Q1 2015 – BUSINESS AND FINANCIAL UPDATE

Macroeconomics - Kenya

86.3 87.3 88.2 89.9

94.3

Q1 Q2 Q3 Q4 Apr-15

Exchange Rate (KShs/USD)6.8 7 7.5

6.25.5

5.6 6.3 7.1

Q1 Q2 Q3 Q4 Jan-15 Feb-15 Mar-15 Apr-15

Inflation (%)

Emerging Challenges:• Depreciation of the Kenya Shilling• Increased likelihood of inflationary pressure• Insecurity• Global Credit Constraints

2

Further weakening of the shilling against the dollar to KShs. 94.3 in April

Inflation trending upwards from 5.5% in January to 7.1% in April

Steady increase in the average interbank rate to 9.95% at the close of April

Burundi: Foreign currency in the country is controlled by the government currently at 1565

Inflation trending down towards 1.2%

91 day Treasury bill down to 4.9%

Focus on general elections end of May 2015

Tanzania: Shilling depreciation by 9% in 2015 to TZS 1,894.10 in April

Inflation marginally trending upwards from 4% in January to 4.3% in March

91 day Treasury bill rate trending down from 7.6% in February to 6.86% in March 2015

Macroeconomics - Region

South Sudan:

SSP maintained at an artificial rate of 3.16 to the USD

Scarce dollar inflow from oil made it difficult for traders to import goods.

Inflation at 8.5%

Sanctions now imposed by the UN Economic council

Uganda: Shilling depreciates to UGX of 2,983

Inflation stable at 3.7%

91 day Treasury bill up 100 basis points in March to close at 13.28%

Rwanda: The Franc stable at 688.98

Inflation trending downward to 3.2%

91 day Treasury bill stable at 3.6%

3

• Launched in April 2015• Rolled out 8 Asset and 10 Liability products• On going staff training • Rolling out in phase II-19 Liability products to

attract deposits, commission and fees

Q1 2015 Material Issues

• 1.4 million Opt in customers• Over KShs. 0.9 billion in loans• More than KShs. 100 million in deposits

4

• Brokerage license obtained• KCB is in the process of building a brokerage

business

• Officially launched in April 2015• KCB is positioning itself to expand the insurance

business through the use of innovative distribution channels

SENIOR MANAGEMENT APPOINTMENTS

• Corporate Director – Ken Ouko• Chief Financial Officer – Lawrence Kimathi

Q1 2015 Material Issues

SUBSIDIARY PERFORMANCE • Strong Performance from Rwanda, Tanzania and Burundi

• Continued monitoring of the situation in South Sudan

• Plan for the Uganda turn around is in place• Security situation in Burundi under close watch

5

BALANCE SHEET GROWTH • Half a Trillion Balance sheet achieved in Q1 2015

T-24 UPGRADE • Moving from Version 8 to Version 14• Project to cost approximately USD 5 million• Project timelines estimated as 52 weeks• Implementation partner identified

KBRR • 8.54% effective 14th January 2015• Applies to variable loans only• 40% of the Bank’s variable loans have been

moved to KBRR

0.5

2.2

4.1

3.5

1.1 1.3

4.3

4.8

3.2

1.0

Agency Banking Mobile Banking Branch Teller ATM's POS

Number of Channel Transactions 'in Millions'

Q1 2014

Q1 2015

Channels

6

FINANCIAL PERFORMANCE

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (KSHS. MN.)

March 2015 March 2014

Actual Mar-15

ActualMar-14

% Y-O-Y Change

Asset Portfolio

Cash and balances with Central Bank 31,716 27,123 17%

Balances with other institutions 60,451 19,653 208%

Investments in Government securities 97,263 106,422 -9%

Investment securities 886 1,991 -56%

Net loans and advances 297,031 233,784 27%

Fixed assets 10,478 9,841 6%

Other assets 12,440 12,615 (1%)

Total Assets 510,265 411,429 24%

Fixed & Other Assets

5% Securities19%

Cash & Bank

Balances18%

Loans58%

Fixed & Other Assets

6%

Securities26%

Cash & Bank

Balances11%

Loans57%

8

9

GROWTH IN LOAN BOOK Net Loans & Advances (KShs. Bn) Key Highlights

Loan segmentation – March 2015 Loan segmentation – March 2014

155

195212

234

297

Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

23% 10% 25%26% 9%

CAGR-13%

3%12%

9%

6%

16%34%

12%

8%

Agriculture

Manufacturing

Building and Construction

Transport and Communication

Real Estate

Personal/Household

Trade

Others*

3%12%

14%

3%

16%32%

12%

8%

Others:- Mining,Energy&Water,Tourism,Restaurant,Hotels and Financial Services

Loan book growth by 27% to KES 297Bn Strong CAGR of 13% Personal, Trade and Real estate continue to remain

the major sectors Opportunities for growth in Agriculture and

Conferencing Tourism.

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ASSET QUALITY NPL Ratio

Coverage Ratio

9.30%8.80%

6.70% 6.30%7.10%

8.40%7.30%

5.60%5.20%

6.40%

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15

Group Bank

65.0%69.3% 69.4%

65.2%69.8%

39.2%44.0%

55.4% 56.4% 54.0%

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15CBK IFRS

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LOAN IMPAIRMENTProvisioning Policy Under Central Bank Rules

Provision amount on each individual account is computedmonthly based on the Central Bank prudential guidelinesand the relevant entries passed through the P&L in the Bankbooks of account

Monthly, the portfolio is subjected to an impairmentassessment as per IFRS

Impairment as per IFRS is compared to provisions amount asper Central Bank and if Central Bank provisions amount isgreater than impairment as per IFRS, the difference isaccounted for through reserves, otherwise an additionalcharge is recognized in P&L to increase provisions to the IFRSassessment

Summary of Central Bank of Kenya Rules

Grade ClassificationClass

Overdue Days

Provisioning required

1 Normal 0-30 1%

2 Watch 31-90 3%

3 Substandard 91-180 20%

4 Doubtful 181-365 100%

5 Loss Over 365 100%

Financial Statement

Assets Liabilities

Gross Loans

IFRS Provisions

Net Loans

Other Assets

Difference between CBK and IFRS provisions is recorded in a reserve included in the Shareholders’ Equity

309,169

12,138

297,031

213,233

Liabilities

Loan Loss Reserve

Shareholders Equity*

*Excluding Loan Loss Reserve

430,857

4,844

74,564

Evolution of Provisions for Loans (KShs. Bn.)

12,037 13,259

15,650 16,982

8,885 8,888 10,385

12,138

FY 2012 FY 2013 FY 2014 Q1 2015

CBK IFRS

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION (KSHS. MN.)

March 2015 March 2014

ActualMar-15

ActualMar-14

% Y-O-YChange

Funding Portfolio

Customer Deposits 397,102 313,510 27%Balances due to other banks 9,448 11,694 (19%)

Other liabilities 11,582 9,168 26%Long-term debt 12,724 10,280 24%

Total Liabilities 430,857 344,652 25%

Share capital 3,025 2,984 1%

Reserves and premium 70,332 57,825 22%

Proposed dividend 6,050 5,968 1%

Shareholders’ Equity 79,408 66,777 19%

Total Liabilities and Equity 510,265 411,429 24%

Other Liabilities

2%

Deposits78%

Shareholders16%

Debt4%

Other Liabilities

2%

Deposits76%

Shareholders16%

Debt6%

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DEPOSITS GROWTHCustomer Deposits Growth (KShs.Bn) Deposits by Type

59%

17%19%

5%

49%

23% 22%

6%

Demand Savings Term Call

Mar-15 Mar-14

209

260287 314

397

74% 75% 74% 75% 74%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

50

100

150

200

250

300

350

400

450

Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

Deposits L-D Ratio

13% 24% 10% 9% 26%

CAGR- 14%

14

CAPITAL ADEQUACY

Core Capital/Total Risk Weighted Assets Total Capital/Total Risk Weighted Assets

10.5% 14.5%

Liquidity Ratio

18%

16% 16%

17% 17%

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

22%

21%20%

21%

18%

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

20.0%

Consistent compliance to the relevant regulatory guidelines as provided by the Central Bank of Kenya.

New prudential ratios on Core & Total Capital to Risk Weighted Assets became effective on 1st

January 2015.

38%41%

33% 31% 31%

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

CONSOLIDATED STATEMENT OF PROFIT OR LOSS (KSHS. MN.)

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ACTUAL Mar-15

ACTUAL Mar-14

Y-o-Y % Change

Net interest income 9,259 8,321 11%

Foreign exchange income 874 1,113 (22%)

Gross fees and commissions 3,218 2,708 19%

Other income 538 650 (17%)

Total operating income 13,888 12,792 9%

Total operating expenses (7,105) (6,442) 10%

Net provisions for bad debts (550) (775) 29%

Profit before tax 6,233 5,575 12%

Tax (1,870) (1,672) 12%

Profit after tax 4,363 3,903 12%

GROWTH IN PROFITABILITY

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PBT Growth (KShs. Bn)

Distribution of PBT by Region - Mar 2015 Distribution of PBT by Region – Mar 2014

Key Highlights

2.5

3.4

4.3

5.66.2

Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

Burundi0%

Rwanda1%

Uganda1%

Tanzania1%

South Sudan6%

Kenya91%

Burundi0%

Rwanda1%

Uganda1%

Tanzania1%

South Sudan8%

Kenya89%

Strong five year CAGR of 20% due to

‒ Investment in innovation and technology

‒ Increased customer numbers

‒ Improved operational efficiency

‒ Investment in alternative channels

KEY STATISTICS AND PERFORMANCE RATIOS- Q1 2015

Return on Average Assets 3.5%

Return on Average Equity 22.52%

Cost to Income 51.2%

Gross NPL to Gross Loans 7.1%

Non funded income to total income 33.81%

Staff costs to total income 27.35%

Cost of funds 2.9%

Net Interest Margin 8.8%

Cost of Risk 1.43%

Loan/Deposit ratio 74%

Debt/Equity 16.03%

Growth of Net Loans And Advances 27%

Growth of Customers Deposits 27%

Growth of Profit/(Loss) Before Tax 12%

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