Slide 1: Absa Group FY22 results presentation
Absa Group FY22 results presentation 13 March 2023
Slide 2: Arrie Rautenbach, Chief Executive
Arrie Rautenbach Chief Executive
Slide 3: Operating environment remained uncertain
Operating environment remained uncertain Global environment Sub-Saharan Africa South Africa • Rising geopolitical tension • Inflationary pressures • Commodity price benefits ‾ Russia/Ukraine conflict • Increased policy rates • Slowing GDP growth ‾ US/China tension • Higher country risk premium • Rat
Slide 4: Headwinds continue to build in South Africa
Headwinds continue to build in South Africa SA real GDP growth (%) SA headline CPI (%) 4.9 6.9 6.1 6.3 3.0 3.2 2.4 2.5 1.4 1.3 0.7 1.2 1.5 0.3 2.0 5.6 5.7 5.0 5.3 4.6 4.6 4.6 4.2 4.1 3.3 (6.3) 10 11 12 13 14 15 16 17 18 19 20 21 22 10 11 12 13 14 15 16 17 18 19 20 21 22 SA end of period repo rate (%
Slide 5: Building the foundation for sustainable growth
Building the foundation for sustainable growth • Successfully navigated Barclays separation and Covid-19 • Evolved our group structure • Diverse leadership team in place • With the right group strategy • Consistent execution showing results • Strong balance sheet (capital, coverage, liquidity) • Inv
Slide 6: Digitally-powered business
Digitally-powered business • Digitally active customer numbers increased: o 11% growth in South Africa o 60% of ARO customers now digitally active • Over 75% of Core Middle Market and Retail Affluent Empowering Africa’s customers entirely digital tomorrow, together • More than two-thirds of CIB cust
Slide 7: Winning, talented and diverse team
Winning, talented and diverse team • Developed strong Employee Value Proposition o Fair pay principles o Invested R590m in employee training • Employee Net Promoter Score almost doubled • Attracting and retaining top talent Empowering Africa’s tomorrow, together • Certified a Top Employer for second
Slide 8: Active force for good in everything we do
Active force for good in everything we do • Elevated ESG as a strategic priority with focus on: o Climate change o Financial Inclusion o Diversity and Inclusion • Continue to lead in South African renewable finance Empowering Africa’s tomorrow, together • Leaders in agriculture finance … one story a
Slide 9: Diversified franchise with deliberate market leading growth
Diversified franchise with deliberate market leading growth • Leveraging the full Absa ecosystem • Bancassurance product set fully integrated into product journeys • Customer numbers growing in key segments • SMEs a key opportunity Empowering Africa’s tomorrow, together • Higher contribution from un
Slide 10: Primary partner of our clients
Primary partner of our clients • Deepened retail customer relationships: o Lowest Ombudsman complaints for 3 years o Converting Reward customers o Improved average product holding • Absa Life 1st in the SA-csi Consulta survey for Empowering Africa’s tomorrow, together second year running … one story
Slide 11: Maintained our positive momentum
Maintained our positive momentum Pre-provision profit (Rbn) Diluted normalised HEPS (c) 25% 13% 7% 48.0 132% 5% 7% 1% 2 482 38.5 2 193 33.6 35.8 1 923 (51%) 946 FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 RoE (%) NAV per share (c) 13% 5% 15.8 16.6 4% 15.8 5% 15 556 14 868 12 605 13 103 7.2 FY19 FY20 FY2
Slide 12: Jason Quinn, Financial Director
Jason Quinn Financial Director
Slide 13: Earnings growth underpinned by very strong revenue
Earnings growth underpinned by very strong revenue Normalised headline earnings (Rbn) Pre-provision profit up 25% (26% CCY) 18% 7% (7% CCY) 5.9 (3.5) 61% 13% (5.2) 17% 7.1 13% (1.9) 0.0 21.0 18.6 FY21 Net interest Non-interest Operating Credit Other* FY22 income income expenses impairments Revenue u
Slide 14: Margin benefited from pricing and higher interest rates
Margin benefited from pricing and higher interest rates Change in net interest margin* (basis points) 9 (14) (5) 8 9 (5) 10 1 0 0 0 456 29 7 446 417 Loans Deposits 8 12 FY20 FY21 Pricing Mix Pricing Mix Endowment Capital ** Hedge *** Other FY22 Note: * average interest bearing assets; ** group equit
Slide 15: Well diversified loan growth
Well diversified loan growth … Net customer loans (Rbn) 8% 9% 432 FY21 FY22 400 399 368 7% 126 135 12% 13% 60 67 64 72 Product Solutions Everyday Banking Relationship Banking ARO RBB CIB Cluster Note: ARO RBB grew 16% and CIB 9% in constant currency. Including loans to banks, CIB grew 14% to R514bn.
Slide 16: With competitive retail loan growth
… with competitive retail loan growth South Africa retail banking net customer loans (Rbn) 9% 293 270 FY21 FY22 9% 107 98 13% 44 10% 39 19 20 Home Loans Vehicle and Asset Credit card Personal loans Finance 16 |
Slide 17: Deposit growth slowed
Deposit growth slowed Customer deposits (Rbn) (0%) 409 407 FY21 FY22 4% 278 290 7% 201 188 9% 101 110 Everyday Banking Relationship Banking ARO RBB CIB Note: In constant currency, ARO RBB grew 13% and CIB was flat. Including bank deposits CIB grew 4% to R500bn. 17 |
Slide 18: Insurance SA drove non-interest income rebound
Insurance SA drove non-interest income rebound Non-interest income (Rbn) Non-interest income by division (Rbn) 38.4 18% 9% FY21 FY22 32.6 32.6 7.0 105% 12.1 3.4 11% 5.0 11.1 7.7 9% 10.3 7.1 9.3 6.0 23.7 7% 21.6 22.1 60% 3% 5.2 5.1 27% 4.9 4.1 3.2 3.3 FY20 FY21 FY22 Product Everyday Relationship ARO
Slide 19: Costs well controlled as we continue to invest
Costs well controlled as we continue to invest FY22 Change Mix Cost-to-income ratio (%) Rm % % Staff 27 873 7 55 57.7 58.0 Property 1 862 (1) 4 56.0 55.2 Technology 5 541 12 11 Depreciation 3 133 (10) 6 51.5 Professional fees 2 884 22 6 Marketing 1 720 34 3 Communication * 1 486 3 3 Cash transportat
Slide 20: Credit loss ratio increased off a relatively low base
Credit loss ratio increased off a relatively low base Credit impairments (Rbn) 61% Credit loss ratio (%) FY21 FY22 2.2 13.7 33% (29%) 87% (8%) Product Solutions 0.35 0.65 0.6 100% 1.4 (0.2) (0.1) Home Loans (0.05) 0.24 1.3 8.5 Vehicle and Asset Finance 1.45 1.76 Everyday Banking 4.99 6.45 Relationsh
Slide 21: NPLs improved and stage 3 coverage increased
NPLs improved and stage 3 coverage increased Non-performing loans (%) Stage 3 coverage (%) 46.1 6.3 44.6 43.7 42.5 5.4 5.3 4.7 FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 21 |
Slide 22: Performance broad-based, benefitting from diversification
Performance broad-based, benefitting from diversification Headline earnings (Rbn) 9% FY21 FY22 9.0 8.3 (0%) 8% 26% 4.1 4.1 4.0 3.5 3.7 2.8 908% 72% 0.1 1.1 (0.4) (0.7) Product Everyday Relationship ARO RBB CIB Head Office, Solutions Banking Banking Treasury, other Pre-provision 42% 17% 4% 30% 13% -
Slide 23: Large businesses all generated returns well above CoE
Large businesses all generated returns well above CoE Group earnings mix (%) Return on regulatory capital (%) 34.5 32.0 FY21 FY22 16 27.2 41 23.9 19 21.4 20.6 16.2 14.4 5 19 10.5 Product Solutions Everyday Banking 1.1 Relationship Banking ARO RBB Product Everyday Relationship ARO RBB CIB CIB Solutio
Slide 24: Insurance SA rebound drives strong PSC growth
Insurance SA rebound drives strong PSC growth Headline earnings (Rm) FY21 FY22 26% 3 531 2 692 (17%) 2 793 2 230 1 891% 1 354 (27%) 672 (15%) 493 68 (639) (546) Home Loans Vehicle and Asset Insurance SA Non-Banking Financial Product Solutions Finance Services and Other Cluster Pre-provision profit g
Slide 25: Credit impairments dampen Everyday Banking earnings
Credit impairments dampen Everyday Banking earnings Headline earnings (Rm) FY21 FY22 (0%) 4 126 4 108 6% 3 306 3 110 (13%) 981 856 (149%) 146 (174%) 54 (108) (111) Card Personal Loans Transactions and Other Everyday Banking Deposits Pre-provision profit growth: 14% 26% 9% - 17% 25 |
Slide 26: Relationship Banking generates strong returns
Relationship Banking generates strong returns Pre-provision profit (Rbn) Loans and deposits (Rbn) 4% 7% 6.3 6.5 201 188 7% 126 135 FY21 FY22 Deposits Loans Headline earnings (Rbn) RoRC (%) 8% 27.2 23.9 4.0 3.7 FY21 FY22 FY21 FY22 26 |
Slide 27: CIB benefits from its improving scale and diversification
CIB benefits from its improving scale and diversification Headline earnings (Rm) 9% FY21 FY22 8 977 8 250 6% (1%) 6 070 5 599 5 526 5 716 30% 15% 3 451 2 651 2 907 2 534 Corporate Bank Investment Bank Total CIB South Africa ARO Pre-provision profit growth: 36% 1% 13% 2% 33% 27 |
Slide 28: ARO RBB revenue drives strong earnings growth
ARO RBB revenue drives strong earnings growth Pre-provision profit (Rbn) Headline earnings (Rbn) 30% 908% 4.1 1.1 3.1 0.1 FY21 FY22 FY21 FY22 RoRC (%) Cost-to-income ratio (%) 73.0 70.6 10.5 1.1 FY21 FY22 FY21 FY22 28 |
Slide 29: Ghana sovereign charge reduced Africa regions earnings
Ghana sovereign charge reduced Africa regions earnings Revenue (Rbn) Normalised headline earnings (Rm) 13% 16% 74.2 18 297 FY21 FY22 FY21 FY22 65.6 15 762 21% 24.6 20.3 (4%) 2 829 2 719 South Africa Africa regions South Africa Africa regions 29 |
Slide 30: CET1 ratio remains strong and above Board target range
CET1 ratio remains strong and above Board target range Group common equity tier 1 ratio (%) 2.0 (0.9) 12.1 (1.1) 12.8 12.8 Board target range 11.0% - 12.5% FY21 Capital demand Profit Dividend FY22 30 |
Slide 31: We remain well positioned for a tougher macro backdrop
We remain well positioned for a tougher macro backdrop Group capital ratios (%) Total loan coverage (%) 17.0 16.6 15.5 4.5 15.0 2.4 2.2 4.1 2.8 3.9 2.8 1.8 1.6 0.9 1.0 3.3 12.8 12.8 11.8 11.2 FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 CET1 Other tier 1 Tier 2 31 |
Slide 32: 2023 outlook
2023 outlook 2023 expectations High single digit revenue growth, driven by net interest income given balance sheet Revenue growth and higher policy rates. Balance sheet High single digit growth in customer loans and deposits. Credit loss ratio (CLR) likely to be at top end of our through-the-cycle t
Slide 33: Disclaimer
Disclaimer Certain statements (words such as ‘anticipates’, ‘estimates’, ‘expects’, ‘projects’, ‘believes’, ‘intends’, ‘plans’, ‘may’, ‘will’ and ‘should’ and similar expressions in this document are forward looking. These relate to, among other things, the plans, objectives, goals, strategies, futu