KCB Group PLC (KCB) Earnings Call Transcript & Summary

Okay. Thank you, [indiscernible]. Let me begin again. The KCB Board members present, KCB CEO, Mr. Paul Russo, senior management team and staff that are present, stock brokers, investors, analysts and fund managers or media partners, ladies and gentlemen, good afternoon once again. Good afternoon. [Foreign Language] On behalf of the group Board of Directors, I welcome you today's ceremony as we release the KCB Group 2025 half year financial results. Thank you for finding time to join us today physically or virtually as we reflect on our performance for the period ending June 30, 2025. Before I proceed, I wish to thank all the -- all our stakeholders that include shareholders, customers, staff, regulators and other partners for the unwavering support and trust in our business over the years. KCB would not be the regional powerhouse brand that it is today without you. You are the bedrock of our success. And for that reason, we salute you. I acknowledge the directors of the KCB Group Board and the subsidiaries for their dedication, continued support and commitment to providing oversight, governance and effective leadership in our business. May I request those who are present today to rise so that we can appreciate them. Please. In the same breath, allow me to thank the group leadership team led by the group CEO, Mr. Paul Russo, for diligently [indiscernible] our [ bankship ] and ensuring that KCB continues to deliver value to its stakeholders. Ladies and gentlemen, before we get through the results, allow me to give an update on a few issues which defined the first half of the year, a period that I would say was very -- was all about resilience. Firstly, the operating environment. As you will -- as you are aware, the geopolitical landscape globally remains fluid with prolonged conflict in the Eastern Europe and the Middle East. These conflicts have have and continue to exact significant pressure, particularly on the energy and commodity markets, thereby adversely impacting on the operating environment of our organization. According to the International Monetary Fund latest update, the global economy is projected to grow at about 3% in 2025, edging up to 3.1% in 2026. So you can see indeed the rate at which the overall global economy is growing is, yes, one might say still somewhat strong because you are talking of the global, but not one that one can say is doing as we would have wanted. But closer home, however, we note some degree of resilience. Indeed, the IMF data and regional analysts indicate sustained above-average growth for many countries in our footprint. For 2025, the IMF's country numbers to mention but a few point to real GDP growth of about 4.8% for Kenya, 6% for Tanzania and 6.1% for Uganda, reflecting a mixing of services, recovery, infrastructure investment and in some cases, commodity and natural resource led expansion in a country like South Sudan. And to some extent, the DRC. These developments in our national economies are encouraging for financial intermediaries intermediation and credit demand across the region. However, risks remain in the form of currency volatility, climate and political transitions in some of our countries that we need to continue to put an eye on. And in some cases, commodity and in some of the countries that we need to put our eye on. So for that reason, it is important that we monitor what is happening in terms of the risk associated with the currency volatility, climate trends and the political transitions in some of these markets. Ladies and gentlemen, it is important for me to add a score at this point as KCB Group, we remain steadfast in supporting businesses, individuals and communities, leveraging our expansive footprint across the region. During the period, the group maintained its solid asset growth, financing and capital adequacy ratios. These indicators reflect the bank's flexibility and resilience to adapt to the ever-evolving environment in which we are operating. The second issue that I feel we need -- I need to touch on is our investments in the regional businesses, which I'm happy to say they have continued to bear fruits. The subsidiaries recorded impressive performance in their contribution to profitability and balance sheet growth, as you will see in the financial results that will be presented to us later. We continue to pursue a balanced strategy focused on growing where returns are attractive, protecting capital and improving our service model for customers. This set of results speak for -- speaks to the resilience of our franchise, the trust of our customers, the discipline of our teams and the soundness of the decisions we have taken and the disciplined execution of risk and capital management policies. The third issue I would like to touch on is the NBK's transaction. As you all know, the acquisition of the National Bank of Kenya by Axis Bank was completed in May this year. That said, let me note the group is, however, open to opportunities to grow its footprint in existing and new markets. And that's important because somebody might ask where you are here selling NBK. Is it that you are trying to rethink your strategy? No, we still remain open, and we are looking into possibility within the region where we could also have more of our footprint. Fourthly, I wish to reiterate that the KCB Group governance structures remain solid. We have instituted governance frameworks that are not only aligned with regulatory requirements, but are also benchmarked against global best practices. These structures ensure a clear delineation of roles and responsibilities, fostering a culture of integrity, innovation and operational excellence. Last but not least, our commitment to sustainability remains at the core of our operations to enable us not only to mitigate operational risk, but also unlock new markets, driving innovation and build resilience in the communities we serve. During the period under review, KCB Group made significant strides in environmental, social and governance initiatives. Ladies and gentlemen, as we navigate the second half of the year, we see opportunities in expanding trade corridors, digital banking penetration and regional integration. We shall continue leveraging technology to enhance banking experiences while driving impact initiatives that contribute to environmentally sustainable economic growth. We are excited about strong potential that we see in our pipeline, supported by our growth engines and the synergies across the group. I take this opportunity to appreciate our customers for our continued trust, our employees for their dedication under the leadership of Paul Russo here, our regulators for their continued support and our shareholders for their faith and belief in the KCB Group broad. Going into the future, we believe that the KCB story is not just about financial strength. It is about purpose, resilience and leadership in shaping the future of East Africa's financial sector and I would say, even beyond the financial sector, the regional economy of this part of our continent. So ladies and gentlemen, allow me now to invite Paul to present an overview of the performance of our bank. Thereafter, we will take any questions you may have. Thank you and God bless you all.

Thank you, Chairman. Good afternoon, everyone in the room and those online. You might struggle [indiscernible] because it's always bad, but when I have a call, it is terrible. But unfortunately, for the next few minutes, you have to bear with me. I just want to touch on a few slides, then Lawrence will come in and present the numbers. I always say in these presentations, I feel like that qui in IBC that when people really want the results and you are in between, they are waiting and keeping them busy. So let me do my quire as Lawrence warms up. Just to touch on a few elements. The leadership team, Chairman that you've congratulated has not changed with the exception of one person. And I think that's what is important about KCB, the consistency of the leadership team, the service for that team. So pardon me for the rest of the team, this is not your day. It is Mark Mwongela's day. So Mark Mwongela is the only one who has not been introduced before. Mark joined us as Group Innovations -- Group Strategy and Innovation Director, taking over from a role that [ Regi ] [indiscernible] held before. Regi is now a Deputy Managing Director in the DRC business, TMB. And Mark joins us from Pesapal in Singapore. And everybody you meet tells you if you want strategy, read some books from Singapore. So we've got the book here with us. So it's PayPal, not Pesa, PayPal. So thank you, Mark, for making the choice to join us. And thank you for what you've done in the last 2 or 3 months, 3 months. And joined the solid team, very stable. I think now and Aastasia, you lead in the years of service. I'm closely getting there to half of that. So thank you very much. [indiscernible] I think that I will close 10 years in the institution. So thank you, leadership team, and I move -- so Tony, you're no longer the new kid in the block, sorry. and you have accepted and moved on. And I look at as well the managing directors of the subsidiaries, all of them have been introduced before. We've not had any change in that setup. A number of them have joined us online for this purpose. But when we announce the full year results, they're always with us. And I thank all of them and their teams for their contribution. In terms of our business, we continue to have the largest footprint in the region, 32 million, 33 million customers. A bit of a change in that number because the Chairman spoke about the sale of NBK, which we concluded on the 30th of June -- May, 30th of May -- maybe I don't want them to go, 30th of May 2025. And that's just a reflection of some of the changes in those numbers, particularly on the staff numbers because they accounted for 1,400 staff. diversified portfolio, and I'm trying to cut out time. We are concluding our acquisition of River Bank in the final stages of that, but doing quite a lot already with them. But just wanting to point out that 100% sale of NBK, pointing out the progress on River Bank acquisition. But most importantly, and I know we've been quoted a number of times, well, let me say we are monitoring the developments in Ethiopia and keenly following that, doing sufficient evaluation with the help of our KCB Investment Bank. We haven't made a decision yet, but definitely an active assignment for us. I just want to touch on the operating context, and I'll touch on 5 items on that. There are shocks from multiple fronts, and I don't want to repeat what the Chairman has said. When we talk about geopolitics, in the past, people used to believe it is only banks that are operating regionally, they are feeling that. as it is today, and I made that comment this morning and the post-MPC review, every institution is feeling the geopolitics pressure. And that's why I always say we cannot stand by. We have to make our contribution at individual level and at institutional level. At the moment, we've had close to 15 or so branches in DRC closed in Eastern DRC. Around 140 of those tasks, we've had to deploy them into some assignments for now. We have trade tariffs that we can't predict. So today, you're in [indiscernible], not sure what that is going to be. Negotiation with the U.S. government, and I'm sure government is doing the right thing, but those have impacts on what we are doing. We've seen definitely a shrinking of customer wallet, particularly in Kenya, given new taxes. And therefore, that calls for a prioritization on how you use your disposable income. We're also monitoring the cost of doing business for various reasons. We've seen new tariffs and new changes of rules and regulations, particularly on cross-border on our neighbors and those have an impact on business flows. The second item that I wanted to touch on, yes, interest rates locally have come down. But in the long term, we still see those interest rates being high. We like what we are seeing. And I'm happy that particularly in Kenya, we are in agreement with the Central Bank in principle on the elements of the new pricing model for credit because we've been trying to solution for 2 things. On the solution for transparency, but as well solution for transmission. So migrating to a common base rate is certainly going to help in that transmission, but also retaining governance within the institutions around the K is actually something very good because we are then not uniform as banks. So I'm very happy on that particularly with CBK. In terms you read KCB and CBK and the change in this instance for the regulatory CBK. And it's also important to see that we -- for the first time, we've seen lending to private sector tick up. I think we've moved from minus 2.2%. I think we are now as at the last report, 3.3%. But we're also asking ourselves from a banking sector is how can we accelerate that. It's not a regulator problem. It is our problem. As long as lending to private sector is muted, we are definitely going to have challenges from the economy side, but banks will feel that hit. So as KBA, as CEOs of banks, we are challenging ourselves and we must find a solution to see how we can mitigate that. I think it's important to note that while NPL at industry level still remain high and you can associate it with the interest rates being high and all those macroeconomic issues. But also, we are seeing some resolution, particularly in Kenya on pending bills, and I'm happy at the innovative solutions to try and resolve the roads pending bills. And I think in today's postMPC, the governor confirmed the conversations around how to resolve the other bills pending bills. That will help a lot. And we've seen just after the resolution of the Roads Board pending bills that we've seen that come down as well. We've seen stable currencies. And maybe as I exit that is to continue to challenge all of us. And I thank Anastasia and team for leading at the front, taking some challenges head on, particularly to resolve for the country, not just KCB. So playing a role in elements such as those pending bills for roads, and I know Board members of the credit committee in the house, being part of the solution with KCB Investment Bank for Lindsay FinCo, we must continue collectively to get new products and new solutions in the right way to be able to unlock for the countries that we operate in. I think people normally talk about KCB Kenya only. The fact that BPR Rwanda led the consortium in funding the Bugesera Airport, the new airport in Rwanda is something that we are proud of. KCB brand must be useful, meaningful in the markets that we operate in. And I'm proud to lead the team that says what do we need to do to mitigate risks. And that's what we are paid to do. We want to grow manufacturing. We have to put our heads together. We want to increase employment. If manufacturing doesn't come into the mainstream, I have no idea how we are going to do it. But we need to crack our heads and work with the different stakeholders to do that. That's the only way we are going to tackle some of these rates. Stable currencies, I think Kenya, Uganda and Tanzania shillings have appreciated year-on-year on USD. And we've seen depreciation against U.S. dollars and Kenya shillings, particularly for South Sudan and Rwanda. But I think it's important to mention, and Lawrence will probably talk to that, that we see South Sudan and Burundi as being in a hyperinflation environment. There might be small businesses. that are very meaningful in trade corridors. So those 2 are really entities that we are watching. We've seen resilient. I think Chairman has spoken to this GDP growth. And the Eastern Africa region is the fastest growing Sub-Saharan Africa, projecting a 5.7% growth against a world of 3% and 3.1% as Chairman has spoken, it still tells us this massive opportunity out there. It's how we are taking advantage of those opportunities. I said inflation remains moderate across the all markets, as I said, for Burundi and South Sudan. I may want to joke Chairman here, but it's actually not a joke. In Burundi, you have to queue for more than 2 weeks plus. When we played the first role on, some of us. Today, everybody wants -- and I'm not a spokesman for the government. But we have to look for solutions that work for all of us. And then you can perfect going forward or when you get out of that then you can find other solutions. Our strategy remains the 2024-2026 strategy is transforming today together, anchored on our purpose for people for better. For every human being that we touch, we live them better. It's the easiest way to explain our purpose. We have not changed our strategy. We are on course with the strategy, and Lawrence will speak to the numbers, but I really want to really say that at the end of the day, we just have to get our customer experience right. And that's why we're making investments, people, technology and partnerships. Some significant milestones that I want to touch on briefly. The sale of NBK, I said we concluded that in 30th May 2025. Sometimes I said to my media brothers and sisters don't crucify us because some of them told me, Paul, we don't think this thing will happen. And they know themselves. I wish it was like selling a camel in Marsabit, very fast. That one I know. And finally, that is done. It took us longer than we expected. Maybe we were extremely bullish. Now we concluded. And I thank the teams that were involved in that transaction. And thank you to the Board for supporting that decision. I think it wasn't the easiest of the decision, at least that I was the MD for 2.5 years. On channel optimization, we've rolled out a new mobile app offering bespoke experience. And I just want to say, particularly it will be the first app where you can open an account end-to-end without stepping into a KCB branch. even unless there's a problem with your ID card or your image and the one you're taking and the one that is on the card is not matching, isn't it, right, or your fingerprints, whatever you've chosen to use are not tying up. That one, we have to confirm that you are the person. But if all things align, Download that new app, open a KCB account, transact immediately. It's been long coming not eKYC. A few people have felt the pain. I have not been the best on that, but we are all proud that it is out there. Now we will load them on various other value proposition and build on to that. For a long time, we've been told we are a government bank, you must come like the government office. I hope this one starts eroding that feeling. And it's not just for the customer. It is also for our staff. It makes lives a lot easier. We have obviously opened new 5 branches in high-growth areas in Kenya and Tanzania. And Kenya, it is selective. But Tanzania is a business, I know Chairman mentioned Tanzania is a market that we have to ask ourselves what is the optimal operating model. We haven't answered that question, but we will answer it. We opened some 2 branches in specific locations to support our customers. But the growth of that business in the last 5 years gives them the ground to ask us what next. And therefore, as Chairman is here, we will try and answer that question together. The work [indiscernible] and his team have done in the last 5 years is commendable. And we believe that, that business has opportunity to grow more. Our ambition is to be top 5, minimum #5 in that market. And therefore, we have to give it fuel. What that fuel is. Mark, welcome to the new role. You have to tell us. On customer CVPs, a significant focus on youth, women, affordable housing and trade finance, always proud of the work that the trade finance team has done, what Jerry is doing in mortgage elements that we are running on youth and women, particularly onto that mobile banking platform. is something that I look forward when we go live. I know the developments are about to close. On payments, I mentioned Riverbank Solutions, pending regulatory approvals, I think we are on the tail end of that, but already doing 2, 3 meaningful things because I think it's important to understand Riverbank is not new to us. We work with Riverbank as a partner for the last 10 years. In fact, 11 because I found Riverbank as a partner. So maybe I can use that as a test and then I know I'm in the ballpark. So that partnership and developing our solutions faster, will continue to be even as we make the acquisition. Multicurrency prepaid card introduced in 2025. How many currencies, 18. Angela knows these things from the -- so 18, maybe I just used 2, 3 of them. But those were blessed 18 and work seamlessly. So well done to the team that was behind this for anyone that has their children studying outside of the country, a witness, just get one of these cuts. I think finally, on this particular one, we talked about Pubs, Pan African payment system for our long one. If you want to send money to Nigeria, walk into any KCB branch. If you want to receive money from Guinea, as long as there's Pubs on that front, he will pick up from a KCB branch. And therefore, even in markets that we are not operating in, we can enable our customers. I think the question I've always asked Angela is when are we going to be present in a country digitally. And she's promised me, I'll keep that as a secret on that date. But it is a competitive advantage, but let me just keep that for now. So Chairman, as you spoke about presence in other markets, I think we're exploring presence without physical branch network, given the investments that we've made on the DFS. Our digital channels continue to offer unmatch the convenience, 63% of volume through digital channels. But you can see the number of non-branch channels in H1. I don't have to go through each of them. And ATM is just becoming a convenience, a last resort. And people say, why don't you remove ATMs? You just remove and you see the pain once you've removed them. They just continue to be a channel for a resort for some other people also must feel them. must feel it. So I think we've seen growth of CDMs, cash deposit machines, significant utilization of cash deposit machines, particularly for our corporates and the ecosystem. I think we've got the opportunity that of unifying agency and merchants. And that project is actually live. And I like what is happening at the Internet banking. I think Chairman said, it is not just about banking and making money. We drive sustainability. We issued EUR 26.9 billion green loans in Kenya in H1. We've screened around 133.2 billion under ESD. We continue to plant trees, and we can confirm that we planted 333,000 in H1. And largely, we're starting to push for fruit trees and something that is more sustainable. For our foundation, thanks mainly, we've created 67,996 jobs under the program, which includes young Africa, [indiscernible] projects. We have sponsored 3,883 as students from disadvantaged backgrounds, particularly those that have experienced harmful cultural practices. But we're also the first to sponsor give sports scholarship. And I think some of those kids won in the Africa championship. And I'm telling those kids and one day, the day one of those kids win Olympics, now we are talking. So I think they are now in Form 2. Our target is to get one of those kids winning Olympics for Kenya because we continue to lift to the rest, isn't? That will be a very good way to show them that. Like I've said to the patron of KCB Football Club, KCB, Rugby, Chess, Volleyball, our teams must be up there to lift ambitions hope for those who want to pursue sports. So even if it is one, I think one of the wing is it a wing [indiscernible] is from KCB football is doing extremely well, started all the games. Those are things we need to reflect on. So when the team represents Kenya for Africa Volleyball Championship, that is what we stand for. On corporate citizenship, we do play a number of roles. And I think I've just talked about the teams. And allow me to say, we pay our teams the same day we pay staff. Staff are paid on 23rd, all our players are paid on 23rd because they are part of the family. They are not just players. They are not. And I like the fact that we have a number of them that are working in our risk team. If I'm not wrong, I've met them. rugby players and HR as professionals. So we've got to impact people for better. As I bring it to a close before people throw some shoes here, get -- please just keep your shoes. I'm stepping down shortly. I think very hard to blow our homes. Best Bank in Kenya by Global Excellence, Wall business and Euromoney magazines, Best SME Bank in Kenya, Best CSR, Africa's fastest-growing company, Financial Institution of the Year by AI, 2025 African Bank of the Year, sustainability. There is an image there that looks like me. I thank the 11,000-plus staff of KCB for all the hard work and looking forward to a very, very strong H2 2025. Like I say, H1 ended 1.5 months ago. So actually, this is still news for staff. So because I know our staff are online, have a challenge for H2. deeply being deeply consumed for the customer, doing what we said we need to do sooner than that, building strong partnerships. And finally, beyond the numbers, living beyond the numbers. That's my rallying call for H2. Very easy to drive the numbers, living beyond the numbers. I'll put the customer, put community, colleagues in there and all stakeholders. So I end my quire with gratitude and invite Lawrence to then deliver the most important part of the presentation. I don't know whether you need to sanitize this mic or we give you another one. It will be a call one. But don't say I didn't warn you.

Thank you. I think we can do better in appreciating him. So if I don't show up for work tomorrow or next week, you know it's the mic. Good afternoon or is it good evening to all of you, those here and those attending online. Welcome to the H1 investor presentation. Since I am the one announcing the results and not the acquire, let me just get straight into it. I'm assuming it's a big red one, okay? There we go. As usual, we start with the balance sheet. So the balance sheet for H1 closed at just under IDR 2 trillion, INR 1.969 trillion to be precise, which is a 7% growth if you do like-for-like. Remember, we've talked about selling NBK. So NBK was in our balance sheet the whole of -- our consolidated numbers the whole of last year. But since we sold NBK 30th of May, we do not consolidate for H1 on the balance sheet side. That goes to the new owner. So like-for-like, 7% growth on total assets. Deposits looking flat at just under NGN 1.5 trillion. But on a like-for-like basis, the deposits grew by about, I think, just under 6%. Our digital channels, our branches, you saw the second slide from Paul, showing our footprint in terms of branches, our digital channels played a very pivotal role in deposit mobilization. But that was tapered by the transitioning of the Uganda portion of the G2G that happened at some point last year. So we did have the deposits when the G2G was being done in Kenya, and that left towards around mid last year. So again, there's a bit of a like-for-like comparison to be done there. At net loans, 6% growth. But again, like-for-like, that loans grew by 12%. We were very aligned to our strategy. So the main sectors that grew in loans was energy, which is one of the areas -- one of the sectors that in our transforming today Together strategy, we called out as underserved and required a bank with the size of our balance sheet to start participating in a big way. Industrials, what we call industrials, which is in many other places you'd call manufacturing... [Technical Difficulty] was also an area that we did -- the loans -- our loan portfolio grew on the comparison to previous year. And lastly, infrastructure. And infrastructure started growing towards, I would say, the end of the second quarter. And that talks to the innovative solution of some of the pending bills, the pending bill part that sits on the infrastructure with the securitization of part of the fuel levy. So that has helped unlock us to be able to go in and lend to the customers. In terms of distribution of that across our subs, you see that our subsidiaries continue to perform quite well. If you look at the year-on-year growth, ranging from 4% to about 29%. Paul did talk to 2 of our subs that have gone into hyperinflation. One went into hyperinflation last year, that's South Sudan. And the second one that has just gone into hyperinflation is Burundi. So you will see that will -- those 2 subs will be impacted. Contribution of the subs outside KCB Kenya marginally dropped, and that's because of the selling off of NBK. Just unpacking the deposits a bit, 75% of our funding comes from customer deposits. So again, using our network of technology and brick-and-mortar to mobilize deposits. One area that we've seen that has spiked up is the call deposits. So if you look at the call deposits in 2024, it was only 5% of the total deposits. That has doubled now. So this is an emerging trend. It looks like our customers want to put money in products that we could very easily call for that money to spend it without incurring a penalty. The good news is when you put term deposit and the call deposits combined together, the percentage contribution to the total cake of deposits hasn't really changed by much. Coming to my not so favorite conversation that NPL. So we do have some good news on this one. Let me start with the ratio. The ratio has dropped 60 basis points to 18.7%. Second good news is the stock has started going in the right direction. It's probably the only slide when I'll say when things go south, we are happy. So you can see the stock is -- has dropped to 221. There's an element of, of course, disposing of NBK that has contributed that. But there's also a lot of work that our recovery steep has been doing, focusing on the strategies that we've talked to here in the past, enhancing recovery efforts, rehabilitation or restructuring to just ensure that our customers' cash flows match what we are asking them to pay. Full and final settlements, that has been actually very, very successful in the last number of years, engaging government for entities that sit in our balance sheet and are not performing. And we've been quite successful in the last, I'll say, 9 months or so, we've remediated, I think, 2 or 3 of those customers. And lastly, write-off. So this is a trend that we want to continue showing in quarter 3 and in quarter 4 that the work we are doing to get our NPL to the right level is bearing fruit. Just looking at the contributors of NPLs by entity, you can see that nothing much has changed there. The only -- actually, maybe the only thing that has changed is that NBK is no longer there. But the main contributors remain the big entities, KCB Kenya, TMB. I talked to South to the issues on hyperinflation. But looking at the sectorial breakdown of that NPL and I'll ask you to look at full year 2024 versus H1 2025. You can see all with the exception of one as a real estate has actually -- is on the decline. So to what I talked to earlier in terms of just the strategies that we are deploying for remediation are starting to work. The real estate one is actually those of you who are keen paid attention, part of the NBK sale, we were -- it was a Section 9 transfer of customers who came into KCB Kenya, and they contribute a big chunk of that movement from KES 38 billion to KES 47 billion. Coming to the income statement side of the results. Our total income closed at just under KES 99 billion. That's a 4% year-on-year growth, mostly driven by top line. So net income -- net interest income grew by about 2%, mostly out of volume in terms of -- I talked to earlier about the loan -- net loans growing year-on-year by about 6%. We've experienced some tightening of margins or decline in margins, especially for KCB Kenya and BPR because we've had the first half of the year, we have been reducing our lending rates. So that has marginally taken the shine off the volume growth. FX income declined quite significantly. And that's driven a lot by the Kenya business and our DRC business. We are seeing with the stability of the shilling most treasurers will tell you, they don't have much room to price. So the margins are low, but also the volume has significantly reduced year-on-year. Looking at costs, I would say, pretty well managed, 2.5% year-on-year growth on costs. Cost-to-income ratio coming down to 46%, a marginal positive jaw of about 2%. So from a cost point, I think we are doing what we can to ensure that we convert our top line to the bottom. And now coming to the actual performance in terms of profitability, an 8% year-on-year growth at net earnings to close at KES 32 billion. When you look at how that has been distributed, you can see very good performance from most of our subsidiaries. I'll single out BPR because the last time I singled them out on the negative. Let me single out them out on the positive this time, a 65% growth in terms of PAT, profit after tax. You can see Tanzania also year-on-year growth quite -- doing quite well. And our insurance business has not been left behind. They've also had a fairly good performance. But as I think the CEO said to the staff watching, this is comparison between this year and last year. We do have another comparison that we look at between this year and budget. And that is a slightly different story. So I do not want staff to go and start resting on their laurels because they are seeing that we have grown 8% on PAT and start thinking that we are there. No, we are not there. The second half of the year, the targets we have for the second half of the year are extremely stretched. So we have to double our efforts. And it starts with, I think, what Paul said, putting the customer first. The customer is the person who pays you. If you do not put them fast, then I'm wondering who are you going to put first. Just because the payroll is done from finance doesn't mean I'm the one who pays you. The money comes from the customer. Coming to, I think, one slide that a lot of people have been waiting for. So the Board met this morning and have proposed a dividend of KES 4 per share. This is split between KES 2 interim out of the performance of H1 and KES 2 special out of the sale of NBK. All that amounts to a payout of just under KES 13 billion. I think that's the largest interim dividend that KCB has ever paid. I don't know whether there's any other company that has ever paid, but maybe [ Safarrica ]. So to those shareholders who've been bombarded in our Chairman with the messages about whether they will see a change in the dividend payout. Remember when we were here to announce full year results, we said we have had, we've listened. We are waiting for all our staff to be aligned before so that we do not put the bank at risk. That has come full circle, and we are now ready to give back some of your investment back to you, you're the owners of the bank. From a capital point of view, we have good buffers -- good capital buffers across all our subsidiaries. Two subsidiaries at total capital have thin buffers that Uganda and Tanzania. We are in the process of capital raising for getting that Tier 2 capital. Uganda should be coming through in a matter of weeks. And for Tanzania, it's work in progress, but that is within our capital planning. And we are not going to come back to the shareholders. It going to be debt -- mostly debt. Looking at our return on equity. This is a slide that actually I feel very proud. When all your subsidiaries are operating above 20% return on equity, it stops the conversation and the questions we've always been asked over the years, why do you take money out of your big subsidiary in Kenya and put it in other subsidiaries when they were giving single-digit ROE. You can see the focus on those markets, getting the strategy right, the ROE, very, very few of them, you can argue, are dilutive to the group. So that's really good performance. Lastly, Chair and members who are watching is our scorecard for H1. You can see the reds. We have 3 reds. Most of the others are right in the middle of green. NFI, that's an unfunded income ratio as a ratio to total income has dipped below 30% for the first time in a while, and that's driven by the FX income that I talked to. The year-on-year decline of about 48% on FX has greatly contributed to that. NPL trending in the right direction finally. And I think Bernard has told me that he's very sure he will be between that range of 14% and 16%. And he's here, he can save on line. Just don't give him a mic. The last one is deposits, just the operating environment we are in. Markets are very tight with liquidity. So a growth of 6% on a like-for-like basis. We believe the strategies we put out for deposit mobilization across our subsidiaries should move that red closer to the range of the outlook that we communicated to you. So I'll stop there and take any questions from here. Thank you very much.

Thank you. Thank you, Lawrence. Thank you, Paul. Thank you, Chairman, for that. I think we'll quickly move into the Q&A session, and I'll ask the team to set up for the panel. In the meantime, I can see there's a lot of engagements online. So we'll take a few questions online, then we can take from the floor. So we see comments online, congratulating KCB for the good results, see comments around the subsidiaries, how the subsidiaries are performing. So Lance, Paul, please get ready with the answers on the same. I see staff saying they hope at the end of the year, they will get their bonuses. I think -- so I think there's quite some engagement. I'll invite the Group Chairman, the Group CEO and Group Director of Finance to come here so that we can take a few questions. We can get the mic going. We pick a few questions from the floor, then we'll go online. Any questions? I can see a number of media people from the media, for coming, our analysts who are here. Let's get the mic going. Any questions? Very good. We'll start from you introduce yourself, then you raise your question and the organization you're coming from.

My name is Sophia Ali from KTN Financial Journalist. My question goes to Russo. What initiatives are in place to support sustainable finance and promote financial inclusion in the region?

We can take a second one. Thank you very much. Any other question? Please go ahead.

We are cognizant and alive to the fact that incredible leadership is the bedrock of every success in every given organization. Allow me also to say this. Thank you for being the powerhouse that you are and the blueprint of the organization's brand. We you for the incredible dividend that you've given us. My name is [indiscernible], and I'm a shareholder. My first question is building generational wealth or planning in family-owned businesses. How is KCB Bank structured to support this family-owned businesses? And how does it address its challenges? The question 2 is on AI. AI is driving us today, right? What's the bank overall approach and the impact on cybersecurity and customer experience? My final question is on climate change. Climate change is becoming a tall order globally. What's your take on the negative effects? And how do you ensure a green economy and enhancing resilience to this concern?

Thank you for that question. I think we can take those 4 first, then we can move to another set.

Okay. Thank you, Sally. You know when you are a shareholder, you can ask questions for a PhD basis. But thank you, Sally. Good to see you. I will attempt to answer them briefly. Sofia, thank you for your question. I think on sustainable finance, I'll say a few things. One, we actually have subject matter experts in KCB around sustainable finance. I can't see Eric [indiscernible] here. But we have a team that are subject matter experts in the institution to support the group. And they've done an amazing job. That's why I think GCF, there is a bit of work that we are doing even with Africa Development Bank on the same part. But most importantly, the work that we've done with schools particularly through anastasia team, whether it's solarization to reduce energy cost and LPGs for schools. I just don't want to touch on 3 planting and what we do around that. But it's a key agenda and even our own certification to be able to deliver that. And this team supports the entire group. Now we have testaments, for example, some schools that how they have reduced their energy costs by over 60%, 70%. I'm always reminded Anastasia the exact number is 65%. [indiscernible] saying 60% to 70%, the exact number, 65%. Now we've got to move to scale up. And as I said earlier on, is particularly on the lending front, you need to cut the flow. So that's why you see our growth in green lending. I think the number was KES 23 billion. But we also have to go back and screen what we have and support those individuals to green. It's not an overnight if somebody has built a whole manufacturing plant. But you have to work that [indiscernible] Sophia with those people to try and green and enable them. And it's important to ask this question because it's not just a financial discussion. It is a sustainability discussion. right? And we are very clear that it is not about making money in the first instance. Now if they cut their cost, it means they can do a lot more with you, isn't it? And they can stay with you longer. And they can deploy that money instead of paying headon. I can also [indiscernible] my clients, but if they pay them less, it means they can do something with the other amount, isn't it? And even education can start being affordable. And then there's an element of decency. [ Wood ] in school versus LPG. You're planting trees on the other side, but the schools, you're burning wood. It's just a contradiction of here. So it's a long way to answer you, but it's important that -- but even as we do that, because your question is 2. And it's a very interesting point about inclusion. There are constituencies in Kenya that I have never had a bank. Today, when you talk about inclusion, people just think digital. You must have seen when Anastasia opened a branch, I think, in West, what's the name of the town again? Kendu Bay. People just wanted to see what is a bank. And we talk about financial inclusion, isn't it? I come from [indiscernible]. There is no branch. There's no bank. So when people tell me, Paul, digital is 93, but you're opening a bank, I think we are willing to get the point. So the opening of branches will continue to be strategic to bring banking closer. Then we will use the branch as a hub and spoke, use our digital to connect. So we might never open as many branches as we used to open, but you need that presence to be able to bring people on board and it's just the right thing to do. That's on the brick-and-mortar, which -- and I started with that because it's normally conflicting. People tell you, Paul, why are you opening branches? I'm just giving you a reality of my own place. When I go holiday, they say, Paul, but you are the CEO of the bank, why have you not opened a bank here. I still have to answer that question. Hopefully, Chairman will help me to answer it. But I'm also reminded sometimes some of these areas, the other issues, right? We tried to do something in [indiscernible]. Our staff are short when they are coming from going to do a survey of the location. I digress. The mobile banking that we've launched is at the heart of that inclusion. It means today then even in those places that we don't have branches like [indiscernible], they can open accounts and they can able to operate. In the past, if they had to open a KCB account, they would have to go to M or I. So by just deploying that capability, you're opening it up for everyone. I think the work that -- and I know our CRO is not here, but the work the credit team has done to perfect credit models so that you don't need a loan officer to review you, you don't need bank. We've really moved. And the partnership with telcos, we've deepened that partnership because it's important for both parties to be able to deliver that. However, we still have to advance solutions. And I think the most difficult one that we are trying to answer and Safaricom hosted us for an event recently is on SMEs. I don't think we've cracked it. And you see what we've learned around sometimes you see it deteriorating. And you can see there are no more people -- better people lend to them than the micro finance entities. And I have not looked at the data, but I learned today that lending to private businesses by micro finance has shrunk the lowest ever. And that is supposed to be the areas of expertise. So there is a lot that we still need to do on the SMEs. The good news is the big boys and girls sitting in front of me have all the capabilities to do that. I know we have quite a lot that is on the pipeline. especially University of UA, but we should be fine when that comes to life. So I hope I've answered you, Sally -- Sofia. Sally, in the past, you will not get money market fund solutions from KCB. Today, KCB Asset Management has moved up the rank. I can't recall the latest KCB Investment Bank, you are the distributor of the product as well. It's gone to 18 billion. We had 0. It's actually the fastest growing. Maybe sometimes we see them too small that Lawrence doesn't include them in the slides. But growing to $18 billion in less than a year or just a year is not a mean achievement for solutions. But when you come to family-owned businesses and wealth management, that gentleman sitting next to you called Maurice, joined us the Maurice joined us to actually deliver those value propositions. So we built -- we've strengthened KCB Investment Bank, resources. We've built KCB Asset Management, and I can see the Board members, including the Chairman here, to be able to offer those value propositions. AI, I think even me when I talk about AI, I feel very late, Sally. So the guy who leads that framework is Dennis Volemi. We are already on proof of concept with a number of -- we've done a lot, but significant to step up to what is truly AI. We are on proof of concept on a number of initiatives. So KCB has a framework for AI. KCB has a policy for that. KCB has a target from the Board. Management has a target from the Board on that particular element. But as you said, it comes with its own risks. You must teach it not to buy other things, isn't. So that's why it runs it on proof of concept. So we have use cases. We will get to the step where we scale that up. And that mandate is with Dennis. Same as cybersecurity, I seem like I'm answering for -- I think the work that, that team has done is something that we really don't shout about. The work -- I think there's a time Safaricom and KCB were being targeted on a daily basis. with a lot of intensity. You probably will remember that time. And this team has done an amazing job to be able to do that. And we'll continue to reinforce whether it's tools, whether it's human capital. The thing about cybersecurity, even for the expert, it evolves every day. Somebody is thinking something new every day. So we've got to continue to support that team to deliver on that. Climate change, it's real. In the past, July was July, isn't it? And the cold was July. But now August is July. I don't know whether it's only me feels cold in August. That's just a reality. It is right here with us. And like I said earlier on, we cannot leave it to government. We cannot leave it to some activists. We cannot leave it to -- we have to be involved at individual levels, and we have to be involved at institutional levels. And as I said, as I was answering Sofia, we are doing sufficiently enough. We can do more, but we are on the table to do what we need to do, right? But we also have to do the -- we also have to run our own advocacy. And as I say always, as CEO of KCB, you have to be able to pronounce yourself on certain things. So you want to clean Nairobi River, but people are still discharging waste. Somebody is still building a flat has nowhere to septic tank or what they call sewage is discharging into that. You can bring wever to clean. It will be the way it is. So certain things must start with us, start at individual level and must start at institutional levels. And that's why, for example, if somebody came to follow up on Sofia's question to ask for a mortgage from us with a property that is going to discharge to Nairobi River, we will not do it. You can stay with it. So we've got to start being responsible out. So a long way, Chairman to answer those questions. Probably there are strong men on my left. I'm sure they can chip in. But thank you, Sally, for the questions, thank you you Sofia.

Thank you very much, Paul. I think Paul has already covered very comprehensively. The only aspect I can mention, if you look at what was being provided in terms of sustainability and the question of business, family business and what in terms of empowering our women, you can see clearly, KCB is doing quite a commendable job. On the question of climate change, ensuring that within the broader national policy, KCB is doing a very good job. You saw the freeze that we have granted. I think, Paul, you could have mentioned, you recall there is sun King, which you are working with other banks and which is intended to be aligned with the climate change is something that perhaps you can spend a minute so that they can appreciate what we are doing. Let me not go beyond that, but I really appreciate that [indiscernible] never -- shareholder never misses this meeting. And we do appreciate you having that faith and belief in us.

Okay. Thank you. Thank you, Chairman. Thank you, CEO. Any questions from the media and other person? Go ahead.

My name is [indiscernible]. I write for [indiscernible] business. [indiscernible] Lawrence and Mr. Paul, you spoke more around what is happening in South Sudan and Burundi. So I wanted you to share more on what is the driving force in Tanzania? And when you said you need to give it more fuel, how much more are you going to invest in that particular market? And the second question is around the DRC market. What is your update on the regulatory requirement from the government?

Okay. Thank you for that. And I think, Paul, you can combine that with a question online. TMB is now fully part of KCB Group. What are some of the highlights for the -- from the business in terms of performance. Any other question? Okay. I think I can pick 2 more, then we respond to those ones, and we can wrap it up. One question -- another question online. Could you speak to the specific performance of the regional businesses? I think, Lawrence, you can speak to that. Then the last question online. The regional economic outlook continues to be plagued by tough operating elements. How has KCB positioned itself to with these headwinds that I think the Chairman can take. Then if there are no other questions, we will end it there, but let's get feedback on those particular questions. Thanks.

Lawrence, do you want to talk about TZ?

Yes. Thank you. Thanks for the question. So TZ, as you've seen, Tanzania for H1 performance, year-on-year, the good growth, I think, 13%. But there's a lot more that we can extract out of Tanzania. 2, 3 years ago, about 2 years ago, we started increasing the number of branches. For a long time, Tanzania has delivered results at a certain number of branches. I think there was something like 14, 15 for quite a number of years, and they've been growing in double digit. From a strategic point of view, we made the decision that, that's -- if we're going to go to the next level where we want Tanzania to be KCB Tanzania to play within the top 5, we've got to put some investment. Hence, open branches in select regions that deliver some good economic returns in regions where they support our presence within the region. So the trade flows from -- whether it's from coming out of DRC, coming out of Burundi, coming out of [indiscernible] on that side and on the Kenya side. So what we need to do is just make sure that we're executing flawlessly on our strategy. We need to deepen our loan portfolio to the SME. For a long time, I think we focused quite a bit on the big ticket items, the big customers, and they are supported by the Anastasia's big balance sheet on the Kenya side. But we do need to get the SME so that we can complete ecosystem banking properly and you're able to retain your cake within your ecosystem. There will definitely need capital for that level of growth, and that's why I pointed out that, that is one of the subsidiaries that part of the money we got from sale of NBK will be allocated to capitalize in Tanzania. DRC was 2 questions. One was about the divestiture. Yes. So on the divestiture, the -- what was originally communicated, I think, in 2023 -- '22? '23? Yes, anyway, a few years ago. The one of 45%, 15%, 15%, 15%, that has since changed. It was discussed in the legislative body, and they've issued some guidelines on saying not limiting -- I think, the maximum number of shareholders to 2 in terms of large shareholders before it was sitting at 4. They haven't pronounced yet the actual shareholding that is required unless that is breaking news that came out this week, but we haven't seen that pronounciation. So there's a new governor who has just been appointed. I think they're just trying -- they're just getting their feet under the table. So we expect that we'll see quite a bit of communication coming out of GRC once the new governor settles. Can I go to the GRB -- -- what was the second question on TMB?

The TMB was on specific highlights of the business.

Okay. Okay. So then I'll combine that together with the GRB because you did ask a question about the GRB performance. So TMB for the first half of the year have been impacted by the conflict in the Eastern side. I think Paul did mention the number of branches that have remained closed since very early in the year, I think mid-January that have impacted, obviously, the revenue you make from the branches. Customers who bank with us because of, obviously, the schemishes would have their cash flows impacted. So that has come to impact TMB on the first half of the year. With the signing of the PIS accord normalcy starting to return, we are actually having the TMB team come here next week to discuss how we will change that trajectory in terms of recovery for the remaining part of the year. That said, it is still a very good investment. You've seen how TMB performed in the first year -- full year 2023 and 2024. They've actually supported the group. This is the beauty of having a portfolio of subsidiaries. When one is down, another one picks up. And TMB played that role for KCB Group for 2 consecutive years. I'm very, very optimistic that they will do a good recovery in the second half of the year. We expect to see year-on-year growth, and they should get very, very close to their targets. The other regional businesses, I'll talk about BPR, 65% year-on-year growth, granted that there's a base effect on that growth. If you recall, when we announced the results -- half year results last year, BPR had just taken a big hit on a write-off that caused a poor performance for the first half of last year. But they've also -- we did a deep dive review for them sometime beginning of the year. They are pumping in terms of pushing on loans. So again, I think BPR is an entity that we expect to see some good performance. There is a macro environmental element because it might not be politically correct to say this, but the conflict is at Eastern Congo. It's right at the border of -- with Rwanda. So that must have some impact on their macro. So even when you look at the competitor analysis, we have seen the competitors in the market are not firing at all cylinders. I did talk to Tanzania, so I'll not cover that. Uganda has had a very good recovery from quarter 1. The quarter 1 was not a very good performance. I actually sit in the Board of KCB Uganda. We had, let's say, very, very stressful discussions with management, and they've had a very good quarter 2. So their quarter 1 and quarter 2 comparison is chalk and cheese. They continue with that trajectory. I have no doubt that Uganda will be delivering a very, very good performance for the year 2025.

I think, Chairman, there was a question for you on the bank -- how the bank has positioned itself to with the headwinds from the international market and local.

Well, thank you very much for that question. Of course, in doing our business, we have to look at what is happening, not just in terms of the domestic, but also globally because if it is like the conflict taking place in Eastern in the European -- that part of the world, because of the trade links that are between our countries and them, they will certainly have an impact on our businesses. But as I did mention in my statement, and I think it came also out from the statement by Paul and Roland, for our region, we have been fortunate. You can see ours, we have been able to grow stronger. And the reason for that is because of the investment that has taken place in terms of infrastructure, also resource-based kind of beginning to show better signs that has benefited us as banks. But of course, our team and the management, we have made it very clear to them. We have to be very insight as to what is happening in those other -- in the context of the impact they have on the businesses which we ourselves are supporting from a financing point of view. So it is important, but we are, I would say, a bit more lucky than perhaps other parts of the world. But that doesn't mean that we just sleep and say we are comfortable, we are moving forward. No, we have to be alert.

Thanks, Chairman. Paul, allow me to pick a few -- the last set of questions and comments online. We have some 2 questions from of Mo Capital. What portion of NPL decline is linked to NBK Kenya's NPLs increased. What drove this? That's one question. Then the second question, maybe you can comment on the NBK sale in regards to specific assets and liabilities. I think you had spoken briefly about that, that you can skip a comment from just online also from [indiscernible], he says good interim dividend ever. We are happy as shareholders. That's a comment. And then he goes and ask a question, would you reduce investing in government securities to focus on giving loans to customers? I think we can take those ones, then we can wrap it up.

Yes. I'll ask Lawrence to comment on [indiscernible] question on the portion. I think that one must be -- but as you prepare, Lawrence, let me tackle the other ones. Yes, I think Lawrence did touch on the dividend. I think we spent quite a year or so, 18 months just fixing a few things in the organization, and we made certain commitments that we will have to focus on the shareholders. So this is not by accident. The group Board has been following up on this. And as management, we are committed to make sure that there is sufficient returns to shareholders. I think apart that I asked a question on investment on government securities. Unfortunately, I'll have to refer you to the numbers. We're probably the only institution in Astasia that is showing year-on-year increase in lending to private sector. It's only -- it's KCB Kenya. So -- and thanks to the BCC members that I see, I see the Chair, I see Caroline, I see [indiscernible]. We've been deliberate. And when I look at even what has been approved pending drawdown, that number is significant. So I think it will be unfair to KCBK to say about that. And as Chairman of Kenya Bank, I am actually challenged to make sure that private sector -- banking sector prioritizes lending to private sector. And it was a discussion this morning with the governor. And we've agreed collectively, we have to change that trajectory. We have to get that number to double digit. If really we have to drive even as institutions ourselves, we have to be ambitious to get that number to double digit. And so unfortunately, I hold the mic both as CEO of the group and Chairman of Kenya Banka. I mean, full alignment. As CBR rates come down, one, we must pass that benefit in all ways possible on the basis of other factors to customers, but we must also really, really increase lending to private sector. I think today, if you talk about manufacturing, you want to talk about employment. Yes, we employ. But only one of the biggest ways for banks to contribute to employment is to support private sector. through lending. So I think you're bridging to the converted, and we will continue to jump on lending to private sector. That I have no doubt about both being a Board member and being the CEO. And I think just on NBKL, I think, Lawrence, you can touch on NBKL plus the portion on NPL. So I think the -- there's a high component with the NPL company. It talks about high and -- but let's just talk about it is high and what the NPL component. And the impact to KCB.

Okay. So [indiscernible] so the straight answer on the question on NPL, which is -- I'm trying to shorten this answer. It's about impact, if I say -- we say the impact of taking NPK out of consolidation of -- on the group, the impact is about -- just about KES 9 billion. But the reason I'm saying is that's just a straight answer because it's not -- when you look at the way the stock operates, you've got a lot of work that the recoveries team do to get recoveries. I think quarter-to-quarter KCB Kenya on its own had a positive movement of about KES 6 billion. just just in terms of the stock for KCB Kenya on its own. But then because of the [indiscernible], we call it [indiscernible] because it came in, there was an element of NPL that came with the assets that were transferred under Section 9 into KCB Kenya. So when you look at KCB Kenya's stock then it looks like it has actually gone up. But in reality, that is what they've inherited from the transaction, and there is what they've actually done in terms of remediation. So -- and then also, you have other entities. We saw a deterioration of TMB in that quarter 2 as well, a big increase in NPL stock from TMB that has come into that number. So I'm trying to answer it in a long way to demonstrate that the work that is being done by the recovery team is bearing fruits. It might not necessarily be showing directly on to those numbers, but it's hidden somewhere in there.

Thank you. Thank you very much. And I hope we haven't locked out anybody. We have responded to all the questions that came online. My is to thank everybody for being here and for those who are online for attending the event. We shall allow you to have refreshments as you walk out, you interact and network. I'll ask the Group Chairman, the Group CEO and the Group Director of Finance to remain on stage for some photo opportunities. And for the media, we have organized a few follow-up interviews for you. So just let's remain behind. For the analysts, you have a date on Monday for your session with the leadership team to speak more about the numbers and the outlook. Again, to the media, we believe everybody has now received a copy of the press release and the rest of the financials. Otherwise, thank you very much, everybody, [indiscernible] and God bless. Have a good evening.