2012
Strong, Sustainable Margins Strong Net Interest Margin
• Strong Net Interest Margin of 13.6% in Q1 2012
– With deposit/ loan repricing, net Interest Margin is enhanced by Equity Bank’s low-cost, efficient funding base
• Low cost of interest bearing liabilities of 3.8% in Q1 2012 results from underlying business model of the bank:
– Large volume, small ticket savings & short term deposits resulting in a low cost, broad deposit base
– Ability to sustainably attract deposits supports strong NIM
• Enhanced strong interest earnings of 17.4% driven by ability to reprice loans favourably to deposits
• Equity Bank continues to maintain its focus on customer acquisition in an efficient manner on both asset and liability sides to maintain attractive NIM
Sustained Net Interest Margin
12.0%11.7%
13.6%
2010 2011 Mar 2012
21
Low Cost of Interest Bearing Liabilities Competitive Yields on Interest Earning Assets
2.1% 2.2%
3.8%
2010 2011 Mar 2012
14.1% 13.9%
17.4%
2010 2011 Mar 2012
Strong Growth Driven by Interest Income Revenue Mix
• Increase in total revenue by 38% to Kshs 9.01 Bn in Q1 2012, predominantly driven by net interest income (65% of total revenue)
– Interest income predominantly driven by loans and advances to customers (90% of interest income)
• Substantial non-interest income provides additional diversification for revenue stream
– Non-interest income grew by 13% to Kshs 3.32 in Q1 2012
– To contribute 35% of the total income
Profitability Drivers – Strong Revenue Generation Model
Kshs Bn
10.46 12.42
3.32
13.78
19.31
7.32
2010 2011 Mar 2012
Non-interest Income Interest Income
24.24
31.72
10.64
22
Interest Income (Q1 2012) Non-interest Income (Q1 2012)
2010 2011 Mar 2012
Kshs Bn Kshs Bn
Increasingly Efficient Operations Cost to Income Ratio
• Despite growing balance sheet and revenue, cost income ratio has consistently declined over past two years
• Declined from 60.1% in 2009 to 51% reflecting improved asset quality and cost efficiencies in 2012 derived from the agency and mobile phone enabled banking operations
– Management continues to focus on developing innovative ways to optimize operational efficiency whilst yet providing unrivalled service
Operating expenses increased by 45% in March
Profitability Drivers – Low Operating Expenses and Improved CoR
60%
51%50%
51%
2009 2010 2011 Mar 2012
23
Operating Expense
• Operating expenses increased by 45% in March 2012 to Kshs 5.28 Bn from Kshs 3.65 Bn in March 2011, driven by continuing investments for future growth:
– Investments in information technology infrastructure
– Investments in regional subsidiaries
– Additional branches opened during the year which resulted in regional branch network increase from 163 to 186
– High interest rate on term deposits & high inflation rate
9.4411.31
14.37
5.28
2009 2010 2011 Mar 2012
Consistently Delivering Strong Growth
Loans
Kshs Bn
Deposits
Kshs Bn
1.
31.54 50.33
69.84
104.43
144.17 153.68
2007 2008 2009 2010 2011 Mar 2012
21.84 44.07
63.38 78.30
113.82 121.13
2007 2008 2009 2010 2011 Mar 2012
24
Revenues
Kshs Bn
Profit Before Tax
Kshs Bn
2.38
5.02 5.28
9.05
12.83
3.73
2007 2008 2009 2010 2011 Mar 2012
5.78
12.59 15.65
22.11
28.66
9.01
2007 2008 2009 2010 2011 Mar 2012
Continued Culture of Sustained Profitability ROA / ROE
• Strong Q1 2012 PBT of Kshs 3.73 Bn up 29% compared to Q1 2011
• High Q1 2012 ROE of 31.4% and ROA of 5.2%
– ROE substantially improved from 19.9% in 2009 to 31.4% in March 2012.
• EPS has consistently increased, to KES 2.85 in March 2012
– Has allowed regular growth in dividends, now at KES 1.0 per share in 2011, representing 25% yoy growth
• Growth in profitability primarily driven by:
– Acceleration in interest income driven primarily by increase in loan and transaction volumes
– Disciplined expense control leading to improving efficiency and
Continually Delivering High Profitability
4.7% 5.8% 6.1% 5.2%
19.9%
28.5%
33.6%31.4%
2009 2010 2011 Mar 2012
ROA ROE
25
Profit Before Tax
rising margins
Kshs Bn
Consistent Dividend Payments
0.40
0.801.00
1.14
1.93
2.79 2.85
2009 2010 2011 Mar 2012
Dividends Per Share Earnings Per Share
5.28
9.05
12.83
3.73
2009 2010 2011 Mar 2012
2009 2010 2011 Mar 2012
45.7% 50.1%51.7% 56.7% 62.3%53.3%
SCBK Equity Bank BBK KCB COOP
Cost / Income
Consistently delivering high profitability ‘Best in class’ revenue generation and efficiency (1)
Superior Performance vs. Peers (Dec 2011)
Source: Company Financial Reports Source: Company Financial Reports
6.3% 6.1%
3.8% 3.8%3.3%
4.7%
BBK Equity Bank SCBK KCB COOP
38.1%33.6% 33.0%
26.3% 26.2%
31.4%
BBK Equity Bank SCBK KCB COOP
ROE
ROA
27.3%
5.5%
3 year average for Equity Bank 3 year average for Equity Bank
43.4% 40.7% 38.0% 37.6%35.0%39.0%
Equity Bank KCB BBK SCBK COOP
Non-Interest Income / Total Income
53.7%
44.0%
1.
26
2
1.1%
2.8%
4.5%
5.2%
5.8%
3.9%
SCBK Equity Bank COOP BBK KCB
Remarkable asset quality in spite of retail focus Robust capital position (2)
Source: Company Financial Reports
Source: Company Financial Reports Source: Company Financial Reports
27.8%
22.0%20.7%
16.4%14.3%
20.2%
BBK Equity Bank KCB COOP SCBK
Source: Company Financial Reports
(1)
27.0%
3 year average for Equity Bank 3 year average for Equity Bank
3 year average for Equity Bank3 year average for Equity Bank
5.0%
Notes
1. Cost Income ratio defined as Operating Costs (excluding Loan Loss Provisions) / Total Income
2. Reflects Group numbers
Total Capital / Risk Weighted AssetsNPL Ratio
Consistently delivering strong growth and high profitability
– 56% loans CAGR 2007-2012
– 50% deposits CAGR 2007-2012
– 31.4% ROE March 2012
Impressive business model which promotes social good while maximizing shareholder value
– Multi-channel distribution model ensures proximity to client
– Leveraging on technology and innovation to broaden reach and enhance efficiency
– Trusted brand with loyal customers (over 50% of bank accounts in Kenya)
Uniquely positioned to benefit from growth in the sector and the region
Equity Bank: A Unique Banking Story in Africa
Best Bank in Kenya, 2011
1.
2.
3.
GCR Rating 2011Long term AA – “…very high credit quality”Short term A1 + “…highest certainty of timely payment”
27
– Present in 5 countries in East Africa including: Kenya, Uganda, Rwanda, South Sudan and Tanzania
– The East African Community (“EAC”) regional integration offers a unique opportunity to expand into neighboring regions where lucrative banking model can be replicated
First class management team and corporate governance standards
– Highly recognized management with strong track record of value creation
– CEO, Dr. James Mwangi, named African Banker of the Year in 2010 and 2011 at the African Banker Awards in Washington D.C.
– Corporate governance and risk management processes of international standards
Macro, demographics and banking sector dynamics offering strong potential
– Underpenetrated banking industry as 33% of bankable Kenyan adults currently have no access to banking services (1)
– Ongoing reforms to ensure well regulated banking sector
“Rated by Kenyans as the company that has made the greatest
contribution towards thedevelopment of the Kenyan people.”
- Business Daily 19 August 2011
Note
1. Sourced from the Central Bank of Kenya
Equity Bank, New
Sustainability Champion –September
2011
The most Preferred Kenyan Bank- Intraband Simpson-2011
Most impactful brand on Kenyans and Highest Rated Brand in Kenya
AAA+
4.
5.
Key Highlights of Q1 2012
March 2011
Profit After Tax Kshs 2.33 BnGrowth of 13% in PAT reflecting the increased tax rate of 30% in 2012 compared to the 20% in prior years after exhausting the 5 years benefit of listing
Return on Equity 34.6%Sustained strong ROE driven by focus on core business and efficiency
Earnings Per Share 2.52 KES / share Growing returns to shareholders
Profit Before tax Kshs 2.90 Bn Strong year on year PBT growth of 29%Kshs 3.73 Bn
Kshs 2.64 Bn
31.4%
2.85 KES / share
Financial Performance Highlights
March 2012
28
Net Interest Margin 12.3%Increasing margins sustained by low-cost and efficient funding base
Loans Kshs 86.19 Bn Strong year on year growth of 41%
Cost-to-Income 45%Increase in cost income ratio reflecting set up costs in 2012 related to the new subsidiaries in Tanzania & Rwanda
NPLs 4.5% Improved asset quality despite growth in loan book, reflecting sound risk management practices
Deposits Kshs 115.07 Bn34% growth in deposits reflecting the sustainability of the savings led business model.
Coverage 53%Increased loan loss provisioning that underpin conservative and proactive risk management
13.6%
51%
Kshs 121.13 Bn
2.7%
72%
Kshs 153.68 Bn
29
Appendix
Summary Balance Sheet
March 2011 March 2012 Growth
Assets (Bn) KES KES KES
Net Loans 86.19 121.13 41%
Cash & Bank Balances 22.02 38.36 74%
Government Securities 29.63 29.64 0%
Other Assets 15.65 19.84 27%
30
Total Assets 153.49 208.97 36%
Liabilities & Capital (Bn)
Deposits 115.07 153.68 34%
Borrowed Funds 7.09 14.90 110%
Other Liabilities 4.74 7.49 58%
Shareholders’ Funds 26.59 32.90 24%
Total Funding 153.49 208.97 36%
Stability & Compliance
March 2012Statutory
RequirementExcess
Core Capital to Total Deposits 18% 8% 10%
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Core Capital to Risk Weighted Assets
18% 8% 10%
Total Capital to Risk Weighted Assets
23% 12% 11%
Liquidity Ratio 35% 20% 15%
Summary Profit & Loss
March 2011 March 2012 Growth
Revenues (Bn) KES KES KES
Total Interest Income 4.01 7.32 83%
Less: Total interest Expense 0.42 1.62 286%
Net Interest Income 3.59 5.70 59%
Total Non Interest Income 2.93 3.31 13%
Total Income 6.52 9.01 38%
Expenses (Bn)
Staff costs 1.31 2.05 56%
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Staff costs 1.31 2.05 56%
Loan Loss Provision 0.70 0.73 4%
Other Expenses 1.61 2.50 55%
Total Operating Expenses 3.62 5.28 46%
Profit Before Tax 2.90 3.73 29%
Taxation 0.57 1.09 91%
Profit After Tax 2.33 2.64 13%
Efficiency Ratio
Cost Income 45% 51% 13%
Key Financials and Ratios
2009 2010 2011 March 2012
Key Financials (Bn) KES KES KES KES
Total Assets 100.81 143.02 196.29 208.97
Customer Loans 63.33 78.30 113.82 121.13
Customer Deposits 69.84 104.43 144.17 153.68
Shareholders’ Equity 22.91 27.20 34.29 32.90
Net Profit 4.23 7.13 10.33 2.64
Profitability
NIM 12.8% 12.0% 11.7% 13.6%
Cost to Income Ratio 60% 51% 50% 51%
ROE 19.9% 28.5% 33.6% 31.4%
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ROE 19.9% 28.5% 33.6% 31.4%
ROA 4.7% 5.8% 6.1% 5.2%
Asset Quality
NPL Ratio 7.7% 4.5% 2.8% 2.7%
Cost of Risk (bps) 187 261 166 70
NPL Coverage 41.0% 39.0% 52.0% 72.0%
Liquidity / Leverage
Loan / Deposit Ratio 90.7% 75.0% 79.0% 79.0%
Liquidity Ratio 32% 40% 37% 35%
Capital Adequacy Ratio
Tier 1 Ratio 24% 22% 15% 18%
Capital Adequacy Ratio 31% 28% 22% 23%
Leadership - Board of Directors
MR. PETER MUNGA, CBS, NON-EXECUTIVE CHAIRMANMr Munga is a Certified Public Secretary with vast experience in both publicand private sector management. He holds a diploma in Human Resources and Financial Management. Mr Munga is a retired Deputy Secretary. He was vested the First Class Chief of the Order of the Burning Spear (CBS) national decoration-the highest presidential award to a civilian, for distinguished contribution in economic development. He is the Chairman of National Oil Corporation and a Director in Micro-Enterprise Support Programme Trust (MESPT), British-American Investments Company (Kenya) Ltd, Rockfeller Foundation and Equatorial Nut Processors.
DR. JAMES MWANGI, CBS,CHIEF EXECUTIVE OFFICER & MANAGING DIRECTORDr Mwangi holds five honorary doctorate degrees in recognition of his contributions to the Kenyan society. He holds a Bachelor of Commerce degree and is a Certified Public Accountant. Dr Mwangi has been
MR. BENSON WAIREGI, EBS – NON-EXECUTIVE VICE CHAIRMANMr. Wairegi holds a Masters of Business Administration degree and Bachelor of Commerce (Accounting option) degree from University of Nairobi and is a Certified Public Accountant – CPA (K). He is the Group Managing Director of British-American Investments Company (Kenya) Ltd. the parent company to British-American Insurance Company (K) Ltd and British-American Asset Managers Limited. He is also a Director of Housing Finance and Chairman of Kenyatta University Council.
TEMITOPE LAWANI – NON-EXECUTIVE DIRECTORMr Lawani is co-founder and Managing Partner of Helios Investment Partners, LLP an Africa-focused private equity firm with approximately $1.8 billion in assets under management. Prior to Helios he was a Principal of TPG Capital (“TPG”), a leading global private equity firm
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honoured thrice with Presidential national awards. Dr. Mwangi is a graduate of Advanced Management Programme (Strathmore-IESE Business School, Barcelona, Spain). He was vested the First Class Chief of the Order of the Burning Spear (CBS) national decoration-the highest presidential award to a civilian, for outstanding contribution in economic development. He is currently the Chairman of Kenya’s Vision 2030 Delivery Board charged with the responsibility of ensuring Kenya becomes a middle income country with global high standards of living by the year 2030. He serves on several international bodies as an advisor or board member. He has wide experience in the banking industry and inclusive finance.
FREDRICK MUCHOKI, HSC – NON-EXECUTIVE DIRECTORMr. Muchoki is a businessman with vast commercial experience. He is the Managing Director of Continental Business Systems and Presta Office Equipment Limited.
JULIUS KIPNG’ETICH – NON-EXECUTIVE DIRECTORMr. Kipng’etich holds a Masters of Business Administration degree and a Bachelors of Commerce (Accounting option) degree from University of Nairobi. He is the Chief Executive Officer of Kenya Wildlife Service and was previously the Managing Director of Investment Promotion Centre.
Principal of TPG Capital (“TPG”), a leading global private equity firm managing over $50 billion in capital. He is also a former Mergers & Acquisitions and Corporate Development Analyst at the Walt Disney Company in Burbank, California. He also serves on Boards of Vivo Energy, First City Monument Bank PLC, Helios Towers Nigeria, InterSwitch Limited, Helios Towers Africa Limited and Finacity. He previously served as a member of the Board of Millicom International Cellular SA. He is a member of the Harvard Law School Dean’s Advisory Board; the Overseers’ Visiting Committee of the Harvard Business School; and the MIT OpenCourseWare Advisory Board. He received his BSc in Chemical Engineering from the Massachusetts Institute of Technology, Juris Doctorate (cum laude) from Harvard Law School and MBA (2nd Year Honors) from Harvard Business School.
Leadership - Board of Directors
BABATUNDE SOYOYE – NON-EXECUTIVE DIRECTORMr. Soyoye holds a Masters in Business Administration from the University of London and a Bachelors degree in Electrical Engineering. He is a co-founder of Helios Investment Partners an Africa - focused private equity firm with approximately $1.8 billion in assets under management. He is a Board member of Africatel Holdings B.V and Helios Towers, Nigeria (HTN). Prior to forming Helios , he was a Principal at Texas Pacific Group (TPG); a leading global private equity firm and has
PROF SHEM MIGOT–ADHOLLA – NON-EXECUTIVE DIRECTOR,NON-EXECUTIVE CHAIRMAN EQUITY BANK SOUTH SUDANProfessor Migot-Adholla holds a PhD in Sociology of Development, Masters of Arts in Sociology both from University of California, was a Special Graduate Student in Agriculture Economics (Michigan State University) and earned a Bachelor of Arts (University of East Africa). He is Chairman of the Board of Directors, Institute of Policy Analysis and Research (IPAR) Nairobi and sits on the Board of the Center for Corporate
DR. HELEN GICHOHI, OGW, MBS – NON-EXECUTIVE DIRECTORDr. Gichohi holds a doctorate in Ecology from the University of Leicester, in the UK. She also holds a Master of Science degree in Biology of Conservation and a Bachelor of Science degree in zoology from the University of Nairobi and Kenyatta University respectively. She is the president of African Wildlife Foundation where she has served for 11 years. Prior to that, she was the director of the African Conservation Centre.Until recently she was a director of Kenya Wildlife Service.
ERNEST NZOVU – NON-EXECUTIVE DIRECTORMr. Nzovu holds a Bachelor of Arts degree in Economics from the University of Navarra, Spain and a Diploma in International Affairs from the University of Ife, Nigeria. He has for many years been a consultant in Human Resources Management and is a Director of Hawkins and Associates, Know How International Limited and KHI Training. He previously served as Director of Kenya Revenue Authority (KRA) and Export Processing Zones Authority(EPZA).
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Texas Pacific Group (TPG); a leading global private equity firm and has vast eperience in the execution of investments across Africa, Europe, Asia and North America. He previously also served as a senior member of the Corporate Strategy team at British Telecom as well as a Manager of Business Development at Singapore Telecom International
Research (IPAR) Nairobi and sits on the Board of the Center for Corporate Governance and is also a Director of Housing Finance. He previously served as Vice-Chairman, Board of Directors, Kenya Wildlife Service, and was Lead Specialist on Land Policy and Administration for Africa Region in the World Bank. He has also served as Permanent Secretary, Ministry of Agriculture and Rural Development, Government of Kenya. He is currently a consultant on agriculture andrural development, land policy reform and environmental issues.
ALYKHAN NATHOO – NON-EXECUTIVE DIRECTORMr. Nathoo holds a Master in Business Administration from Harvard Business School and a Bachelor of Arts with Distinction in Quantitative Economics from Stanford University. He has over 15 years of experience in Private Equity at Bain Capital, Dubai International Capital and most recently at Helios Investment Partners. He is a Partner at Helios Investment Partners with regional focus on Eastern and Southern Africa. He also sits on the Board of Continental Outdoors. He is alternate to Temitope Lawani.
DAVID R ANSELL– NON-EXECUTIVE DIRECTOR,NON-EXECUTIVE CHAIRMAN EQUITY BANK UGANDA,RWANDA, TANZANIAMr. Ansell holds a BA degree in Mathematics from University of North Carolina-Wilmington and a BFT degree in Finance from the Thunderbird Graduate School of International Management as well as an Advanced Management degree from the Wharton School of Business. He worked 32 years for Citibank in England, Taiwan, Czech Republic, Russia and Africa before retiring in 2001. He serves as the Chairman of the Board of Equity Bank’s wholly owned subsidiaries in Uganda, Rwanda and Tanzania. He is also a Director of Housing Finance and a member of the Advisory Board of Private Equity New Markets for BankInvest in Denmark.
Leadership - Board of Directors
DENNIS ALUANGA – NON-EXECUTIVE DIRECTORMr. Aluanga holds a Masters of Business Administration degree from the University of Edinburgh and is a Certified Public Accountant – CPA (K). He is a Partner at Helios Investment Partners and a Board member of Nation Media Group. He was previously the Chief Operating Officer at Industrial Promotion Services (IPS) - the Manufacturing and Infrastructure division of the Aga Khan Fund for Economic Development (AKFED). Prior to IPS he held various senior management positions in Finance, Strategy and Operations at Nation Media Group. He is alternate to Babatunde Soyoye.
JOHN STALEY – NON-EXECUTIVE DIRECTOR EQUITY BANK UGANDA,RWANDA, TANZANIAMr Staley has a Masters of Science in Applied and Computational Mathematics and a Bachelor of Science in Physics. He also holds a Bachelor of Commerce degree and is a qualified Chartered Accountant. A specialist in implementing cost effective ICT solutions, John worked as the CEO of Credit Indemnity (Pty) Ltd in South Africa before joining Equity Bank.
ELIZABETH LWANGA – NON-EXECUTIVE DIRECTOR EQUITY BANK UGANDAMs. Lwanga has over thirty years experience in international development work with emphasis on Africa. She worked with the All Africa Conference of Churches as Communications Director; with the United Nations Development Programme as Head of UNDP’s global Gender In Development Programme; and as
PROF GEORGE ALIBARUHO – NON-EXECUTIVE DIRECTOR EQUITY BANK UGANDAProf. Alibaruho holds a PhD degree (Economics), University of California. He has worked in various capacities for the United Nations, Economic Commission for Africa, World Bank, International Research Institute in Washington DC. He is a Member Global Register’s WHO’S WHO in
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as Head of UNDP’s global Gender In Development Programme; and as Resident Representative and United Nations Resident Coordinator in Sierra Leone, Swazilandand Kenya. She also served as UNDP’s Deputy Regional Director for Africa.
Washington DC. He is a Member Global Register’s WHO’S WHO in Executives and Professionals Rockefeller Foundation Fellowship & a Fellowship with CGIAR. He is currently the Dean of Kabale University in Uganda.
MARY WAMAE – COMPANY SECRETARYMrs. Wamae holds an LLB degree from the University of Nairobi, a Diploma in Law from the Kenya School of Law and is a Certified Public Secretary (Kenya). She is a graduate of Advanced Management Programme (Strathmore - IESE Business School,Barcelona Spain ). She is an Advocate of the High Court of Kenya and holds a Post Graduate Diploma in Gender and Development and has over 13 years private practice experience.
Global Executive Management
DR JAMES MWANGI, CBS – CEO & Managing DirectorJames holds five Honorary doctorate degrees in recognition of his contributions to the Kenyan society. He holds a Bachelor of Commerce degree and is a Certified Public Accountant. James has been honoured twice with Presidential national awards. He was vested the First Class Chief of the Order of the Burning Spear (CBS) national decoration-the highest presidential award to a civilian, for outstanding contribution in economic development. He is currently the Chairman of Kenya’s Vision 2030 DeliveryBoard charged with the responsibility of ensuring Kenya becomes a middle income country with global high standards of living by the year 2030. James serves on several international bodies as an advisor and sits on the Board of the Africa Leadership Academy in South Africa. James has wide experience in the banking industry and inclusive finance.
MARY WAMAE – Company Secretary and Director of Corporate StrategyMary holds an LLB degree from the University of Nairobi, a Diploma in Law from the Kenya School of Law and is a Certified Public Secretary (Kenya). She is a graduate of Advanced Management Programme (Strathmore - IESE Business School, Barcelona Spain ). She is an Advocate of the High Court of Kenya and holds a Post Graduate Diploma in Gender and Development and has over 13 years private practice experience.
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GERALD WARUI – Director of Human Resource and Customer ExperienceGerald is a Certified Public Accountant (CPA K) and a graduate of Advanced Management Program offered by Strathmore-IESE Business School, Barcelona Spain. A career banker, Gerald has served in Equity Bank for 14 years
JOHN STALEY – Director of Mobile Banking and Payment InnovationsJohn has a Masters of Science in Applied and Computational Mathematics and a Bachelor of Science in Physics. He also holds a Bachelor of Commerce degree and is a qualified Chartered Accountant. A specialist in implementing cost effective ICT solutions, John worked as the CEO of Credit Indemnity (Pty) Ltd in South Africa before joining Equity Bank.
MAURICE A EWING, PhD, FRM – Chief Risk OfficerMaurice has a PhD and MA in economics from Princeton, a BA in economics and mathematics from Northwestern and the Chartered FRM from GARP. He has wide experience in all major areas of risk management, including: market, credit, operational and strategic risk across more than 30 emerging, newly-EU markets & Greece. He is a contributor to the Harvard BusinessReview and advisor to Federal Reserve Chairman, Ben Bernanke.
PAUL NJAGA – Chief Finance OfficerPaul holds a Masters degree in Business Administration (Finance) from the University of Manchester (UK) and Bachelors degree (Hons) in Economics. Paul is also a UK Chartered Institute of Securities & Investment Diploma holder (Derivatives & Fixed Income Securities products) and a Certified Public Accountant (CPA K). Prior to joining Equity, Paul worked inLondon, UK, for BNP Paribas where he led the Policy & Projects Group. Whilst in London, Paul also served as the Deputy Chairman of Association for Financial Markets in Europe (AFME) and London Investment Banking Association (LIBA) accounting committees. Earlier in his career, Paul worked as a Senior Manager with PricewaterhouseCoopers UK & Kenya offices.
Global Executive Management
ALLAN WAITITU - Director of IT and Innovation CentreAllan is a Certified Systems Engineer, a Novell Certified Network Engineer and a graduate of Advanced Management Programme (Strathmore-IESE Business School, Barcelona Spain). He has over 20 years experience in information technology and banking and previously served as Equity Bank’s General Manager of Operations.
MICHAEL WACHIRA - Director of Treasury, Trade Finance and MarketingMichael holds a Bachelor of Science degree in Economics and a Master of Science in Investment Management. Prior to joining Equity Bank, Michael worked in Brussels, Belgium for the Fortis Bank group. Michael has also worked as an Emerging Markets Proprietary Trader focusing on the Middle East and Africa for Cargill Financial Markets based in London.
HILDAH MUGO - Director of OperationsHildah holds a Masters degree in Business Administration - strategic management, a Bachelor of Business Administration in Entrepreneurship and is an Associate of Kenya Institute of Bankers. Prior to joining Equity Bank seven years ago, Hilda had acquired extensive banking experience in operations, compliance, customer service and consumer banking for over ten
COLLINS OTIWU – Finance DirectorCollins holds an MBA (Finance), from University of Warwick (UK), Bachelor of Commerce, University of Nairobi. He is a Certified Public Accountant, CPA(K) and a Certified InformationSystems Auditor (CISA). Prior to joining the bank, he worked at British Telecoms (BT) in London as the Group Head of Finance and Treasury, and British Petroleum (BP) in London as Senior Manager, Policy. He also
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over tenyears with Barclays Bank of Kenya.
and British Petroleum (BP) in London as Senior Manager, Policy. He also worked at PwC both in London and Nairobi. He has 14 years experience.
ISAAC MWIGE - Director Corporate BankingIsaac holds a Masters degree in International Business Administration from United States International University and a Bachelor of Business Administration from University of EasternBaraton. He has over 14 years experience in Banking covering Corporate & Retail Banking and has previously worked with Standard Chartered Bank as the Director, Transaction Banking,East Africa, West Africa.
BILDARD FWAMBA - Internal AuditorBildard holds a Bachelor of Commerce (Accounting) Degree and is a Certified Public Accountant – CPA (K). He has 15 years experience in Finance and Audit and previously worked with Central Bank of Kenya and British American Insurance Co (K) Ltd. Bildard joined Equity Bank in 2004.
ELIZABETH GATHAI - Director of CreditElizabeth holds a Masters degree in Business Administration from the University of Nairobi, Bachelor of Commerce degree in finance, and a Certified Public Accountant CPA (K). She is a graduate of Advanced Management Programme (Strathmore- IESE Business School, Barcelona Spain) and Management Executive Programme (Maastricht School of Management (MSM)- Netherlands). She has 10 years of banking experience. Elizabeth joined Equity Bank in 2001.
Global Executive Management
FRANCIS C G MILLS - ROBERTSON - Managing Director, Equity Bank UgandaFrancis holds a BA (Hons) Social Sciences degree from the Kwame Nkrumah University of Science and Technology, Ghana and is an Associate member of the Oxford University Society. A Business leader with over 15 years cumulative experience in Banking and Finance, Francis last worked as the Executive Director, Consumer Banking at Standard Chartered Bank Ghana,before joining Equity Bank Uganda.
PAUL GITAHI - Executive Director, Equity Bank South SudanPaul is a career banker with over 24 years experience and previously worked with ABC bank and Cooperative bank. He has extensive banking experience in operations, marketing and customer service. Paul served previously as the General Manager in charge of marketing in Equity Bank Kenya before taking up his present position.
SAMUEL KIRUBI - Managing Director, Equity Bank RwandaSamuel holds a Masters Degree in Business Administration (finance) from Moi University and a Bachelor of Arts degree in Economics and statistics from Egerton University. Since joining Equity Bank in 2001, Samuel has gained vast experience in operations, marketing and customer service. Samuel was previously the Chief Operations Officer in Equity Bank South
SAMUEL MAKOME – Managing Director, Equity Bank TanzaniaSamuel holds a Bachelor of Science (Engineering) Degree from the University of Nairobi and is an Associate of the Chartered Institute of Bankers (ACIB), London. He has over 19 years experience in Banking covering Corporate & Retail Banking, Operations and Risk Management and has previously worked with Citibank and Standard Chartered Bank,
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Samuel was previously the Chief Operations Officer in Equity Bank South Sudan.
and has previously worked with Citibank and Standard Chartered Bank, Africa. His International banking experience has seen him work across East, Southern and West Africa. Prior to joining Equity Bank three years ago, he was Executive Director with Bank of Africa, Uganda.
APOLLO NJOROGE - Executive Director, Equity Bank UgandaApollo holds a Masters degree in International Business Administration in Finance from United States International University, a Bachelor of Science (Hons) from University of Nairobi in Mathematics and Physics and a Diploma in Banking. Apollo served as the General Manager in Corporate Banking in Equity Bank Kenya before his current role. He has over 18 years banking experience.
JOSEPH IHA - Executive Director, Equity Bank TanzaniaJoseph holds a Bachelor of Education in Accounting and Mathematics from the University of Nairobi and has also attended various professional courses in banking. He has over 12 years banking and leadership experience in Credit, Corporate banking and Operations. Prior to joining Equity Bank Tanzania, he worked as the General Manager, Credit in Equity Bank Ugandaand General Manager, Corporate Banking Division at Equity Bank Kenya. Joseph joined Equity Bank in 2005.
