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Understanding the I&M Group H1 2026 Results · The Mwango Capital Podcast

0:00
SPEAKER_00: Thank you, everyone.
0:01
SPEAKER_00: Thank you for joining us in this conversation, reviewing the half-year results of I&M Group.
0:05
SPEAKER_00: The numbers do make for really interesting reading.
0:07
SPEAKER_00: There's plenty of interesting stories and ideas and trends to get into the meat of
0:13
SPEAKER_00: in a conversation that we'll be having with the CFO David Gata in the course
0:16
SPEAKER_00: of this particular space.
0:17
SPEAKER_00: My name is Raman Yang.
0:18
SPEAKER_00: I'm a business standard space here in Nairobi, Kenya.
0:20
SPEAKER_00: I will be your host for the duration of this particular space.
0:24
SPEAKER_00: Some quick numbers just before we start with respect to where INM is and some
0:29
SPEAKER_00: the aspirations that they have at the moment.
0:31
SPEAKER_00: This is a bank that,
0:33
SPEAKER_00: remember, over the long run, they're aiming to have ROE numbers of around 20%.
0:36
SPEAKER_00: They're about 300 basis points below that in the first half of 2026.
0:40
SPEAKER_00: They aim to have over a million customers.
0:43
SPEAKER_00: They've already gone well past that figure by the half-year mark.
0:47
SPEAKER_00: And of course,
0:47
SPEAKER_00: on top of that,
0:48
SPEAKER_00: we also saw a fair bit of double digit growth,
0:50
SPEAKER_00: both in asset growth,
0:51
SPEAKER_00: deposit growth,
0:53
SPEAKER_00: size of the loan book and the business as a whole across most of the markets in
0:56
SPEAKER_00: which the bank operating.
0:58
SPEAKER_00: We'll dive into the weeds of those numbers in just a moment.
1:01
SPEAKER_00: But first, David,
1:02
SPEAKER_00: I want to give you the opportunity to give us a two minute summary of the result of
1:06
SPEAKER_00: the performance of the bank,
1:07
SPEAKER_00: the performance and group in the first six months of 2026.
1:11
SPEAKER_01: Thank you, Rama.
1:12
SPEAKER_01: My name is David.
1:13
SPEAKER_01: We're leading listeners.
1:15
SPEAKER_01: We're very pleased with the results for the top year 2026.
1:20
SPEAKER_01: I think Rama did a good job, particularly in some of the aspects, but not yet with the numbers.
1:26
SPEAKER_01: The results were driven by growth in both net interest income and non-funded income
1:33
SPEAKER_01: by growing 23% to about 3.70.7 billion.
1:39
SPEAKER_01: Uh, we registered copy task goals of the keeper trend to 3.5 billion.
1:45
SPEAKER_01: And for the first time you remember,
1:46
SPEAKER_01: we reported copy capture tasks, uh, crossing the 10 billion mark at 10.2 billion.
1:53
SPEAKER_01: And that's at 22%.
1:56
SPEAKER_01: Across the board,
1:57
SPEAKER_01: we had more than 50% increase in loans,
2:00
SPEAKER_01: 80% close to the fall leads,
2:02
SPEAKER_01: and approximately across the half trillion market cycle five million.
2:08
SPEAKER_01: We did have our return on equity as we just had 17%.
2:11
SPEAKER_01: Our medium-term target, return on assets at 3%.
2:18
SPEAKER_01: And the growth that we observed is across the board,
2:23
SPEAKER_01: especially we have subsidiaries outside of Kenya.
2:26
SPEAKER_01: Contributing 33% of their group profit before tax, up from 25% last year.
2:34
SPEAKER_01: A good group of that coming from us in Rwanda,
2:37
SPEAKER_01: which register 2% growth in profitability,
2:41
SPEAKER_01: as well as Uganda, which register 235% growth in quality to 700.
2:49
SPEAKER_01: A Kenyan business contributed 7% of the group profitability.
2:53
SPEAKER_01: The Kenyan bank profitability there was relatively flat here on here,
2:58
SPEAKER_01: but was non-banking Kenyan business,
3:01
SPEAKER_01: especially was a way of money business and bank assurance business.
3:06
SPEAKER_01: Registable,
3:07
SPEAKER_01: aggressive growth,
3:08
SPEAKER_01: glory at 145 and 87,
3:12
SPEAKER_01: saying PBT growth here on that to be from,
3:16
SPEAKER_01: um, Overall summary, we can get
3:19
SPEAKER_00: into the details.
3:20
SPEAKER_00: Indeed.
3:21
SPEAKER_00: And I want to start with the asset side of the business,
3:23
SPEAKER_00: because if you look at the net loans and advances that went up around 15%,
3:26
SPEAKER_00: over 373 billion shillings, but growth in total assets was much, much larger, right?
3:31
SPEAKER_00: Almost 27%.
3:32
SPEAKER_00: So where's the rest of that expansion sitting?
3:35
SPEAKER_00: Is it government securities and placements?
3:37
SPEAKER_00: Is that going to be the pattern that we should expect at least second half of 2026,
3:42
SPEAKER_00: maybe into the first half of 2027,
3:44
SPEAKER_00: given the macroeconomic environments in East Africa?
3:47
SPEAKER_01: Yes, you're totally right.
3:48
SPEAKER_01: The rest of the growth is in governance security.
3:52
SPEAKER_01: So as deposits come in,
3:54
SPEAKER_01: we do have a hefty loan pipeline, but for that pipeline can come to realization.
4:01
SPEAKER_01: Then in the ETA,
4:02
SPEAKER_01: we do take advantage in case that funding,
4:05
SPEAKER_01: short-term governance security is to be added at yield of it.
4:09
SPEAKER_00: And that's where the rest of the funding is.
4:12
SPEAKER_00: I just want to pivot back your contribution from the subsidiaries.
4:16
SPEAKER_00: You did mention this in your initial summary of the results,
4:18
SPEAKER_00: and by and large, it's trending in the right direction, right?
4:22
SPEAKER_00: This time last year, 25% of all the PTAX earnings are coming from the subsidiaries ex-Kenya.
4:27
SPEAKER_00: This time in 2026, it's up to a third.
4:31
SPEAKER_00: Where do you think you can get that to?
4:32
SPEAKER_00: Do you have a medium-term target in trying to figure out where the spread
4:36
SPEAKER_00: of earnings should come from between Kenya and the subsidiaries?
4:41
SPEAKER_01: Yes, at 33%, that is slightly above our medium-term target.
4:46
SPEAKER_01: Medium-term target is the range that we are in between 25 and 30%.
4:51
SPEAKER_01: So we do anticipate that the senior business,
4:55
SPEAKER_01: which the earnings or profitability was relatively flat,
4:59
SPEAKER_01: that I would continue to accelerate.
5:01
SPEAKER_01: Now, when senior is a much larger Gizmo franchise,
5:06
SPEAKER_01: and therefore The growth there would offset some of the subsidiary contribution
5:11
SPEAKER_01: that I've spoken to.
5:12
SPEAKER_01: So for instance,
5:13
SPEAKER_01: half year today,
5:15
SPEAKER_01: Uganda was contributing 700 years there to about 8.3 billion,
5:19
SPEAKER_01: but I think on his net,
5:20
SPEAKER_01: the Kenyan needs to only grow 10% to really have the same term as the Ugandans.
5:27
SPEAKER_01: This crucial pool will be there in the second half of the year and in the future.
5:32
SPEAKER_00: In terms of the growth that we've seen,
5:34
SPEAKER_00: we've covered assets a little early in the hour,
5:37
SPEAKER_00: but we're looking at customer deposits,
5:38
SPEAKER_00: looking at lead loans, net loans, and advances.
5:40
SPEAKER_00: Comparing that to half year 24, half year 25, there's been a dramatic shift.
5:46
SPEAKER_00: So for example,
5:46
SPEAKER_00: if you look at customer deposits, right,
5:48
SPEAKER_00: between half year 24 and half year 25,
5:50
SPEAKER_00: around 2% growth, and then you're looking at an 18% jump.
5:53
SPEAKER_00: In the 2026 period,
5:55
SPEAKER_00: net loans and advances,
5:56
SPEAKER_00: pretty much the same trend,
5:58
SPEAKER_00: 2% growth between half-year 24 and 2025, and then this year, are jumped by 15%.
6:03
SPEAKER_00: When it comes to deposit growth, however, what explains that drive?
6:08
SPEAKER_00: What changed this year to explain that surge that we're seeing in deposits?
6:13
SPEAKER_01: The current strategy cycle that we are on the January 2024.
6:18
SPEAKER_01: One of the initiatives
6:20
SPEAKER_01: where we have had strong repercussions is around our branch distribution.
6:24
SPEAKER_01: We increased our branch network in Kenya, especially by close to a half.
6:30
SPEAKER_01: We've opened about 25 branches.
6:32
SPEAKER_01: We are looking to open two to three more from the end of the year.
6:36
SPEAKER_01: And what we have seen is those rankings contributing to the positive growth.
6:42
SPEAKER_01: Particularly this year,
6:43
SPEAKER_01: because a significant chunk of the positive growth that we experienced after driving
6:49
SPEAKER_01: that 80% growth is a positive positive.
6:53
SPEAKER_01: And this is coming through our branch network.
6:56
SPEAKER_01: So that's the one area.
6:58
SPEAKER_01: The next area is around being able to, speciality in oil and dust.
7:04
SPEAKER_01: We are a bit made in G2G in Kenya, the oil in court arrangement, as well as Rwanda.
7:11
SPEAKER_01: Now Rwanda has just all that.
7:13
SPEAKER_01: And that is really also a big deposit driver,
7:17
SPEAKER_01: given that yes,
7:18
SPEAKER_01: you officially have this to start behind the importer,
7:22
SPEAKER_01: but over time,
7:23
SPEAKER_01: then the oil gets sold out, and then those deposits come through to you.
7:27
SPEAKER_01: Those are the two big drivers for deposit growth.
7:30
SPEAKER_01: And then our play is the ecosystem where we are working at Amina Sri Lanka,
7:35
SPEAKER_01: looking at keeping the various transaction flows.
7:39
SPEAKER_01: From anchor to their suppliers and their customers,
7:43
SPEAKER_01: that has been what has driven our
7:45
SPEAKER_00: deposit growth year on year.
7:48
SPEAKER_00: Can you go into a bit more detail about the benefits that come in from having
7:52
SPEAKER_00: that physical presence, right?
7:54
SPEAKER_00: I think for some who look at the banking sector,
7:57
SPEAKER_00: they will look at the Kenyan market or they look pretty much at East Africa and say,
7:59
SPEAKER_00: hang on a minute, but we do so many things online.
8:01
SPEAKER_00: We do so many things on our apps these days.
8:03
SPEAKER_00: We gather deposits.
8:04
SPEAKER_00: We invest in money market funds.
8:06
SPEAKER_00: We pay our bills on our apps.
8:08
SPEAKER_00: And in that sort of context,
8:10
SPEAKER_00: the idea of having branches and expanding physically through branches
8:14
SPEAKER_00: at some point has seemed a bit archaic.
8:17
SPEAKER_00: But based on what you're saying and the data you have here,
8:19
SPEAKER_00: you're saying,
8:20
SPEAKER_00: hang on a minute,
8:21
SPEAKER_00: It's actually still important to have that physical presence,
8:24
SPEAKER_00: and it's vital in drawing in that much wider spread of lower-cost,
8:28
SPEAKER_00: stickier CASA deposits.
8:30
SPEAKER_01: So, yes, it's true.
8:32
SPEAKER_01: Once we own both customers,
8:34
SPEAKER_01: we do a lot of self-subs from Russian,
8:37
SPEAKER_01: and you have a very superb on-the-grove each collab where
8:41
SPEAKER_01: the customer can self-subs.
8:43
SPEAKER_01: But the way we position our business is the term digital, which is physical combined digital.
8:49
SPEAKER_01: So they raise a lot of power and brand value.
8:54
SPEAKER_01: For the customers to be able to see brands where they are
8:59
SPEAKER_01: and associate their banking with something physical agency.
9:04
SPEAKER_01: So we are today in Kenya, happy for counties.
9:08
SPEAKER_01: So wherever we do type of brand, let's say you see T2 we did last year then.
9:14
SPEAKER_01: People in TQE,
9:15
SPEAKER_01: businesses in TQE,
9:16
SPEAKER_01: they see that bank on a day-to-day basis and it does fab as a send
9:23
SPEAKER_01: after bank can come and transact business and you capture customers that.
9:27
SPEAKER_01: So it's true that each capability is needed, but they raise value and space for branch.
9:34
SPEAKER_01: And we have seen that or flexed in our growth in deposit and other sets
9:39
SPEAKER_00: of transaction The branch expansion,
9:42
SPEAKER_00: to what extent does that then translate into the rise that we saw
9:46
SPEAKER_00: in operating expenses, right?
9:47
SPEAKER_00: Up about 20 cents, 20.56 billion shillings.
9:50
SPEAKER_00: And that outpaced income growth, not by months, around 400 or so basis points.
9:54
SPEAKER_00: So what are the main drivers for that growth in costs?
9:57
SPEAKER_00: And when do you expect that trend to flip?
9:59
SPEAKER_00: So we have a much higher growth in income vis-a-vis costs.
10:04
SPEAKER_00: You're exactly right.
10:05
SPEAKER_01: So the growth in costs is driven by the branches.
10:09
SPEAKER_01: Once you open the branch, you have to pay for the physical location itself.
10:14
SPEAKER_01: You have to have people buying that branch.
10:17
SPEAKER_01: You have to equip that branch with certain superabilities.
10:20
SPEAKER_01: Another aspect is the security costs that you have to cover goes with the branch.
10:25
SPEAKER_01: So that's one of the drivers.
10:28
SPEAKER_01: The other driver for the cost is continual investment that we involve.
10:33
SPEAKER_01: You're making on the digital capabilities,
10:36
SPEAKER_01: new applications around ML, rebumping our core infrastructure.
10:42
SPEAKER_01: So that also results in the increased extent.
10:46
SPEAKER_01: We expect that to moderate.
10:48
SPEAKER_01: So in 2023, we had about 45, 48 branches.
10:54
SPEAKER_01: So we open 10 branches.
10:57
SPEAKER_01: That's about 20% of our branch network.
11:01
SPEAKER_01: And it's numbers are leading up to Kenya.
11:03
SPEAKER_01: Whereas now, we are physically here to be often.
11:07
SPEAKER_01: Don't close the year somewhere around 77, 79 branches.
11:11
SPEAKER_01: So now next year we opened 10 branches.
11:15
SPEAKER_01: It's no longer going to be 20% of expansion or network costs.
11:22
SPEAKER_01: It's going to be much smaller in the same thing that turn out from 80,
11:26
SPEAKER_01: what would be a closer to about stock.
11:28
SPEAKER_01: So we expect that moderation to come through that one.
11:32
SPEAKER_01: Then secondly,
11:33
SPEAKER_01: once you open a branch,
11:34
SPEAKER_01: it doesn't report profit for To the extent that you're opening
12:06
SPEAKER_00: These new branches where you're fortifying your position in your home market
12:09
SPEAKER_00: in Kenya, specifically quite a few of the other markets as well.
12:13
SPEAKER_00: Are you thinking about entering any new markets or is that not part of the plan at the moment?
12:19
SPEAKER_00: It's a focus instead on,
12:21
SPEAKER_00: let's double down and see what growth we can eke out and maximize
12:23
SPEAKER_00: the opportunity we have in the countries we're in now.
12:27
SPEAKER_01: Yeah, we are extremely forecasted at the QT where The countries that we are in now
12:34
SPEAKER_01: and growing our business and growing our market share in Kenya over
12:37
SPEAKER_01: the last three years in the current strategy cycle burdened about 80 basis points
12:42
SPEAKER_01: to our market share moving from about 2% to 2.8%.
12:45
SPEAKER_01: And similarly, we think our market share grew in Rwanda and growing in Uganda and Tandran.
12:52
SPEAKER_01: What about the domestic competitive landscape?
12:55
SPEAKER_01: Do you expect that to change?
13:08
SPEAKER_00: Significantly now that there's a lot more South African capital.
13:12
SPEAKER_00: We've seen the acquisitions by NetBank.
13:14
SPEAKER_00: Hapsa is trying to expand their footprint in this market.
13:17
SPEAKER_00: Stanbik is busy looking out for acquisitions.
13:20
SPEAKER_00: There's a lot of South African capital looking at this market and thinking,
13:22
SPEAKER_00: let's try to enhance our foothold.
13:24
SPEAKER_00: Does that give you a reason to pause and think, okay,
13:26
SPEAKER_00: there's going to be high competition in the market,
13:28
SPEAKER_00: so we need to keep our game as high as it can be?
13:31
SPEAKER_01: We welcome the competition.
13:33
SPEAKER_01: We believe we have had a Some of our new proposition that has resonated
13:38
SPEAKER_01: with our customers and especially the young demographics.
13:41
SPEAKER_01: We believe we are able to offer a compelling differentiation compared to our firm.
13:48
SPEAKER_01: Even with the new capital and we see that there will be this decreased market share.
13:54
SPEAKER_01: Capturing of market share,
13:56
SPEAKER_01: you have many things from the industry,
13:57
SPEAKER_01: going to a few, a few, a few,
13:59
SPEAKER_01: a few banks,
14:00
SPEAKER_01: from the industry people,
14:01
SPEAKER_01: after you continue,
14:03
SPEAKER_01: and our customer acquisition,
14:06
SPEAKER_01: Procore Richard,
14:07
SPEAKER_01: is really made, Compelli, again, as the new South
14:10
SPEAKER_00: African competition.
14:12
SPEAKER_00: Just out of curiosity,
14:13
SPEAKER_00: what's the typical age,
14:15
SPEAKER_00: where's the bulk of the demographics of your typical I&M client?
14:19
SPEAKER_00: The reason I'm asking that is in terms of Humans knew who we are.
14:23
SPEAKER_00: We tend to be very sticky, right?
14:25
SPEAKER_00: In the sort of banking habits we adopt from an early age.
14:28
SPEAKER_00: You open an account with one bank and if it works for you,
14:31
SPEAKER_00: you stick with the bank for the next 10, 15 years or whatever the case is.
14:34
SPEAKER_00: So if you have a significant share of your markets in that younger demographic,
14:39
SPEAKER_00: it bodes well for your long-term growth in deposits and asset growth and so on.
14:44
SPEAKER_00: So where does your typical INM customer fit in terms of age?
14:48
SPEAKER_01: I don't have the average numbers of the age of our customers,
14:52
SPEAKER_01: but fair to say,
14:53
SPEAKER_01: especially for the new customers,
14:55
SPEAKER_01: that the number will be, they tend to be the younger demographic.
15:00
SPEAKER_01: And really the one element,
15:02
SPEAKER_01: which is a big part,
15:04
SPEAKER_01: the depreciator for us is having our desired value proposition,
15:09
SPEAKER_01: where we offer through Bannel transfer or free transfer to mobile wallet.
15:15
SPEAKER_01: Our customers join to enjoy that.
15:18
SPEAKER_01: What we have to think is that in the first overtime,
15:22
SPEAKER_01: they are banking relationships up to different.
15:25
SPEAKER_01: In Belivia and other banks,
15:27
SPEAKER_01: customers,
15:27
SPEAKER_01: yet they often are set an account without And over time,
15:31
SPEAKER_01: they move to start to incorporate DAF as a primary account.
15:35
SPEAKER_01: And we do see them then starting to launch additional products from there.
15:39
SPEAKER_01: We see then brand and a market position poised to capture the Based demographic,
15:46
SPEAKER_01: and then as you say,
15:47
SPEAKER_01: our role then becomes to keep them,
15:50
SPEAKER_01: even as now they start to get into the deeper levels of financial product.
15:56
SPEAKER_01: And then the other element which we have found very well is giving the customer the choice.
16:02
SPEAKER_01: It can be in the banking business of hearing your call with your saving data.
16:09
SPEAKER_01: Or you can cross over to our wealth management business and be exposed
16:14
SPEAKER_01: to various types of products and be able to meet your financial goals with
16:21
SPEAKER_01: a curated proposition that works for viewers and viewers and viewers.
16:26
SPEAKER_01: And that, again,
16:28
SPEAKER_01: the way that business has grown,
16:29
SPEAKER_01: we have seen solvers from other from the market,
16:33
SPEAKER_01: where they tell me,
16:34
SPEAKER_01: I'm a banking customer and They may drive up or driving the acquisition has been
16:41
SPEAKER_01: to be able to pay
16:42
SPEAKER_00: to in our way of management.
16:44
SPEAKER_00: Indeed.
16:44
SPEAKER_00: It will be really interesting to see what your typical I&M customer looks like in
16:48
SPEAKER_00: the cost of acquisition.
16:49
SPEAKER_00: How long do they stay?
16:50
SPEAKER_00: What do they do?
16:51
SPEAKER_00: That's all some fascinating consumer data,
16:53
SPEAKER_00: but I want to turn over to loan loss provisions,
16:56
SPEAKER_00: if I may, because I went up around 38%.
16:58
SPEAKER_00: That's more than double, right, the pace of loan growth.
17:02
SPEAKER_00: It looks like a very forward-looking, cautious, preemptive start.
17:06
SPEAKER_00: Am I right in reading it that way?
17:08
SPEAKER_01: Yeah.
17:08
SPEAKER_01: Absolute no number has continued to spend downwards.
17:11
SPEAKER_01: And what we are proactively agree is making sure that coverage is going up.
17:17
SPEAKER_01: We have, especially the East location, they have something either of army, anything.
17:23
SPEAKER_01: How should we then think about reconciling uprising provisioning?
17:40
SPEAKER_00: At a time when asset quality is getting better,
17:43
SPEAKER_00: because as you point out,
17:43
SPEAKER_00: your NPL ratios are, by and large, are trending in the right direction, right?
17:47
SPEAKER_00: This time, 2024, you're looking at about a gross figure of $35 billion.
17:51
SPEAKER_00: That's down to around $30 billion now.
17:53
SPEAKER_00: Presumably, that trend is going to continue.
17:56
SPEAKER_00: Are you going into the first half of 2027,
17:57
SPEAKER_00: you're trying to baton down the hatches and say,
17:59
SPEAKER_00: you know,
18:00
SPEAKER_00: let's get as aggressive as we can in trying to make sure
18:03
SPEAKER_00: that we have enough provisions available for all the macroeconomic headwinds
18:07
SPEAKER_00: that we're going to run into,
18:09
SPEAKER_00: and then we can start doubling down on asset growth after
18:11
SPEAKER_00: that macroeconomic cycle has swept through in the first half of 2027?
18:16
SPEAKER_01: Yeah, and the asset growth story,
18:19
SPEAKER_01: instead of solid paying out,
18:21
SPEAKER_01: so Ken has pretty much seen that 9% growth expansion in our lending portfolio.
18:27
SPEAKER_01: For us, say here, the year before, loan code was only cheapest.
18:32
SPEAKER_01: Now, in December of 2020,
18:34
SPEAKER_01: before the banking take up the lending credit, I was actually nethered.
18:38
SPEAKER_01: So we expect 9% growth and you report to a big day, that's to 4% growth.
18:46
SPEAKER_01: Lending to the product sector, we expect that to accelerate.
18:49
SPEAKER_01: Now we have a low work handy, we are getting to the meeting position.
18:53
SPEAKER_01: And when that is playing out,
18:55
SPEAKER_01: we do want to make sure that for So walk
19:05
SPEAKER_01: us through
19:08
SPEAKER_00: the composition of NPLs because
19:10
SPEAKER_00: the overall ratio is coming down.
19:12
SPEAKER_00: It's now under 9% for this particular period.
19:15
SPEAKER_00: And the bulk of these are contained in, for the most part, it's three sectors, right?
19:19
SPEAKER_00: So manufacturing, trade, and the personal or household space as well.
19:24
SPEAKER_00: What explains that decline that we keep seeing in the numbers?
19:28
SPEAKER_00: Is it that your clients are recovering, especially in the first half of this year?
19:32
SPEAKER_00: So essentially some individuals who were behind
19:34
SPEAKER_00: on their facilities perhaps have started servicing them again,
19:37
SPEAKER_00: and then you've got writebacks coming into the books.
19:40
SPEAKER_00: Is it a case of refinancing some of these facilities?
19:43
SPEAKER_00: Walk through the recovery.
19:45
SPEAKER_01: The starting point for the NPL management is a decent play,
19:50
SPEAKER_01: monetary for your performing group,
19:53
SPEAKER_01: making sure what's performing with keeping a close of end.
19:58
SPEAKER_01: Of course,
19:58
SPEAKER_01: watch for your customer to make sure that they continue their division
20:02
SPEAKER_01: and therefore you're not having slip it into the NPL.
20:04
SPEAKER_01: So that has to be,
20:05
SPEAKER_01: you have done a tremendous job,
20:07
SPEAKER_01: a relationship manager,
20:08
SPEAKER_01: and a relationship management, making sure that doesn't happen.
20:12
SPEAKER_01: Then the quality of our underwriting,
20:14
SPEAKER_01: another element,
20:15
SPEAKER_01: making sure that we are matching the customer, those in the right way then.
20:21
SPEAKER_01: And for a solid editing of the speed at which long-loss realization for
20:27
SPEAKER_01: that emergency period may happen.
20:30
SPEAKER_01: Now for the existing NPLs though, the forecast there is slightly different, is around recovery.
20:37
SPEAKER_01: So what we have B3, the current strategy, I call it difficulty and forecast collection.
20:44
SPEAKER_01: So wherever we have collateral,
20:46
SPEAKER_01: going through the motions, what do they somehow to realize that collateral.
20:51
SPEAKER_01: And declining that USD is mostly due to cash collected,
20:56
SPEAKER_01: which here on here being able to resolve of the big NPL needs where we had
21:02
SPEAKER_01: the collateral cases and especially for the Kenyan monarch that goes with that and
21:07
SPEAKER_01: that slows things down.
21:08
SPEAKER_01: And now working through that and being able to then collect that cash.
21:14
SPEAKER_01: And as you observed,
21:16
SPEAKER_01: Our loan uttering and trade and personal household sector,
21:20
SPEAKER_01: so for the personal household sector area of the Mowgli deal, well,
21:24
SPEAKER_01: short-term digital loans products of those ones are really,
21:28
SPEAKER_01: when they go,
21:29
SPEAKER_01: they need to come and yell, yes,
21:31
SPEAKER_01: the collection reports are there,
21:32
SPEAKER_01: but then you are quicker to write for the trade and the uttering sector,
21:38
SPEAKER_01: then we do ensure that you are well collateralized as for the underwriting process.
21:45
SPEAKER_00: You mentioned that focus on being a lot more collateralized,
21:47
SPEAKER_00: but given the macroeconomic environment that we're facing over the next 12 months,
21:51
SPEAKER_00: inflation is going to be relatively higher.
21:53
SPEAKER_00: The rate-casting cycle,
21:54
SPEAKER_00: that essentially has come to a pause at the moment,
21:57
SPEAKER_00: given everything that's happening in the Persian Gulf.
22:00
SPEAKER_00: Should we expect this decline in NPLs to continue in the second half of 2026?
22:05
SPEAKER_01: Yes, the remaining NPLs that you can be equal to, we expect mission of collections.
22:10
SPEAKER_01: My identification is that for the card quarter,
22:14
SPEAKER_01: then eventually at the end of the year,
22:16
SPEAKER_01: it will be 40, even a lower number than the cartigillion.
22:21
SPEAKER_01: Now, the risks that you point out to about inflation,
22:25
SPEAKER_01: for the time being, it seems to be a holy person.
22:28
SPEAKER_01: We need that.
22:29
SPEAKER_01: We have the demand of equal and may.
22:33
SPEAKER_01: Then, calm down, eat, and empty cases point, you see the point, foreign jeep, kenyas.
22:39
SPEAKER_01: You slice up a holy pattern.
22:40
SPEAKER_01: And then, from what we are gathering, from the weatherman, lots of rain expected.
22:45
SPEAKER_01: So, some of these days,
22:47
SPEAKER_01: again, it does mean, let's say, the food bucket will be enough more affordable.
22:52
SPEAKER_01: But then to earlier discussions around why we are being deliberate in our level
22:58
SPEAKER_01: of provisioning,
22:59
SPEAKER_01: and then we anticipate the full play of that to come,
23:04
SPEAKER_01: not necessarily in the next fund or so, but a little further down the road.
23:09
SPEAKER_00: Now that we've actually spoken about where interest rates are heading,
23:11
SPEAKER_00: because your margin compression,
23:13
SPEAKER_00: especially your net interest income, was certainly a concern, right?
23:16
SPEAKER_00: Because on one hand,
23:17
SPEAKER_00: yet we've got a lot more lending coming through,
23:19
SPEAKER_00: so the volumes are going up,
23:20
SPEAKER_00: but Interest rates are also trending lower at the same time, right?
23:24
SPEAKER_00: So looking at the first half of the year, net interest income was up 22%, 23% on your books.
23:30
SPEAKER_00: Do you reckon you'll be able to maintain growth at those levels
23:33
SPEAKER_00: or even exceed them now that the rate-cutting cycle is basically paused?
23:37
SPEAKER_00: And at least for the foreseeable future, perhaps it might change in the first quarter of 2027.
23:43
SPEAKER_00: But right now, loan growth is essentially in that recovery phase.
23:46
SPEAKER_00: It's now over double digits, but it's on several prime data.
23:49
SPEAKER_00: We have two respects to that.
23:51
SPEAKER_01: One is low lending to the private sector has better yield,
23:55
SPEAKER_01: better margin than lending to the government.
23:58
SPEAKER_01: And therefore,
23:58
SPEAKER_01: these continued growth in supporting our customer lending from industry,
24:04
SPEAKER_01: where the growth in private sector lending expands the margin.
24:09
SPEAKER_01: So we anticipate that increased lending to the private sector,
24:13
SPEAKER_01: and we anticipate that we can grow it from here to grow and lending.
24:17
SPEAKER_01: And then As you also observe,
24:20
SPEAKER_01: right now what we are seeing,
24:21
SPEAKER_01: and especially from the GOK,
24:23
SPEAKER_01: so the RPC component from the central bank,
24:26
SPEAKER_01: but also where GOK is financially itself,
24:29
SPEAKER_01: we did see,
24:30
SPEAKER_01: especially on the shop,
24:32
SPEAKER_01: and the pressure rate deals,
24:33
SPEAKER_01: we trust the city by about 100 basis points from March 2021.
24:39
SPEAKER_01: Towards the end of June,
24:41
SPEAKER_01: but what we have observed is that now also that needs to be stabilized.
24:46
SPEAKER_01: And should things go there,
24:47
SPEAKER_01: then maybe answer the Kenyan macros to be able to support at the same level,
24:53
SPEAKER_01: net interest margins,
24:55
SPEAKER_00: and we should be able to maintain.
24:57
SPEAKER_00: Some of these interesting trends, yes,
24:59
SPEAKER_00: you're seeing double-digit growth,
25:00
SPEAKER_00: say, for example, in asset growth, that's up like 20, what, 26.7%, give or take.
25:05
SPEAKER_00: Deposits grow by 18% and a bit.
25:09
SPEAKER_00: What's the strategy to close the gap between those two?
25:12
SPEAKER_00: Because if you're going to power this growth,
25:13
SPEAKER_00: you need a lot more deposits, a lot more capital in the system.
25:17
SPEAKER_00: So what will you be doing?
25:19
SPEAKER_00: What will be your focus in terms of trying to get a lot more deposits into the bank?
25:23
SPEAKER_00: Is it going to be more focused on aggressively pushing the digital product
25:27
SPEAKER_00: or is it going to be more focused on what you mentioned a little earlier, right?
25:30
SPEAKER_00: This drive on having a physical presence where your clients are.
25:34
SPEAKER_01: We'll continue to do both forecast on digital.
25:38
SPEAKER_01: Obviously,
25:38
SPEAKER_01: in customer population food,
25:40
SPEAKER_01: you're a lot more cost-efficient than the branch,
25:42
SPEAKER_01: but we will use site on the branch as well.
25:46
SPEAKER_00: Now, I know referenced the
25:48
SPEAKER_00: growth in deposit versus a growth in asset.
25:51
SPEAKER_00: The one thing we
25:52
SPEAKER_01: should consider when they check you,
25:54
SPEAKER_01: the one that they're looking at those two is as well as the HISTAR-5B from
25:58
SPEAKER_01: the MTN-NORP that is, or sometimes we may have this here.
26:04
SPEAKER_01: So that's another source of funding which supports the asset growth and the balance
26:14
SPEAKER_01: between the asset growth versus the deposit growth, which is for the
26:21
SPEAKER_00: How much headroom do you have on the capital side of the business to continue
26:25
SPEAKER_00: with these trends?
26:26
SPEAKER_00: Because you're looking at where your minimum statutory capital
26:29
SPEAKER_00: and liquidity ratios are at the moment.
26:31
SPEAKER_00: Are you comfortable with that or do you anticipate that might become a binding constraint?
26:35
SPEAKER_00: Not necessarily now, but perhaps in the medium term.
26:39
SPEAKER_01: So in Kenya, a headroom of us as the regulatory headroom, say,
26:44
SPEAKER_01: we at about 19.8 of a capital of us, like, Oki,
26:49
SPEAKER_01: and Aha,
26:50
SPEAKER_01: Toledimam,
26:51
SPEAKER_01: MTM Grok,
26:52
SPEAKER_01: which is,
26:53
SPEAKER_01: when we rent the market,
26:54
SPEAKER_01: this is a wrap to be able to better afford,
26:57
SPEAKER_01: while single of the other lending and Grow a lending business,
27:02
SPEAKER_01: that that give us the fed home and we don't have to build any headbeads
27:07
SPEAKER_01: or any constraint on there.
27:10
SPEAKER_01: Similarly, the drafting reason why we rent for a year-to-prevet placement in Rwanda.
27:16
SPEAKER_01: Now Rwanda, we continue to grow strongly.
27:18
SPEAKER_01: You have seen Rwanda loan growth a lot higher, 30% growth year on year.
27:25
SPEAKER_01: Bala should grow faster, but Capital support is there as well.
27:30
SPEAKER_01: The Uganda business,
27:32
SPEAKER_01: if they can go to that Uganda business,
27:34
SPEAKER_01: the Ugandan regulator requires a very high absolute minimum capital,
27:39
SPEAKER_01: 150 billion UGX,
27:41
SPEAKER_01: which we already have,
27:42
SPEAKER_01: that has been one of the regions of our ROI in that subsidiary has been lower,
27:48
SPEAKER_01: but we actually now position the business to be able to grow,
27:53
SPEAKER_01: to scale that supported by the level of capital that we have had to put in
27:58
SPEAKER_01: that subsidiary.
27:59
SPEAKER_01: Then Tanzania, we have a very well positioned, we have adequate end room.
28:05
SPEAKER_01: And again,
28:06
SPEAKER_01: we are currently in the market with a medium-term note to shore up a single,
28:11
SPEAKER_01: obligal lending, and if we talk to them, I lost for that.
28:15
SPEAKER_01: Now bank one, we are closely assessing that.
28:19
SPEAKER_01: We have seen lending picking up a linear future.
28:22
SPEAKER_01: We may also be in the market, again, from a tier two perspective to increase the headroom debt.
28:28
SPEAKER_01: So across the board,
28:29
SPEAKER_01: for all of our banking business,
28:32
SPEAKER_01: capital position has not a headroom of where it's not, like you have that near then.
28:38
SPEAKER_01: Yeah.
28:38
SPEAKER_01: So therefore, it's the issue about the aware of position for growth.
28:43
SPEAKER_00: You say you're really intent on raising a bit more capital in the Tanzanian market.
28:46
SPEAKER_00: Can you give us more details on how that's going to work out?
28:48
SPEAKER_00: Should we expect a medium-term note in that particular market or private placement of that sort?
28:53
SPEAKER_00: How much capital are you looking to raise?
28:55
SPEAKER_01: It's actually ongoing right now.
28:57
SPEAKER_01: We are raising a medium-term note in order to work the heat for the Kenyan business.
29:02
SPEAKER_01: The program is a hundred billion times initially.
29:06
SPEAKER_01: The medium term, that should be more than a three-year program.
29:09
SPEAKER_01: But in the medium term, we expect that to be able to support the business.
29:14
SPEAKER_01: So that's already happening in the market and a bit.
29:17
SPEAKER_01: Amranian media will be more making a lot of good noises.
29:21
SPEAKER_00: And we are hoping to be as successful as we were with the Kenyan program.
29:24
SPEAKER_00: There's clearly a lot of demand, private commercial debt in the market at the moment.
29:28
SPEAKER_00: We can see that.
29:29
SPEAKER_00: And there's a ton of liquidity that is chasing yield across the region of just in Kenya.
29:32
SPEAKER_00: So it'd be interesting to see what the response there looks like.
29:35
SPEAKER_00: With respect to earning and dividend policy,
29:38
SPEAKER_00: because EPS was up 20% function instead of 5 cents a share.
29:42
SPEAKER_00: The pace of earnings growth looks pretty interesting.
29:45
SPEAKER_00: How are you thinking about the dividend payout ratio for fiscal 26?
29:49
SPEAKER_00: Should shareholders expect distributions to track earnings growth or given all
29:53
SPEAKER_00: the capital needs that you have to power your next phase of growth,
29:56
SPEAKER_00: should we expect a bit of a reduction in the payout ratio?
29:59
SPEAKER_01: The good thing about the capital that we need to be part
30:03
SPEAKER_01: of our business growth is very proprietary capital,
30:07
SPEAKER_01: subordinated debt, medium-term note.
30:09
SPEAKER_01: So that can be a lot cheaper than the cost of equity.
30:15
SPEAKER_01: The cost of equity in a market is economically higher than the debt capital for dividend.
30:22
SPEAKER_01: We've been consistently over the last few years paid 30% plus.
30:28
SPEAKER_01: We really assessed this in the closer year.
30:31
SPEAKER_01: And yes, you're right, reported increased profitability.
30:34
SPEAKER_01: So we have seen what the capital needs are.
30:37
SPEAKER_01: There will be definitely a dividend payout at the end of the year.
30:41
SPEAKER_01: And over the last two years as well, we've I've entered the practice of paying an interim.
30:46
SPEAKER_01: So that goes out in January and we expect to keep that.
30:50
SPEAKER_00: As we're trying to bring the conversation to a close here,
30:52
SPEAKER_00: looking at the second half of 2026,
30:54
SPEAKER_00: because there's so many different macroeconomic endpoints,
30:57
SPEAKER_00: right, that we're heading into.
30:58
SPEAKER_00: You've got the surge in inflation, primarily due to what's happening with energy costs.
31:04
SPEAKER_00: Food supply, food prices will, I think, continue to be an issue.
31:07
SPEAKER_00: And then there's El Nino, the worst in eight decades on the horizon.
31:11
SPEAKER_00: What are the three main things that have your attention for the second half of
31:15
SPEAKER_00: the year,
31:15
SPEAKER_00: whether that's capital rating,
31:17
SPEAKER_00: maintaining asset quality,
31:19
SPEAKER_00: getting a handle on NPLs and keeping that number going down?
31:23
SPEAKER_00: What are your main priorities for the second half of 2026?
31:26
SPEAKER_01: We are approaching the second half of 2026.
31:29
SPEAKER_01: We are a lot more violent sheet over the institution across the group.
31:35
SPEAKER_01: I was talking about pollution and all of the initiatives,
31:37
SPEAKER_01: health and behavioral We have very good liquidity and the balance.
31:42
SPEAKER_01: These are NPLs are quite at single digits.
31:45
SPEAKER_01: And then at the macro level,
31:47
SPEAKER_01: although, yes,
31:48
SPEAKER_01: they are,
31:48
SPEAKER_01: especially with the fuel implication, they are with the overhang of information.
31:54
SPEAKER_01: But, and especially when we look at the deep market,
31:56
SPEAKER_01: even the country itself,
31:58
SPEAKER_01: with its position, we have a historic level, so the fixed results.
32:03
SPEAKER_01: Kenya, the fixed results for the other countries have also niched up.
32:08
SPEAKER_01: Inflation has been relatively stable in all of our markets.
32:12
SPEAKER_01: For the longest period of weeks,
32:13
SPEAKER_01: only is Rwanda, which we have seen an Arctic of Nats during the year.
32:17
SPEAKER_01: Our exchange rates have been more than those able on the region.
32:21
SPEAKER_01: And there are global habits that are picking us.
32:24
SPEAKER_01: We have specific in-country mafros that are able to pay off that.
32:29
SPEAKER_01: And then there is this specific product, each repudence before us.
32:33
SPEAKER_01: But as we get into then the second half of the year,
32:36
SPEAKER_01: We do need to keep the discipline,
32:38
SPEAKER_01: the credit money side that we spoke about and continue on resolving all the numbers
32:43
SPEAKER_01: on the end of the year.
32:45
SPEAKER_01: But more so, for us,
32:46
SPEAKER_01: we get a petition and a strategy,
32:48
SPEAKER_01: the last part of the matter-free strategy that has really resonated with
32:53
SPEAKER_01: the customers.
32:54
SPEAKER_01: So we want to see our customer petition across all of our matter.
33:00
SPEAKER_01: And we continue to grow the new lines of business,
33:03
SPEAKER_01: which has come through from our current structure and especially our way
33:07
SPEAKER_01: of managing business.
33:09
SPEAKER_00: And frankly, the market clearly looks at the I&M story.
33:12
SPEAKER_00: They look at the business and investors like to vote through their wallets.
33:15
SPEAKER_00: As it was, we look at the share price of the firm.
33:17
SPEAKER_00: We've gone from,
33:19
SPEAKER_00: I believe it was under 18 shillings a share at the start of the year 2024,
33:23
SPEAKER_00: I&M well over 70 shillings a share now.
33:25
SPEAKER_00: That's a massive return,
33:27
SPEAKER_00: a significant depreciation for anyone who was holding I&M shares at
33:30
SPEAKER_00: that particular point in time.
33:32
SPEAKER_00: David, the market clearly likes the story,
33:35
SPEAKER_00: the performance of the business, and the numbers do speak for themselves.
33:38
SPEAKER_00: So we really can't thank you enough for carving time out of your schedules
33:41
SPEAKER_00: to be here with us and the audience,
33:43
SPEAKER_00: of course,
33:43
SPEAKER_00: to speak about the results of the first half of the year
33:46
SPEAKER_00: and what we should expect moving into the second half of 2026.
33:50
SPEAKER_00: Any last words you'd like to leave our listeners with?
33:53
SPEAKER_01: Lastly, thank you so much for the time and the listeners for your time as well.
33:58
SPEAKER_01: We are really focused, as I just said, on the execution and launching our fields.
34:02
SPEAKER_01: As you said,
34:03
SPEAKER_01: the competition is not resty,
34:05
SPEAKER_01: the uncertainty is not the way,
34:08
SPEAKER_01: but that's why we are here for a,
34:11
SPEAKER_01: we want to keep adding this list and would like the best to continue.
34:16
SPEAKER_00: So thank you so much.
34:17
SPEAKER_00: Indeed.
34:18
SPEAKER_00: Thank you, David.
34:19
SPEAKER_00: And of course,
34:20
SPEAKER_00: thank you to all of you who have taken time over your schedule
34:22
SPEAKER_00: on this Thursday evening to join us to do a dive into some of the results
34:25
SPEAKER_00: from INM Group over the first six months of 2026.
34:29
SPEAKER_00: Thank you, everyone.
34:30
SPEAKER_00: Good night.