Annual REPORT

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MANAGING DIRECTOR & CEO’S STATEMENT ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 Dear Shareholders, I am delighted to present the Bank’s Annual Report and Financial Statements for the year ended 31 st December 2015. It was a year of great performance set against a challenging industry wide economic backdrop. We registered impressive growth on all parameters – once again ending the year with a strong Balance Sheet and Profit position. The Bank overcame increasing pressure from the operating environment and continued to manage various macroeconomic issues with vigor, tact and urgency. Notably, we were able to manage the industry wide challenge of increasing cost of funds and the renewed pressure by the Regulators and other lobby groups to reduce interest rates by enhancing our business volumes and operational efficiency across the bank. The journey to become a Tier one Bank is well elaborated within our Growth strategy and Must Win Battles which has been fully embraced by the Board, Management and Staff. Our Sustained good financial performance reaffirms that the sustained push to unlock the potential for greater performance is on. During the year we consolidated our gains in the new business areas i.e. Corporate and Institutional Banking, Treasury, Trade Finance, Diaspora, Sacco Banking and Alternative Business Channels. One of our key achievements in 2015 was the successful roll-out of our capital raising initiatives including the Corporate Bond in which we sought to raise Ksh10Billion in tranches. This with other ongoing efforts will catapult the Bank on a growth trajectory to attain tier one Status in the next three years. We continued leveraging on Strategic Partnerships with key high value institutions thus growing our market share in all the business segments. This is a manifestation of our brand strength and commitment to continue with our vision of positively transforming lives. Financial Performance Profit before tax (PBT) increased by 10% from Ksh 2.62 Billion full year 2014 to Ksh 2.88 Billion for the year ended 31 st December 2015. This commendable financial performance strengthened the Bank’s position as one of the leading banks in good Profit growth ranking. The Bank outperformed peers in the banking industry by registering this sustainable performance. The remarkable increase in profit before tax was mainly attributed to selective Credit acquisition, growth in the customer base and operating efficiency. Total assets grew by Ksh 19.4 billion representing a 31% increase from Ksh 61.8billion as at 31 st December 2014 to Ksh 81.2Bllion as at 31 st December 2015. This high growth in assets was primarily attributable to the growth in the number of customers, the loan book and the branch expansion strategy. Net loans and advances stood at Ksh 55.9billion as at 31 st December 2015 compared to Ksh 37.9 billion as at 31 st December 2014, representing a 47% growth. 16
ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 MANAGING DIRECTOR & CEO’S STATEMENT (Continued) The customer base stood at 1.7Million as at 31 st December 2015 up from 1.5Million customers as at 31 st December 2014. Consequently, our customer Deposits grew by 33% from Ksh. 47.2Billion as at 31 st December 2014 to Ksh 62.7 Billion as at 31 st December 2015. This was as a result of an aggressive customer growth campaign, a strong presence in the Corporate and institutional banking sector and expansion of the branch network. The shareholders’ funds grew by 12% from Ksh 10.62billion as at 31 st December 2014 to Ksh 11.93billion as at 31 st December 2015 mainly due to the growth in retained earnings from the high profits earned from our business segments. The Bank’s CBK Statutory Ratios remained strong and way above the statutory minimum with core capital to total deposit Liabilities ratio at 18.1%, core capital to total risk weighted assets 15.4%, total capital to total risk weighted assets at 18.9% against minimums of 8%, 10.5% and 14.5% respectively . The Bank continued to operate sustainably with liquidity ratio at between 31% to 37% against the CBK statutory 20%. 17
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Annual REPORT

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