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Transcript

NCBA H1 2024 Results · The Mwango Capital Podcast

0:00
SPEAKER_01: Good evening, wherever you're joining us from.
0:02
SPEAKER_01: My name is Eric Mokai.
0:02
SPEAKER_01: I'm the founder of Wango Captures.
0:04
SPEAKER_01: We're going to be discussing NCBS H1 2020 for performance and giving context to the results.
0:10
SPEAKER_01: If you look around on our timeline,
0:12
SPEAKER_01: you'll see a bit of analysis on the results so that you can be able to dig in with us.
0:16
SPEAKER_01: We have
0:17
SPEAKER_01: Lots of questions which have been sent in,
0:19
SPEAKER_01: some ranging from dividend to performance,
0:22
SPEAKER_01: the subsidiary performances,
0:23
SPEAKER_01: asset quality,
0:24
SPEAKER_01: MPLs,
0:25
SPEAKER_01: and a lot of that.
0:27
SPEAKER_01: And something else to note,
0:28
SPEAKER_01: of course,
0:28
SPEAKER_01: our guest is also the Kenya Bank Association Chair,
0:32
SPEAKER_01: so quite informed on industry trends.
0:34
SPEAKER_01: We're going to be analyzing that too.
0:36
SPEAKER_01: John?
0:36
SPEAKER_01: Thank you for joining us.
0:37
SPEAKER_01: You're quite well known in banking circles, so I think no much introduction is needed from you.
0:41
SPEAKER_01: But perhaps for the uninitiated,
0:43
SPEAKER_01: you could tell people who you are then so they can get to know you a little bit better.
0:47
SPEAKER_02: Thank you.
0:47
SPEAKER_02: Thank you very much.
0:48
SPEAKER_02: This is John Gashora.
0:49
SPEAKER_02: I'm the Group Managing Director for NCBA Group.
0:53
SPEAKER_02: For those who don't know NCBA Group,
0:55
SPEAKER_02: it's a banking or financial institution headquartered in Nairobi,
0:59
SPEAKER_02: Kenya.
1:00
SPEAKER_02: Operating in now six countries.
1:02
SPEAKER_02: We're in Kenya,
1:03
SPEAKER_02: Uganda,
1:04
SPEAKER_02: Tanzania,
1:05
SPEAKER_02: Rwanda,
1:05
SPEAKER_02: Ivory Coast,
1:06
SPEAKER_02: and starting some digital operations in Ghana in a short while.
1:10
SPEAKER_01: Let's start from the broad picture.
1:13
SPEAKER_01: So perhaps you can use a bird's eye view of the results for H1 2024 and how you
1:17
SPEAKER_01: feel about the performance so far.
1:18
SPEAKER_02: Sure.
1:19
SPEAKER_02: Thank you.
1:19
SPEAKER_02: Thank you.
1:20
SPEAKER_02: Thank you again for having me here.
1:21
SPEAKER_02: We announced our results this morning.
1:23
SPEAKER_02: Profit after tax,
1:25
SPEAKER_02: Canadian shillings 9.8 billion,
1:28
SPEAKER_02: 5% above last year at the same time where we were at 9.4 billion.
1:32
SPEAKER_02: Our assets continue to grow again at about the same rate, 4%, coming in at 690 billion.
1:39
SPEAKER_02: And I think key highlights of our results were one,
1:42
SPEAKER_02: that our bank capital has now reached 100 billion shillings.
1:46
SPEAKER_02: I think the second observation is that the contribution of our regional
1:50
SPEAKER_02: subsidiaries has risen significantly.
1:53
SPEAKER_02: Our non-Kenyan subsidiaries are now contributing 16% of our profitability.
1:58
SPEAKER_02: And I think that point I'll make is that all our businesses this time around were profitable.
2:04
SPEAKER_02: which is really good showing that our diversity in terms of earnings is coming through quite strongly.
2:10
SPEAKER_02: And lastly, our NPL ratio at 12.1%.
2:13
SPEAKER_02: We're below the industry, which is at 16.3%.
2:17
SPEAKER_02: So again, showing the work we have done.
2:19
SPEAKER_02: And as we have talked before,
2:21
SPEAKER_02: to invest in the public at large,
2:23
SPEAKER_02: that we were managing our NPLs quite strongly down.
2:27
SPEAKER_02: For us, it's been going down, as even for the industry, unfortunately, has been rising.
2:31
SPEAKER_02: So those are some of the highlights I wanted to give Eric.
2:33
SPEAKER_01: Yeah, let's start with the NPLs, the pain point for many.
2:36
SPEAKER_01: I think a couple of banks have reported and we've seen NPLs above industry average
2:41
SPEAKER_01: around 18%,
2:41
SPEAKER_01: some of them.
2:42
SPEAKER_01: But you're around 12% and the industry is at 16%.
2:45
SPEAKER_01: Surely there's something that you're doing that is different from the rest.
2:48
SPEAKER_01: So perhaps you could give people your secret thoughts to maintaining low NPLs in a
2:53
SPEAKER_01: capital operating environment.
2:54
SPEAKER_02: And I think if you look back,
2:55
SPEAKER_02: Eric,
2:56
SPEAKER_02: just maybe three years ago,
2:58
SPEAKER_02: you asked me the question in reverse about
3:00
SPEAKER_02: Our NPO ratio was higher than the industry.
3:02
SPEAKER_02: And I explained then that we were seeing the risks ahead of the game, if you recall.
3:07
SPEAKER_02: And I said, we are taking the risks early enough and acting early enough.
3:11
SPEAKER_02: Those actions are the ones that have really upheld us, that we were very specific about the names.
3:16
SPEAKER_02: And even then, if you recall, I did say that there was
3:19
SPEAKER_02: specific names we were dealing with.
3:20
SPEAKER_02: We have been able to deal with those names,
3:22
SPEAKER_02: putting in the actions that are required either to recover,
3:25
SPEAKER_02: to rehabilitate,
3:26
SPEAKER_02: and in some cases to take the painful decision of writing them off.
3:30
SPEAKER_02: We can just make the decisions early, realize the risks early and act early.
3:34
SPEAKER_02: So that's what you see being the reason where we are.
3:37
SPEAKER_02: I think I would say that a number of other banks did not perhaps see the risk or
3:43
SPEAKER_02: didn't even have the risk that we had and maybe then take the precautions that we
3:47
SPEAKER_02: took at the right time.
3:49
SPEAKER_01: So in terms of NPLs,
3:50
SPEAKER_01: the CFO was speaking to something that caught my attention,
3:53
SPEAKER_01: that the stickiness in terms of NPLs,
3:55
SPEAKER_01: it can take you up to five to 10 years to be able to deal with them.
3:59
SPEAKER_01: What's been your learning point in terms of dealing with NPLs?
4:01
SPEAKER_01: I think the CFO talked about exploring alternative mechanisms for resolution
4:07
SPEAKER_01: instead of going to court because that takes longer to resolve.
4:10
SPEAKER_01: Perhaps what are some of the things that you've learned that maybe you can share
4:12
SPEAKER_01: with the industry in terms of how you're dealing with that?
4:14
SPEAKER_02: I think the biggest lesson for us is take action early.
4:17
SPEAKER_02: Customers will always be very optimistic when they're in trouble.
4:21
SPEAKER_02: I think that is true.
4:22
SPEAKER_02: Even for us as individuals, we keep making promises.
4:25
SPEAKER_02: But I think be realistic,
4:27
SPEAKER_02: take actions early,
4:28
SPEAKER_02: be obviously empathetic that these customers have taken time,
4:33
SPEAKER_02: effort,
4:33
SPEAKER_02: money,
4:34
SPEAKER_02: family time to create these businesses.
4:36
SPEAKER_02: So be empathetic about it.
4:38
SPEAKER_02: But be firm in terms of taking the action.
4:41
SPEAKER_02: I think that is what we have done.
4:42
SPEAKER_02: The second thing is be a good listening bank.
4:45
SPEAKER_02: As you say, going through the calls can take forever.
4:48
SPEAKER_02: So the advice I always give to my customers is, look, we're not here to mess up your business.
4:52
SPEAKER_02: We're not here to not see you successful.
4:54
SPEAKER_02: We started this journey with you to help you succeed.
4:57
SPEAKER_02: Therefore, let's not end it with a third party telling us how we started this relationship.
5:03
SPEAKER_02: Let's come together and discuss.
5:04
SPEAKER_02: And we do that a lot while we discuss.
5:06
SPEAKER_02: We agree on a vision, a journey of resolution.
5:09
SPEAKER_02: We'll give you the time to do the resolution.
5:11
SPEAKER_02: But I think any customer will tell you the question we always ask is,
5:15
SPEAKER_02: what is the most realistic journey to resolution?
5:18
SPEAKER_02: We tell them, please be realistic.
5:20
SPEAKER_02: A customer comes and says, I'll be able to make these payments every month or these quarterly payments.
5:25
SPEAKER_02: I want to see exactly where it's going to come from.
5:27
SPEAKER_02: And then after you show me that,
5:28
SPEAKER_02: tell me how you're going to pay fees for your kids to go to school,
5:32
SPEAKER_02: how you're going to pay for your rent,
5:33
SPEAKER_02: all that.
5:34
SPEAKER_02: Then I say, once you take all that out,
5:35
SPEAKER_02: is this amount realistic for you to pay down your debt?
5:38
SPEAKER_02: And if it's not, then let's take another course of action.
5:41
SPEAKER_02: And I think we've gotten good resolution out of that.
5:44
SPEAKER_02: I think lastly is that there is a journey to resolution where the customer keeps their business.
5:50
SPEAKER_02: That should always be the preferred route to take.
5:52
SPEAKER_02: And if all else fails, obviously the court process unfortunately does.
5:55
SPEAKER_02: But it's very rare that you see the bank
5:58
SPEAKER_02: That is, we're in the back for that mantra.
5:59
SPEAKER_02: There's one initiated called processes.
6:01
SPEAKER_02: Typically, those will be initiated by the customers.
6:04
SPEAKER_02: But I encourage customers and banks to see if they can use alternatives to get to a
6:09
SPEAKER_02: better position for everybody.
6:11
SPEAKER_01: I think NPLs is the heartbeat of how the country is performing.
6:15
SPEAKER_01: In your conversations with customers and clients,
6:17
SPEAKER_01: what are they telling you about the state of the economy?
6:19
SPEAKER_01: What can you see in terms of their movement and spending?
6:22
SPEAKER_01: Maybe give us a bit of a view on the state of the economy.
6:25
SPEAKER_01: Give us your state of the nation address on the economy.
6:27
SPEAKER_02: A very loaded question there.
6:29
SPEAKER_02: Let me start saying the obvious.
6:30
SPEAKER_02: Obviously, we're operating in a situation where interest rates are highly elevated.
6:35
SPEAKER_02: There are customers being charged over 20% interest rates on their loans.
6:39
SPEAKER_02: These are customers that I would say prime customers paying that sort of interest rate.
6:44
SPEAKER_02: So it's a tough environment.
6:45
SPEAKER_02: Things are expensive.
6:47
SPEAKER_02: I know inflation has come down quite well.
6:49
SPEAKER_02: We're between 4.3% and 4.6% as we speak.
6:53
SPEAKER_02: In the country now, I'm talking about Kenya.
6:55
SPEAKER_02: Obviously, we operate in a number of markets.
6:57
SPEAKER_02: Talking to Kenneth specifically,
6:59
SPEAKER_02: if you look at that and given the few years where inflation has been elevated,
7:04
SPEAKER_02: it means the cost of living is quite high.
7:06
SPEAKER_02: There's a debate on school fees now and university fees being too high.
7:10
SPEAKER_02: I think you're seeing that very big debate.
7:13
SPEAKER_02: salaries being delayed.
7:14
SPEAKER_02: I'm sure you've seen that quite a bit.
7:15
SPEAKER_02: So when we speak with the industry, it is a tough time.
7:18
SPEAKER_02: The economy is going through a tough time.
7:21
SPEAKER_02: The withdrawal of the finance bill obviously also means from even at a not just micro,
7:26
SPEAKER_02: now at a macro level,
7:28
SPEAKER_02: our fiscal policy is challenged,
7:30
SPEAKER_02: which is,
7:31
SPEAKER_02: I believe,
7:31
SPEAKER_02: why the government is signaling the intention to bring back
7:35
SPEAKER_02: quite a few of the clauses that were in the finance bill,
7:39
SPEAKER_02: because that's the only way to be able to address some of the macroeconomic
7:43
SPEAKER_02: challenges as well as the commitment they have made for physical consolidation.
7:47
SPEAKER_02: So all in all, tough times.
7:48
SPEAKER_02: So when we speak with our customers, that is indeed the message that we're getting.
7:54
SPEAKER_02: There are obviously concerns about consistencies in tax policies not being helped
7:59
SPEAKER_02: by the fact that obviously that Kenyans were going to court even getting the 2023
8:05
SPEAKER_02: finance bill almost reversed.
8:07
SPEAKER_02: It means there is quite a bit of uncertainty about the tax environment.
8:11
SPEAKER_02: So when you look at all that, I would say that the business environment continues to be challenged.
8:16
SPEAKER_02: The economy as a whole continues to be challenged.
8:19
SPEAKER_02: When I speak with Gen Zs who recently went on the streets,
8:22
SPEAKER_02: Part of the reason they did that was that the main street had a lot of financial challenges.
8:27
SPEAKER_02: To your question, is it an easy time?
8:29
SPEAKER_02: No, it's not.
8:30
SPEAKER_02: All that said,
8:31
SPEAKER_02: I say this morning,
8:32
SPEAKER_02: the fact that the government has listened,
8:36
SPEAKER_02: they've shown a level of listening with the recent Gen Z mandamano.
8:41
SPEAKER_02: They have acted.
8:42
SPEAKER_02: The president has come publicly to commit to dialogue going forward.
8:45
SPEAKER_02: I think the approach of governance has changed for the better.
8:49
SPEAKER_02: I think Kenya's resilience,
8:51
SPEAKER_02: which we have seen in the past,
8:52
SPEAKER_02: gives me a lot of optimism that we will be on a good path
8:57
SPEAKER_02: And I think we shouldn't take it for granted the commitment that the president has
9:00
SPEAKER_02: made on physical consolidation,
9:02
SPEAKER_02: the short-term pain for long-term gain.
9:04
SPEAKER_02: And I think we should certainly listen and hopefully come together and support some
9:09
SPEAKER_02: of the measures that the government is coming up with.
9:12
SPEAKER_02: So I would say all in all, it's a mixed bag.
9:15
SPEAKER_02: The last thing I would want to comment on is obviously that all this and the failing of Main Street,
9:20
SPEAKER_02: Obviously, it depends on what happens to interest rates.
9:23
SPEAKER_02: I think the Monetary Policy Committee signaled in its last meeting the intention to
9:29
SPEAKER_02: start monetary easing by lowering the central bank rates.
9:33
SPEAKER_02: I think the intention would have been to continue on that trend.
9:36
SPEAKER_02: Given inflation is within the range,
9:39
SPEAKER_02: the target range,
9:40
SPEAKER_02: given that the shilling has stabilized the two things that they were focused on
9:44
SPEAKER_02: when they raised interest rates.
9:45
SPEAKER_02: But I think obviously that said,
9:47
SPEAKER_02: it all depends on what happened given the fiscal need to raise more money from
9:53
SPEAKER_02: borrowing given the withdrawal of the finance bill.
9:56
SPEAKER_01: On that note,
9:56
SPEAKER_01: it would be good to remind you that if you want to be participating in the discussion,
10:00
SPEAKER_01: you can just DM us your question.
10:01
SPEAKER_01: Below the pinned tweet, you can send us a few more of your questions and we'll get them answered.
10:05
SPEAKER_01: So I just wanted to move a little bit to maybe the income statement to see how that
10:09
SPEAKER_01: top and bottom line have been evolving in the past couple of years and your feeling
10:13
SPEAKER_01: on where the areas of growth have come in the past year and how maybe net interest
10:17
SPEAKER_01: income and non-interest income lines have evolved in the past year.
10:21
SPEAKER_01: So perhaps you can take us a bit through the income statement and then the profitability,
10:25
SPEAKER_01: top and bottom line.
10:26
SPEAKER_02: Okay.
10:26
SPEAKER_02: So I think what you see with the numbers,
10:29
SPEAKER_02: I didn't intend to go through each of the lines,
10:32
SPEAKER_02: is that you've had very good growth on the interest income line,
10:37
SPEAKER_02: very good growth.
10:37
SPEAKER_02: What you see,
10:38
SPEAKER_02: obviously,
10:38
SPEAKER_02: because of the rates have been rising and we've been revising interest rates,
10:43
SPEAKER_02: is that interest income has risen comfortably.
10:46
SPEAKER_02: But that also means the cost of deposits
10:49
SPEAKER_02: has also risen quite tremendously.
10:51
SPEAKER_02: So net interest income actually for us was flat year over year, did not really grow.
10:55
SPEAKER_02: I think that's what you find.
10:57
SPEAKER_02: And indeed,
10:58
SPEAKER_02: the growth that we have seen from an income perspective has been from non-interest income,
11:02
SPEAKER_02: where the non-funded income has had good performance on our digital business,
11:07
SPEAKER_02: for example.
11:08
SPEAKER_02: And that has been driven by the
11:11
SPEAKER_02: down.
11:11
SPEAKER_02: Our FX is down.
11:13
SPEAKER_02: However, our transactional income, whether that be trade and transactional income is up comfortably.
11:19
SPEAKER_02: So those are the lines generally in terms of direction.
11:22
SPEAKER_02: That's what you find with our income statement.
11:24
SPEAKER_01: And the subsidiaries, how is their performance?
11:26
SPEAKER_01: What's your feeling around the region beyond Kenya and how they are performing?
11:30
SPEAKER_02: So again, those have performed very well.
11:32
SPEAKER_02: So Ivalu Kada Subsidies Uganda has done very well, both on the core bank as well as the digital bank.
11:39
SPEAKER_02: They continue to perform actually quite strongly, well ahead of plan.
11:42
SPEAKER_02: Tanzania has again been performing.
11:45
SPEAKER_02: I would say the core bank has been ahead of plan.
11:47
SPEAKER_02: The digital bank has not, but it has turned around quite well.
11:51
SPEAKER_02: They had a tough start in first place.
11:52
SPEAKER_02: quarter, but it's turned around well in second quarter.
11:55
SPEAKER_02: So it's actually,
11:56
SPEAKER_02: whereas it's still behind plan,
11:58
SPEAKER_02: given the trajectory we have seen,
12:00
SPEAKER_02: I believe it will catch up in the rest of the year to plan.
12:03
SPEAKER_02: Rwanda,
12:03
SPEAKER_02: which is very good performance from the digital bank,
12:06
SPEAKER_02: but actually not as good performance from the co-bank.
12:09
SPEAKER_02: The co-bank actually reported us
12:12
SPEAKER_02: slight loss.
12:13
SPEAKER_02: And that's really because we had one large customer that has not performed well and
12:17
SPEAKER_02: we have had to take significant provisions in Rwanda for that one customer.
12:22
SPEAKER_02: Even if it's a small business,
12:24
SPEAKER_02: when a large customer gets into trouble and you have to provide for them,
12:28
SPEAKER_02: obviously that has a big lever effect on your income.
12:32
SPEAKER_02: So that's generally what you find.
12:34
SPEAKER_02: And then find every cost.
12:35
SPEAKER_02: Small business,
12:36
SPEAKER_02: profitable throughout the month,
12:38
SPEAKER_02: but again,
12:39
SPEAKER_02: probably not big enough to make a huge difference to the bottom line.
12:42
SPEAKER_01: And Ghana, there was some talk about you putting your wings there.
12:46
SPEAKER_01: How's that going?
12:47
SPEAKER_02: Yes, Ghana, what I've said about Ghana is that we have applied for a license to operate digitally.
12:55
SPEAKER_02: So it's really to work with local partners from a digital banking perspective,
13:00
SPEAKER_02: the same way that we work in Ivory Coast with MTN and in other markets with MTN,
13:06
SPEAKER_02: Vodacom,
13:07
SPEAKER_02: here in Safar with Safaricom.
13:09
SPEAKER_02: And since we don't have a bank,
13:10
SPEAKER_02: we'll probably have to get a bank or a microfinance partner to work within that market.
13:14
SPEAKER_02: But for us, it's really to provide our capability and our capacity on the digital lending side.
13:21
SPEAKER_02: And that is the business that we want to open.
13:23
SPEAKER_02: So we've made applications for Provewood.
13:25
SPEAKER_02: do that.
13:26
SPEAKER_02: And my estimation is that we'll be operational sometime next year.
13:29
SPEAKER_02: I don't have an exact date because we depend a lot on the approvals that we get.
13:33
SPEAKER_02: And given that they don't have exactly the kind of license we're looking for,
13:37
SPEAKER_02: it's hard to tell you exactly the timeline that we will face to get the approval.
13:41
SPEAKER_01: And in terms of your West Africa strategy,
13:43
SPEAKER_01: is that like part of your co-ambition to be a kind of east to west coverage of the continent?
13:49
SPEAKER_01: Is that what you're seeking to provide at some point?
13:50
SPEAKER_02: Yes, yes and no.
13:52
SPEAKER_02: I think we are slightly opportunistic.
13:54
SPEAKER_02: We look at the markets that speak to, one, the innovations that we have.
13:59
SPEAKER_02: And I think it was very clear to us that Ivory Coast spoke to us.
14:03
SPEAKER_02: It's clear that Ghana speaks to us, very similar like Kenya, fairly sophisticated private sector.
14:09
SPEAKER_02: good individual banking.
14:11
SPEAKER_02: And if you look at our numbers in Ivory Coast,
14:13
SPEAKER_02: for example,
14:14
SPEAKER_02: very high saving rates from customers,
14:17
SPEAKER_02: similar to what we see here with Amshuari.
14:19
SPEAKER_02: And that has been what we look at essentially when we go into these markets.
14:23
SPEAKER_02: That said, do we have an east to west strategy?
14:26
SPEAKER_02: I think it gets informed daily in terms of how that will evolve.
14:30
SPEAKER_02: I think before we have talked about places like DRC, we've looked at DRC.
14:34
SPEAKER_02: We still continue to look at it.
14:36
SPEAKER_02: Again, we don't have any timeline.
14:37
SPEAKER_02: The DLP has an interesting market for us.
14:39
SPEAKER_02: Again, we don't have timelines.
14:41
SPEAKER_02: That depends on when the government will liberalize its financial sector.
14:45
SPEAKER_02: I'm not saying it's a random walk,
14:46
SPEAKER_02: but again,
14:47
SPEAKER_02: it's not an east-west belt strategy,
14:49
SPEAKER_02: if I may put it that way.
14:50
SPEAKER_01: Maybe a curious question from my end.
14:52
SPEAKER_01: Are there like regional differences in terms of how people bank across the region
14:56
SPEAKER_01: that you've observed from your vantage point of operating across the region?
14:59
SPEAKER_02: Yes.
15:00
SPEAKER_02: Corporate banking is global.
15:02
SPEAKER_02: Retail banking is local.
15:04
SPEAKER_02: I think that's the best way to put it.
15:05
SPEAKER_02: Because whereas corporate banking,
15:07
SPEAKER_02: you look at companies' balance sheet,
15:09
SPEAKER_02: the companies' reporting,
15:11
SPEAKER_02: and most countries have requirements for tax filings and all that for companies.
15:15
SPEAKER_02: It's not necessarily true for individuals.
15:17
SPEAKER_02: So cultural differences of repaying of loans have been
15:20
SPEAKER_00: Kenya,
15:20
SPEAKER_02: we're blessed to have had a culture where people understand when you take people's money,
15:25
SPEAKER_02: you must repay.
15:25
SPEAKER_02: It's not necessarily true in every culture.
15:27
SPEAKER_02: And so there's a lot of education that needs to be done in some of these markets.
15:32
SPEAKER_02: Lastly, it's people capacity.
15:34
SPEAKER_02: I think,
15:34
SPEAKER_02: again,
15:35
SPEAKER_02: Kenya has been blessed to have the human capital capacity to do what we've been
15:39
SPEAKER_02: able to do.
15:40
SPEAKER_02: It's not always true in some of these markets that we get into that you can get the
15:43
SPEAKER_02: right workforce to deliver the kind of sophisticated products that NCBO wants to deliver.
15:50
SPEAKER_02: that we have taken from working in these markets.
15:52
SPEAKER_01: I just wanted to move a little bit perhaps now discussing about the FX.
15:56
SPEAKER_01: And last time you and I were discussing about some issues around FX in the country
16:01
SPEAKER_01: that was launched two years ago.
16:03
SPEAKER_01: I think the issue has evolved quite a bit now to a space where I think there's been
16:07
SPEAKER_01: a lot of breathing space,
16:08
SPEAKER_01: especially after the Euro bond repayment earlier this year.
16:11
SPEAKER_01: What has driven kind of the FX performance from your vantage point of being KBO chair?
16:17
SPEAKER_01: What have you seen in the markets or evolved over the past two years and where we are right now?
16:21
SPEAKER_02: Last time I said, and maybe I got into a bit of trouble.
16:24
SPEAKER_02: So when the selling war goes on,
16:27
SPEAKER_02: weakening and the exchange rate was falling.
16:30
SPEAKER_02: I did say then that there are no fundamentals to support that.
16:34
SPEAKER_02: I think it was sentiments.
16:35
SPEAKER_02: And I think what we have seen,
16:37
SPEAKER_02: even when it comes to now the sharing strength beginning,
16:39
SPEAKER_02: is actually sentiment again.
16:41
SPEAKER_02: It tells me that sentiment is what was driving
16:44
SPEAKER_02: performance of the shilling for the last possibly couple of years.
16:48
SPEAKER_02: And by taking the action,
16:50
SPEAKER_02: the government,
16:50
SPEAKER_02: the central bank took on one,
16:52
SPEAKER_02: repaying the Eurobond,
16:53
SPEAKER_02: but two,
16:54
SPEAKER_02: issuing that very big infrastructure bond,
16:57
SPEAKER_02: which was well oversubscribed and we understand a lot of the money came from
17:02
SPEAKER_02: from overseas, that helped to strengthen and stabilize the shillings.
17:06
SPEAKER_02: And once the buyers of the dollar got a change in sentiment,
17:10
SPEAKER_02: that has helped continue to keep the shilling where it is.
17:13
SPEAKER_02: I think it does help that the central bank also received additional dollars to show up their reserves.
17:19
SPEAKER_02: So they have shown that they are capable of supporting the shilling.
17:22
SPEAKER_02: It does help that they did come into the market a few times,
17:25
SPEAKER_02: not necessarily just to support the shilling,
17:26
SPEAKER_02: just to
17:27
SPEAKER_02: stabilize it, that also showed that they were ready to act.
17:30
SPEAKER_02: And I think all that has helped change the sentiment on the sharing for the better.
17:34
SPEAKER_00: So could you probably share with us more about the acquisition of AIG and probably
17:38
SPEAKER_00: how you've integrated it into NCBA's operations and the progress in it so far?
17:43
SPEAKER_02: Yes, for those who don't know, we purchased the 67% share that we do not own of AIG Kenya business.
17:52
SPEAKER_02: That's the pure general handwriting business here in Kenya.
17:56
SPEAKER_02: And we closed that purchase on the 1st of July.
17:59
SPEAKER_02: So from 1st of July, AIG is
18:01
SPEAKER_02: Kenya is now part of NCBA.
18:04
SPEAKER_02: Obviously, that came from a long time of work.
18:07
SPEAKER_02: We announced the acquisition in September of last year.
18:11
SPEAKER_02: And since then, we've been getting the one regulatory approvals that we need.
18:15
SPEAKER_02: And more importantly, trying to get everything geared up towards
18:19
SPEAKER_02: crossover on 1st of July in terms of operations,
18:22
SPEAKER_02: in terms of technology,
18:23
SPEAKER_02: in terms of reporting,
18:25
SPEAKER_02: in terms of people,
18:25
SPEAKER_02: in terms of policy.
18:26
SPEAKER_02: And that has gone very well.
18:28
SPEAKER_02: So I would say today from where we sit, we are well integrated.
18:31
SPEAKER_02: Not everything is integrated.
18:32
SPEAKER_02: Brand, for example, we have not changed the brand yet.
18:35
SPEAKER_02: There's still some work that is going on there to get the brand changed.
18:38
SPEAKER_02: But really good acquisition, if I may say, from a
18:42
SPEAKER_02: strategic perspective,
18:43
SPEAKER_02: perhaps more beneficial to AIG Kenya that they'll be able to use our very expanded
18:48
SPEAKER_02: network to do marketing,
18:50
SPEAKER_02: to service customers,
18:51
SPEAKER_02: and to work with agents all across the country,
18:54
SPEAKER_02: as opposed to agents near the two branches that they have had.
18:58
SPEAKER_02: And then from our existing customer,
19:00
SPEAKER_02: the ability for us to have conversations that touch on the full financial needs spectrum,
19:05
SPEAKER_02: from investment,
19:07
SPEAKER_02: savings,
19:07
SPEAKER_02: to transactions,
19:09
SPEAKER_02: to borrowing,
19:10
SPEAKER_02: to insuring,
19:11
SPEAKER_02: that we can actually have that full conversation with them.
19:14
SPEAKER_02: and be able to give them first-hand information on what's required from the insurance perspective.
19:20
SPEAKER_02: So all in all, very positive.
19:22
SPEAKER_02: I think you start seeing the numbers as from this quarter when we report they were
19:28
SPEAKER_02: not part of the June numbers,
19:30
SPEAKER_02: but they'll be coming on stream from this quarter.
19:32
SPEAKER_01: The next question I had was mostly about strategic acquisitions.
19:34
SPEAKER_01: There has been the proposal from the central bank to raise the core capital of
19:38
SPEAKER_01: banks over a period of time.
19:39
SPEAKER_01: That would mean opportunities, perhaps strategic, to be able to maybe make up a few more acquisitions.
19:44
SPEAKER_01: Is that something that you're actively in the market for,
19:46
SPEAKER_01: or are you just more sitting back and relaxing and waiting perhaps for
19:50
SPEAKER_01: opportunities to present themselves at some point?
19:52
SPEAKER_02: The change in capital that's being proposed,
19:54
SPEAKER_02: which is moving from a billion to 10 billion,
19:57
SPEAKER_02: is significant.
19:58
SPEAKER_02: It's necessary.
19:59
SPEAKER_02: It should have happened many years ago,
20:00
SPEAKER_02: if you ask me,
20:01
SPEAKER_02: because you all need very strong and large banks for safety and security of our
20:07
SPEAKER_02: depositors and employees and everybody else and other customers.
20:11
SPEAKER_02: So I think it is a good move.
20:12
SPEAKER_02: Also,
20:13
SPEAKER_02: I've said this before,
20:14
SPEAKER_02: that Kenya,
20:15
SPEAKER_02: with our size of population,
20:17
SPEAKER_02: our size of economy,
20:19
SPEAKER_02: I don't think 43 banks are necessary.
20:22
SPEAKER_02: We probably need quite a few less than that.
20:24
SPEAKER_02: That said, I don't necessarily imagine that even...
20:29
SPEAKER_02: Capital requirements were raised that a lot of the banks that are already quite
20:33
SPEAKER_02: strong will not be able to raise it.
20:35
SPEAKER_02: I think they will be able to raise the capital that is required.
20:38
SPEAKER_02: Those who will not be able to do, then they will perhaps be forced into a merger.
20:41
SPEAKER_02: It depends on what the law is going to say.
20:43
SPEAKER_02: They may be given quite a bit of time to raise it.
20:45
SPEAKER_02: But if they are not,
20:47
SPEAKER_02: and they are told they must raise it in very short order,
20:49
SPEAKER_02: then I expect that there will be some mergers expected.
20:52
SPEAKER_02: To your question, where does NCBA stand?
20:54
SPEAKER_02: As I said, our capital stands at $100 billion, so we are comfortably above the $10 billion.
21:00
SPEAKER_02: We're looking to do a merger.
21:01
SPEAKER_02: I think we are opportunistic, yeah?
21:03
SPEAKER_02: We are opportunistic.
21:05
SPEAKER_02: And when this has happened,
21:06
SPEAKER_02: at least when it happened in Nigeria,
21:08
SPEAKER_02: I believe the regulator went and tapped certain banks and said,
21:11
SPEAKER_02: I know you're not interested in a merger,
21:12
SPEAKER_02: but I think you should.
21:14
SPEAKER_02: take this bank.
21:14
SPEAKER_02: And that's how it happened.
21:16
SPEAKER_02: Would it happen here?
21:17
SPEAKER_02: We don't know.
21:17
SPEAKER_02: But I would imagine,
21:19
SPEAKER_02: I've used the word forced marriages before,
21:22
SPEAKER_02: that if this became necessary,
21:24
SPEAKER_02: that every bank must be at a capital that is significantly higher than where they are,
21:30
SPEAKER_02: that the regulator would want to do some forced marriages.
21:33
SPEAKER_01: Yes,
21:33
SPEAKER_01: I think you hinted also on the fact that you recorded a milestone of crossing 100
21:37
SPEAKER_01: billion shillings in terms of shareholder funds.
21:40
SPEAKER_01: What does that mean for you as a bank?
21:42
SPEAKER_02: It means that we're actually getting closer and closer to fulfilling some of the
21:46
SPEAKER_02: promises we made for the merger.
21:48
SPEAKER_02: We said one of the
21:49
SPEAKER_02: aspirations was to have a large capital base to be able to support the large
21:54
SPEAKER_02: companies that are operating in this region.
21:56
SPEAKER_02: I think we now have a large capital base.
21:59
SPEAKER_02: It continues to grow.
22:00
SPEAKER_02: And now we can do deals that are of significant size.
22:04
SPEAKER_02: The maximum lending we can do is 25% of our capital.
22:07
SPEAKER_02: So that means with a hundred billion of
22:11
SPEAKER_02: capital we can lend up to 25 billion to a single customer that's a significant
22:16
SPEAKER_02: lending and it's one even if we lent it to governments just significant lending or
22:21
SPEAKER_02: any undertaking so it's really coming to life what we said was one of the
22:25
SPEAKER_02: motivations that we want to be a catalyst to local businesses local corporates we
22:30
SPEAKER_02: want to be able to support large infrastructure projects
22:34
SPEAKER_02: And I think this is what this large capital base means.
22:37
SPEAKER_02: And of course, lastly, is that we want to be a safe, secure bank.
22:40
SPEAKER_02: And certainly this amount of capital shows that we're exactly that.
22:43
SPEAKER_01: All right.
22:44
SPEAKER_01: Thank you so much.
22:45
SPEAKER_01: We have 24 minutes to go.
22:46
SPEAKER_01: So if you have any questions, please send them in and then we'll be able to check them out.
22:49
SPEAKER_01: What's your general outlook,
22:51
SPEAKER_01: especially in terms of risk-based lending and how you've integrated that in your
22:55
SPEAKER_01: lending so far to clients?
22:56
SPEAKER_01: Is that something you've taken up very seriously or is it just not part of the core
23:01
SPEAKER_01: strategy that you've been implementing so far?
23:03
SPEAKER_02: Look, I think we have developed a risk-based pricing model.
23:07
SPEAKER_02: We have shared that with the central bank and they seem to be okay with it.
23:11
SPEAKER_02: There are a few questions still remaining, especially to do with the digital bank.
23:16
SPEAKER_02: And imagine that risk-based scoring for digital banks is fairly different because
23:20
SPEAKER_02: we don't have the granular information on each customer that we would get on the
23:24
SPEAKER_02: core bank side.
23:25
SPEAKER_02: But what I would say is that we are applying the methodology that we presented in
23:29
SPEAKER_02: terms of how we are pricing our customers.
23:33
SPEAKER_02: We're already applying it.
23:34
SPEAKER_02: It's really based on cost of funds.
23:36
SPEAKER_02: It's based on direction of the signals from the central bank.
23:40
SPEAKER_02: MPC.
23:41
SPEAKER_02: So I would say CBR is an input to that model.
23:44
SPEAKER_02: I would say cost of funds is an input to that model based on indicators of cost of
23:49
SPEAKER_02: funds that we use and then individual risks inputs to that model and of course
23:54
SPEAKER_02: expected profitability and the cost of service.
23:57
SPEAKER_02: So those are some of the things that go into that model that we developed and we
24:00
SPEAKER_02: already are supplying it to our customers.
24:03
SPEAKER_01: And then in terms of digital banking, how Gen Z is now at the top of town.
24:08
SPEAKER_01: And I had one of the questions that you asked today is how much the average age of your customer is.
24:13
SPEAKER_01: You did not want to disclose that,
24:14
SPEAKER_01: but perhaps you have a digital strategy and you want to share that with us in terms
24:18
SPEAKER_01: of how you're approaching the Gen Z and all the younger customers who are around.
24:22
SPEAKER_01: What products do you have so far that are geared towards them?
24:25
SPEAKER_02: Sure.
24:25
SPEAKER_02: So I think...
24:26
SPEAKER_02: What I said this morning is that,
24:27
SPEAKER_02: whereas I didn't disclose the numbers,
24:29
SPEAKER_02: our customers tend to be slightly older than the average customer in the market.
24:35
SPEAKER_02: And the reason I explained this morning is that because we're an aspirational bank,
24:40
SPEAKER_02: we tend to get customers who have made a few decisions about their future.
24:45
SPEAKER_02: And what you find is, therefore, we are not typically the first bank.
24:49
SPEAKER_02: We tend to be the second or third bank.
24:52
SPEAKER_02: Our statistics show somewhere between 75% and 80% of our customers are multi-bank,
24:58
SPEAKER_02: and we were not their first bank,
24:59
SPEAKER_02: and that is understandable.
25:01
SPEAKER_02: If you open your backing account when you're on Compass,
25:05
SPEAKER_02: I think you know quite well,
25:06
SPEAKER_02: it probably was not NCBA or one of their predecessors,
25:09
SPEAKER_02: the bank that you sold.
25:11
SPEAKER_02: It's probably one of our other larger competitors and smaller competitors that have
25:15
SPEAKER_02: presence on campuses.
25:17
SPEAKER_02: That said,
25:18
SPEAKER_02: we then developed a strategy to attract the younger generation because I think in
25:23
SPEAKER_02: terms of products,
25:24
SPEAKER_02: in terms of services,
25:25
SPEAKER_02: in terms of the things that good offers the bank,
25:28
SPEAKER_02: I think we are as good,
25:30
SPEAKER_02: if not one of the very best.
25:31
SPEAKER_02: for younger generation who are discerning,
25:34
SPEAKER_02: who are looking for good service,
25:36
SPEAKER_02: who want to be treated in a very customized way.
25:39
SPEAKER_02: And that's why we developed the Loop Digital Bank.
25:42
SPEAKER_02: And Loop Digital Bank really is offering you full bank on your phone, a full bank on your phone.
25:48
SPEAKER_02: And this was launched, we actually launched it beginning of last year.
25:53
SPEAKER_02: now have seen a bit more marketing that we're trying to do on it.
25:56
SPEAKER_02: We're developing it now as a super app because we know that you don't go into the
26:00
SPEAKER_02: banking app just to do banking.
26:02
SPEAKER_02: These days, you go there to find deals, for example.
26:05
SPEAKER_02: You go there to find advice.
26:07
SPEAKER_02: You go there to find a way to save for a trip.
26:10
SPEAKER_02: We have goal setting.
26:11
SPEAKER_02: We have investments.
26:12
SPEAKER_02: So it's adding all the things that you care about.
26:15
SPEAKER_02: And finally, we're giving you more terms and more information from a budgeting perspective.
26:20
SPEAKER_02: We're moving away from those days where you go to a bank,
26:23
SPEAKER_02: you draw your money and you got to write it on your notebook at home to remember
26:26
SPEAKER_02: what you did.
26:27
SPEAKER_02: We're providing you all that information on the phone through this loop app.
26:31
SPEAKER_02: I would encourage anybody who is listening to me to please try it.
26:35
SPEAKER_02: You can open the accounts remotely at the comfort of your house.
26:38
SPEAKER_02: And then again, that makes it to be aimed at that population and also a lot cheaper.
26:43
SPEAKER_02: to use than most other alternatives that you would have to make payments,
26:47
SPEAKER_02: transfer money,
26:48
SPEAKER_02: or do most of the transactions that you would want to do.
26:51
SPEAKER_02: The other thing I talked about today is that the way we have built it is that its system,
26:55
SPEAKER_02: its infrastructure is separate from that of the NCBA core bank.
27:00
SPEAKER_02: That's because we also want to give people a redundant solution.
27:04
SPEAKER_02: So for some of us like myself,
27:06
SPEAKER_02: lifelong NCBA customer,
27:08
SPEAKER_02: I would get very frustrated when NCBA app,
27:11
SPEAKER_02: for example,
27:11
SPEAKER_02: goes down.
27:12
SPEAKER_02: But now with Loop,
27:13
SPEAKER_02: which I'm a very dedicated member and a customer,
27:16
SPEAKER_02: I have two channels that I use that work.
27:19
SPEAKER_02: One is down, the other one is working.
27:21
SPEAKER_02: And inevitably, sometimes because of maintenance that we have to do, a channel will be down.
27:26
SPEAKER_02: And those are the times you don't want to be frustrated.
27:28
SPEAKER_02: I urge everybody, even if you bank with NCBA, please try Loop as your alternative bank.
27:34
SPEAKER_02: And if you're on Loop, try NCBA as your alternative bank.
27:37
SPEAKER_02: It works a lot better that way.
27:38
SPEAKER_01: Thank you on that.
27:40
SPEAKER_01: It's also a good time to pitch yourself and your bank to the customers who are listening,
27:44
SPEAKER_01: potentially,
27:45
SPEAKER_01: who may be looking to switch or looking to start banking with you.
27:49
SPEAKER_01: The next question should be about capital allocation.
27:51
SPEAKER_01: So I think there is a nice dividend increase, entry dividend.
27:54
SPEAKER_01: I think you've been a regular at that.
27:56
SPEAKER_01: Perhaps you can speak to the dividend payout and how that fits in your capital
28:00
SPEAKER_01: allocation strategy so far and shareholder returns.
28:03
SPEAKER_02: Sure.
28:03
SPEAKER_02: So I think it's fair to say one of the big discussions that we always have at the
28:08
SPEAKER_02: board level is that we do this for,
28:11
SPEAKER_02: obviously,
28:12
SPEAKER_02: for the shareholders.
28:13
SPEAKER_02: Society that gives the license to operate,
28:15
SPEAKER_02: sustainability becomes very important,
28:17
SPEAKER_02: but also for shareholders who have invested their capital into this bank and who
28:21
SPEAKER_02: expect returns.
28:22
SPEAKER_02: So that said, the conversation we always have is, are we giving the best to our shareholders?
28:28
SPEAKER_02: And how do we make them be part of our journey?
28:31
SPEAKER_02: And because of that,
28:32
SPEAKER_02: we've developed what I would call a fairly aggressive,
28:35
SPEAKER_02: but I think very good dividend policy,
28:37
SPEAKER_02: which is that unless there is an absolutely compelling investment opportunity,
28:43
SPEAKER_02: the first decision should be that we should return as much money to shareholders as possible.
28:49
SPEAKER_02: So it is based on that, that we've been able to pay very healthy dividends.
28:53
SPEAKER_02: And as you say,
28:54
SPEAKER_02: we just announced that the board has approved payment of an interim dividend of two
28:58
SPEAKER_02: shillings and 25 cents,
29:00
SPEAKER_02: the highest interim dividend we have ever paid.
29:03
SPEAKER_02: And given our performance, I think you will continue to see us pay better and better.
29:09
SPEAKER_02: That's our policy.
29:10
SPEAKER_02: And I can tell you that the board is very clear that shareholders must continue to
29:15
SPEAKER_02: walk this journey with us.
29:17
SPEAKER_02: And as we work, we should make sure that we keep them in mind and paying them what we can.
29:23
SPEAKER_01: On that note, I wanted to ask a bit about staff costs.
29:26
SPEAKER_01: You're quite up, I think, double digits growth in staff costs.
29:29
SPEAKER_01: And I know you're quite good in terms of investing in very good and high quality
29:33
SPEAKER_01: executives to be part of your team.
29:35
SPEAKER_01: Now,
29:35
SPEAKER_01: as far as you can speak to that,
29:37
SPEAKER_01: the writing staff costs and your kind of strategy to get the best in business to
29:41
SPEAKER_01: lead the various growth initiatives in the group.
29:44
SPEAKER_01: And that's one part of it.
29:45
SPEAKER_01: The second part is also a bit about there have been a bit of tax changes in the past couple of years.
29:50
SPEAKER_01: From an earnings call I had with the corporate bank,
29:53
SPEAKER_01: they said part of the rise in staff costs was due to the housing levy and some of
29:57
SPEAKER_01: these levies that are coming up.
29:59
SPEAKER_01: Could you speak to both of those in terms of your bank and your vantage point of seeing things?
30:03
SPEAKER_02: Yeah, so you're right.
30:05
SPEAKER_02: Our staff costs have been rising and I think
30:09
SPEAKER_02: You have observed year over year quite a substantial growth in staff costs.
30:13
SPEAKER_02: Let me explain it this way.
30:15
SPEAKER_02: Obviously, as you say, others have explained about the statutory reasons taxes are up.
30:21
SPEAKER_02: So that's a starting point.
30:23
SPEAKER_02: But I think just two things for us are probably the ones that make the biggest difference.
30:27
SPEAKER_02: One is last year we hired about 450 new people into the organization.
30:32
SPEAKER_02: And those people then,
30:34
SPEAKER_02: depending on what time of the year they came last year,
30:36
SPEAKER_02: this year they'll be accounting for 100% of their cost.
30:40
SPEAKER_02: If somebody came in September last year, this year we started carrying that cost straight in January.
30:45
SPEAKER_02: So those people have come on payroll fully this year.
30:49
SPEAKER_02: And so quite a bit of the growth that you have seen is because of the hiring that we did last year.
30:54
SPEAKER_02: Why did we do such hiring?
30:56
SPEAKER_02: I talked before about the investments we have made.
30:58
SPEAKER_02: We continue to open branches quite aggressively.
31:01
SPEAKER_02: Last year, we said to open 10 branches.
31:04
SPEAKER_02: This year, we're opening about seven branches.
31:06
SPEAKER_02: And all those come with a significant cost in terms of people.
31:09
SPEAKER_02: And that is the reason why.
31:11
SPEAKER_02: The second reason is that we had obviously to give people raises given the
31:15
SPEAKER_02: inflationary environment that we all find ourselves in.
31:18
SPEAKER_02: So again, we give raises across the organization to meet with the individual needs of the organization.
31:25
SPEAKER_02: At the end of the day, banking is about people and banking for us is about our staff, making sure that
31:30
SPEAKER_02: We are so sensitive to their needs.
31:32
SPEAKER_02: They are humans after all.
31:33
SPEAKER_02: So that's actually the reason that you've seen those costs rising.
31:37
SPEAKER_02: I think this year we are taking some special measures.
31:40
SPEAKER_02: For example, our hiring will have reduced.
31:44
SPEAKER_02: And I think you'll see that over the course of the year.
31:46
SPEAKER_02: We're not hiring as much as we did last year.
31:49
SPEAKER_02: We're driving more productivity.
31:51
SPEAKER_02: per person,
31:52
SPEAKER_02: using our people a lot better,
31:54
SPEAKER_02: having the ones who came last year now better trained,
31:57
SPEAKER_02: so they are more productive.
31:59
SPEAKER_02: So that's what you'll find now going into next year.
32:01
SPEAKER_02: But that's the reason in terms of the people cost.
32:04
SPEAKER_01: Two or three questions that have come in from the audience.
32:06
SPEAKER_01: I'll take them up and then I'll ask you one or two closing questions.
32:10
SPEAKER_01: Someone is asking about Lou.
32:12
SPEAKER_01: Is it just on the tech side that it's separated from NCBA or is it also on the operations side?
32:18
SPEAKER_01: He's asking about how the loans and how the integrity they are into the NCBA ecosystem.
32:22
SPEAKER_01: I think that's the first part.
32:23
SPEAKER_01: And then the second part is asking the status of mobile and digital loan offerings.
32:28
SPEAKER_01: And maybe you can speak to that.
32:29
SPEAKER_01: And then Arnold is asking, given the close relationship with ICA Lion, will AIG operations be merged?
32:36
SPEAKER_01: Those are the three questions I've seen from the audience.
32:39
SPEAKER_02: Okay, very good questions.
32:41
SPEAKER_02: So let me start with the first one on loop.
32:43
SPEAKER_02: So I talked about the fact that the system is separated.
32:46
SPEAKER_02: Operations are also separated.
32:48
SPEAKER_02: So loop runs as a separate unit, even physically.
32:53
SPEAKER_02: However,
32:53
SPEAKER_02: people sitting in Westlands,
32:54
SPEAKER_02: because again,
32:55
SPEAKER_02: for the need for redundancy,
32:57
SPEAKER_02: business continuity management and all that.
32:59
SPEAKER_02: And that's why we keep these two quite separate.
33:02
SPEAKER_02: So operationally separated and system separate.
33:05
SPEAKER_02: Obviously, there are certain things that you use a bank, for example, SWIFT.
33:09
SPEAKER_02: For example,
33:10
SPEAKER_02: you go to the bank,
33:11
SPEAKER_02: but most things that you need from a transactional perspective,
33:15
SPEAKER_02: those will be separated.
33:17
SPEAKER_02: In terms of the question of status on mobile and digital loans,
33:20
SPEAKER_02: I'm not sure whether that's speaking to world status.
33:24
SPEAKER_02: Let me maybe try to attempt to answer that.
33:26
SPEAKER_02: To say that, one, we have two types of mobile loans today.
33:30
SPEAKER_02: We have the mobile loans that are traditional that we have offered through our digital bank.
33:35
SPEAKER_02: That's the Amshuari, Fuliza, Mokash if you're in Uganda, Mokash if you're in Ivory Coast.
33:44
SPEAKER_02: Empower, if you're in Tanzania, more cash if you're in Rwanda, and then Loop.
33:49
SPEAKER_02: I should add in there Loop as well.
33:51
SPEAKER_02: Those offerings continue as they were, and we have seen a lot of growth in that.
33:55
SPEAKER_02: I announced today that as of June, we had lent $478 billion.
34:00
SPEAKER_02: through those channels.
34:03
SPEAKER_02: And we serve about 65 million customers across Africa,
34:06
SPEAKER_02: the largest retail bank by customer numbers actually in Africa today.
34:10
SPEAKER_02: And that's something that we continue to see growth in.
34:14
SPEAKER_02: Given the economic terms that we have seen, one of the things
34:17
SPEAKER_02: have done is we've been very active in increasing limits for customers on those
34:22
SPEAKER_02: channels to continue supporting them.
34:24
SPEAKER_02: So that's the one positive that you have seen from our mobile loans and perhaps the
34:28
SPEAKER_02: reason that our disbursements have continued to grow.
34:32
SPEAKER_02: We then also have mobile loans for what we call our core customers.
34:35
SPEAKER_02: So if you're an NCBA
34:38
SPEAKER_02: And therefore, you use NCBA Now app.
34:42
SPEAKER_02: Again, one of the highest rated mobile banking app in East Africa.
34:46
SPEAKER_02: If you use that, then they raise a mobile loan available to you.
34:50
SPEAKER_02: We call it Now Loans available to you.
34:53
SPEAKER_02: And that goes up to a median shareings, from zero to a median shareings.
34:57
SPEAKER_02: And that you can choose the 10-hour days, month to one year in terms of repayment.
35:02
SPEAKER_02: And again,
35:03
SPEAKER_02: that is developed for co-customers who we believe that they should benefit from the
35:08
SPEAKER_02: fact that we have a bit more data about them than we have an emissary customer,
35:13
SPEAKER_02: for example.
35:13
SPEAKER_02: So that's the status of mobile and digital loans across the organization.
35:17
SPEAKER_02: Lastly, is a question about ICLI and AIG.
35:21
SPEAKER_02: That's a curious question, but let me be really clear and want to clarify it.
35:26
SPEAKER_02: ICA Lion is not part of NCBA at all.
35:30
SPEAKER_02: We are completely two independent organizations.
35:34
SPEAKER_02: ICA Lion, the only commonality we may have is in terms of shareholders, that we share some shareholders.
35:41
SPEAKER_02: The main shareholder is a shareholder in
35:45
SPEAKER_02: And I think that is in the public domain.
35:48
SPEAKER_02: But besides that, there is nothing that we have in common between us and ICA.
35:52
SPEAKER_02: And we deal with them on a non-flank basis, just as we deal with every other underwriter.
35:59
SPEAKER_02: AIG Kenya is part of NCBA Group 100%.
36:03
SPEAKER_02: We count it as a part of us now.
36:05
SPEAKER_02: We determine its strategy.
36:07
SPEAKER_02: We determine everything.
36:08
SPEAKER_02: Somebody is asking about combining ICA and AIG.
36:12
SPEAKER_02: That would have to be a merger negotiated by very different shareholders and we'd
36:16
SPEAKER_02: have to announce that quite with a lot of details.
36:19
SPEAKER_02: So just to be clear, we are two very different companies, ICLion and LCBA.
36:24
SPEAKER_01: Yes,
36:24
SPEAKER_01: as we draw to a close,
36:25
SPEAKER_01: perhaps one question is you could attempt to answer,
36:28
SPEAKER_01: are there any observations that you're making in terms of mobile loans uptaking
36:33
SPEAKER_01: tenure and how that links to the economy?
36:34
SPEAKER_01: There was some comment on that last year.
36:36
SPEAKER_01: Have you seen any differences?
36:39
SPEAKER_01: in that way.
36:39
SPEAKER_01: And then secondly,
36:40
SPEAKER_01: someone is asking about credit rating agencies downgrading Kenya and the debt
36:44
SPEAKER_01: situation in the country.
36:46
SPEAKER_01: Is this something that worries you as a bank and that is worrying your customers?
36:49
SPEAKER_01: And on that note,
36:50
SPEAKER_01: you can also take the opportunity to give us your kind of high-level outlook for
36:55
SPEAKER_01: the second half of the year and set the tone in terms of what customers and
37:00
SPEAKER_01: shareholders can expect from you and the bank going into the second half of the year.
37:06
SPEAKER_02: So let me start with the first one on mobile loan growth.
37:10
SPEAKER_02: I think last year I said that we have seen significant growth in mobile loan optics
37:14
SPEAKER_02: as an alternative source of funding for a lot of customers.
37:17
SPEAKER_02: This year,
37:18
SPEAKER_02: we have continued to see some growth,
37:20
SPEAKER_02: not as strong as we saw last year,
37:22
SPEAKER_02: I must say,
37:23
SPEAKER_02: year to year.
37:24
SPEAKER_02: But what we have seen really change is mobile loan defaults.
37:28
SPEAKER_02: We have seen that come down quite strongly.
37:31
SPEAKER_02: And our read into this is that mobile loans are
37:35
SPEAKER_02: These digital loans have become a way of life for a lot of us in Kenya.
37:40
SPEAKER_02: And because of that,
37:41
SPEAKER_02: what we have observed is that our customers would rather default or fail to pay
37:45
SPEAKER_02: their credit cards,
37:46
SPEAKER_02: default or even fail to pay their rent,
37:48
SPEAKER_02: than fail to pay their mobile loans because that has become part of their life.
37:53
SPEAKER_02: And I think you all know how people don't want to be embarrassed
37:56
SPEAKER_02: anymore to say that I cannot get a full visa loan, right?
37:59
SPEAKER_02: Sometimes you have no money.
38:00
SPEAKER_02: You typically tell them just full visa, isn't it?
38:03
SPEAKER_02: So I think that's what we have observed on the positive.
38:05
SPEAKER_02: It's become a way of life.
38:07
SPEAKER_02: And because of that,
38:08
SPEAKER_02: people are quite fidel to making sure that they maintain a good credit rating for
38:13
SPEAKER_02: their digital loans.
38:15
SPEAKER_02: I think the second question there was on rating of the country.
38:18
SPEAKER_02: Yes, we have been downgraded by Moody's and FIG as a country.
38:23
SPEAKER_02: And that is because of the withdrawal of the finance bill.
38:26
SPEAKER_02: where they have questioned the ability of us to meet our fiscal commitments and
38:31
SPEAKER_02: also to maintain the fiscal consolidation journey that the country has been on.
38:37
SPEAKER_02: The question being, what do I think about this?
38:40
SPEAKER_02: First of all,
38:40
SPEAKER_02: is that when the country gets downgraded,
38:43
SPEAKER_02: any company that is in that country that had a rating that's equal to the country's
38:48
SPEAKER_02: rating also gets downgraded.
38:49
SPEAKER_02: Hence why you would have seen some announcements saying that a number of banks that
38:53
SPEAKER_02: enjoyed credit rating from these agencies have been downgraded.
38:57
SPEAKER_02: For us,
38:57
SPEAKER_02: we were just two weeks ago by Fitch,
39:00
SPEAKER_02: who has a rating for NCBA,
39:02
SPEAKER_02: came back and said we are downgrading it.
39:04
SPEAKER_02: But that downgrade really just leaves us at the same level as a country.
39:09
SPEAKER_02: Policy being that you cannot be more credit worthy than your country, which makes a lot of sense.
39:14
SPEAKER_02: So am I concerned about all this?
39:16
SPEAKER_02: Actually, I am not.
39:17
SPEAKER_02: And I'll tell you why.
39:20
SPEAKER_02: A country like ours is not very credit rating sensitive.
39:24
SPEAKER_02: And when you come to private businesses, our credit rating anyway was not very high.
39:30
SPEAKER_02: And even when we sell bonds into the market previously that we have done,
39:35
SPEAKER_02: or any company for that matter,
39:37
SPEAKER_02: you notice that pricing for bonds tends to be about the same,
39:40
SPEAKER_02: at least coming from the corporates.
39:41
SPEAKER_02: It has to be about the same across.
39:43
SPEAKER_02: You look at the country where they are borrowing today,
39:46
SPEAKER_02: they are borrowing higher than some corporates are able to borrow.
39:49
SPEAKER_02: It tells you that rating is not really determining cost of funds for us.
39:54
SPEAKER_02: I think it's more bragging rights, yeah?
39:56
SPEAKER_02: It's more of a bragging rights.
39:57
SPEAKER_02: That's really what it comes down to, that your bragging rights now is slightly worse.
40:02
SPEAKER_02: Interesting enough,
40:03
SPEAKER_02: I think,
40:04
SPEAKER_02: Eric,
40:04
SPEAKER_02: you may have noticed that Eurobonds,
40:06
SPEAKER_02: Canadian Eurobonds,
40:07
SPEAKER_02: actually performed better after the downgrade.
40:10
SPEAKER_02: They perform better after the downgrade,
40:11
SPEAKER_02: which really supports my sentiment that people's view of our credit is not so
40:16
SPEAKER_02: highly dependent on the view of the credit rating agencies of our credit.
40:20
SPEAKER_02: It's more of a bragging rights thing, if I may.
40:23
SPEAKER_02: Obviously, we like to stay rated better.
40:25
SPEAKER_02: There is a point you reach where the rating matters a lot.
40:28
SPEAKER_02: Instead of getting to the investment grade,
40:30
SPEAKER_02: Triple B,
40:31
SPEAKER_02: for example,
40:31
SPEAKER_02: then ratings start to matter a great deal,
40:33
SPEAKER_02: which is why a country like South Africa that used to be investment-grade,
40:37
SPEAKER_02: when they get downgraded,
40:38
SPEAKER_02: it matters a great deal,
40:40
SPEAKER_02: and not for a country like us.
40:41
SPEAKER_02: So looking forward, coming from there, what's my view going forward?
40:45
SPEAKER_02: I think perhaps
40:47
SPEAKER_02: Go back to what I said.
40:48
SPEAKER_02: We just had the Gen Z demonstrations here in Kenya.
40:51
SPEAKER_02: And as I said this morning,
40:54
SPEAKER_02: one of the perhaps biggest realization and appreciation we should have is that
40:59
SPEAKER_02: because of that,
41:00
SPEAKER_02: we had the greatest movement,
41:02
SPEAKER_02: the greatest change in governance in the shortest time that we have seen in Kenya.
41:06
SPEAKER_02: And I think that's something to applaud.
41:08
SPEAKER_02: We,
41:09
SPEAKER_02: as Kenyans,
41:09
SPEAKER_02: must applaud not just the Gen Zs,
41:11
SPEAKER_02: but we ourselves,
41:12
SPEAKER_02: because it's a two-way process that there were Gen Zs that woke up and went to
41:18
SPEAKER_02: fight for their future.
41:19
SPEAKER_02: And the country also listened, the political listened, and our president listened.
41:24
SPEAKER_02: I think we must applaud everybody.
41:26
SPEAKER_02: for paying attention to the growing call for change and taking that change quickly.
41:31
SPEAKER_02: Now, obviously, the proof is in the pudding.
41:34
SPEAKER_02: We have made some changes already, as we have seen.
41:37
SPEAKER_02: The president has committed that his government will be one of listening and one of dialogue.
41:42
SPEAKER_02: We will hold him to that,
41:43
SPEAKER_02: I think,
41:44
SPEAKER_02: to make sure that going forward,
41:46
SPEAKER_02: the decisions that we make as a country are well-reasoned.
41:49
SPEAKER_02: and followed through as well.
41:51
SPEAKER_02: I think there were concerns about fiscal spending.
41:54
SPEAKER_02: And again,
41:54
SPEAKER_02: it's a hope that the promises that have been made in terms of cutting costs and
41:59
SPEAKER_02: cutting spending will be maintained.
42:01
SPEAKER_02: I think that said, obviously, the withdrawal of the finance bill, as I said earlier,
42:06
SPEAKER_02: Whereas it was perhaps necessary,
42:09
SPEAKER_02: it's also the case that there are a number of things in that finance bill that were
42:13
SPEAKER_02: necessary for us to meet our macro commitments and to keep ourselves on the fiscal
42:19
SPEAKER_02: consolidation journey that the Kenya Kwanzaa government committed.
42:24
SPEAKER_02: And for that reason,
42:25
SPEAKER_02: I think as you have heard some noises being made,
42:27
SPEAKER_02: there is consideration that we must relook at some of the clauses that were in that
42:31
SPEAKER_02: finance bill and hopefully by dialoguing together,
42:35
SPEAKER_02: We can get to a point where we agree what we can live with and what we cannot live with.
42:39
SPEAKER_02: So looking forward then,
42:40
SPEAKER_02: a lot of it will depend on what comes back after that dialogue,
42:45
SPEAKER_02: after that dialogue and consideration.
42:47
SPEAKER_02: It will depend on then what it means from a liquidity for the country perspective,
42:52
SPEAKER_02: given that the MPC has already signaled.
42:55
SPEAKER_02: is intention to bring interest rates down.
42:59
SPEAKER_02: We are hopeful that will be possible to bring rates down in this environment.
43:03
SPEAKER_02: And that will also depend on whether the government is able to raise enough funds
43:08
SPEAKER_02: to be able to pay some of its pending bills so that they raise liquidity released
43:12
SPEAKER_02: into the market.
43:12
SPEAKER_02: So there are a lot of dependencies.
43:14
SPEAKER_02: We as a bank, I think we've gone through some challenging times, some good times.
43:19
SPEAKER_02: So if I project forward, I would say that the times will remain challenging.
43:24
SPEAKER_02: We are fit for that challenge.
43:27
SPEAKER_02: I expect that we'll continue to record good growth.
43:31
SPEAKER_02: We'll continue to work very closely with our customers.
43:34
SPEAKER_02: We'll continue to watch that NPO ratio that we talked about.
43:37
SPEAKER_02: earlier.
43:38
SPEAKER_02: And as I said this morning, I continue to be a very big bettor on the Republic of Kenya.
43:44
SPEAKER_02: So I wouldn't challenge everybody.
43:46
SPEAKER_02: If you are looking for a country to bet on, please bet on Kenya.
43:50
SPEAKER_01: Thank you so much, John, for joining us today.
43:51
SPEAKER_01: So perhaps I can give you a chance to give you your closing thoughts and we look
43:55
SPEAKER_01: forward to hosting you again soon.
43:57
SPEAKER_02: Okay, no, thank you.
43:58
SPEAKER_02: I think...
44:00
SPEAKER_02: The first half of the year, as I said, has been challenging.
44:04
SPEAKER_02: But I think the second half could be even more,
44:06
SPEAKER_02: given that the Manda Manu and the resultant new government,
44:11
SPEAKER_02: if you may,
44:12
SPEAKER_02: drone-based government,
44:13
SPEAKER_02: has come in the second half of the year.
44:15
SPEAKER_02: So I think that's really our focus,
44:17
SPEAKER_02: to see how the drone-based government will operate,
44:20
SPEAKER_02: whether there will be a listening government.
44:22
SPEAKER_02: But what I'd like to...
44:23
SPEAKER_02: to say,
44:23
SPEAKER_02: and I said this morning,
44:25
SPEAKER_02: is that if there's anything that we continue to prove to ourselves and to the world,
44:31
SPEAKER_02: it's how resilient we are as a country that will go through very tough times,
44:36
SPEAKER_02: very challenging times,
44:37
SPEAKER_02: and come out of the other side having found solutions and still smiling.
44:41
SPEAKER_02: My message to everybody is let's bet on a country called Kenya.
44:44
SPEAKER_02: I think it's one that will keep winning a hundred times.
44:48
SPEAKER_02: The second thing I would say is as NCBA,
44:51
SPEAKER_02: We have also gone through some challenging times,
44:53
SPEAKER_02: both from the political front and,
44:55
SPEAKER_02: of course,
44:56
SPEAKER_02: as I talked about,
44:57
SPEAKER_02: the economy and the same challenges everybody else is facing.
45:00
SPEAKER_02: When you look at all the challenges that any business could face, I think NCBA was primed to face them.
45:06
SPEAKER_02: come out of that very strongly.
45:08
SPEAKER_02: We continue to do very well.
45:10
SPEAKER_02: Again,
45:11
SPEAKER_02: all that has been because we have maintained the primary strength that we have,
45:16
SPEAKER_02: which is to take care of our customers.
45:18
SPEAKER_02: We stay close to our customers.
45:20
SPEAKER_02: We continue listening to customers.
45:22
SPEAKER_02: And that is the most important thing that we have done.
45:24
SPEAKER_02: I would say the second one, obviously, is taking care of our staff.
45:27
SPEAKER_02: We continue to be very mindful, very empathetic to our staff.
45:30
SPEAKER_02: And those two have gotten us to where we are.
45:32
SPEAKER_02: So again, if you're to bet on a company, if you're to bet on a bank, I would say please bet on NCBA.
45:39
SPEAKER_02: And I think lastly, I should say that for everybody, this is not the time to be cynical.
45:43
SPEAKER_02: This is the time to look at the future with optimism.
45:46
SPEAKER_02: This is the time to hold leaders to account.
45:49
SPEAKER_02: to make sure that the promises that we made during the Gen Zima,
45:53
SPEAKER_02: Damano,
45:54
SPEAKER_02: and any other time in the past,
45:55
SPEAKER_02: that you're holding us all to account,
45:57
SPEAKER_02: that what we say is what we do,
45:59
SPEAKER_02: and what we do applies to all of us equally,
46:02
SPEAKER_02: which is also very important,
46:03
SPEAKER_02: because quite often we do things that apply to a few,
46:06
SPEAKER_02: but not to us.
46:06
SPEAKER_02: Let's make sure that what we say is what we do, and what we do applies to all of us equally.
46:13
SPEAKER_02: Back to you, Eric and Asante.
46:14
SPEAKER_01: Thank you so much, John.
46:15
SPEAKER_01: I know it's a long day today.
46:17
SPEAKER_01: You must have explained the results so many times today.
46:20
SPEAKER_01: So we let you go so that you can get some rest and prepare the results for the next half year.
46:25
SPEAKER_01: I think that's very important.
46:27
SPEAKER_01: So very good on what you're doing.
46:28
SPEAKER_01: Keep at it.
46:30
SPEAKER_01: And the shareholders seem to be very happy.
46:31
SPEAKER_01: I think the share price was up 5% today on the back of those really nice results that you posted.
46:36
SPEAKER_01: So keep at it and let's see you again, perhaps in Q3 or Q4,
46:42
SPEAKER_01: you've had so far.
46:43
SPEAKER_01: So for the rest of our audience, thank you so much.
46:46
SPEAKER_01: Keep tuned in and keep an eye on the timeline so that we can give you more conversations like this.
46:51
SPEAKER_01: John, you can say kohere and then we let you know.
46:55
SPEAKER_02: No, thank you.
46:55
SPEAKER_02: Thank you.
46:56
SPEAKER_02: Thank you, Eric.
46:56
SPEAKER_02: Thank you, Manuel.
46:57
SPEAKER_02: Thank you to the Muango team for putting this together.
47:00
SPEAKER_02: Thank you to my team that's been working with you to put this together.
47:03
SPEAKER_02: And thank you to the audience for taking the time to come and listen to us.
47:07
SPEAKER_02: We don't take it for granted.
47:09
SPEAKER_02: And hopefully I've been able to answer some of the questions that you may have.
47:13
SPEAKER_02: In the future, of course, when we don't have results to talk about, I'm hoping we can meet again.
47:18
SPEAKER_02: Then I can tell you a lot more stories to do away from the results.
47:21
SPEAKER_02: But yeah.
47:22
SPEAKER_02: Have a good evening, everybody, and certainly a great weekend ahead.
47:25
SPEAKER_02: Thank you.
47:25
SPEAKER_02: Definitely.
47:26
SPEAKER_02: Thank you so much, our audience.
47:28
SPEAKER_02: Thank you so much for joining us.