Slide 1: Absa Group 1H23 results presentation
Absa Group 1H23 results presentation 14 August 2023
Slide 2: Arrie Rautenbach, Chief Executive
Arrie Rautenbach Chief Executive
Slide 3: Operating environment remains challenging
Operating environment remains challenging Global environment Sub-Saharan Africa South Africa • Continued geopolitical tension • Growth expectations lowered • Persistently higher inflation • Persistently high inflation • Inflation pressures remain • Interest rates higher than • Monetary policy tighte
Slide 4: South Africa is under pressure
South Africa is under pressure SA Headline CPI (%) Prime rate (%) 16 8 14 7 12 6 10 5 8 4 6 3 4 2 2 1 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2008 2010 2012 2014 2016 2018 2020 2022 Loadshedding GWh (k) BER Business Confidence Index 50 2018 2019 2020 2021 2022 2023 16 000 45 43 43 42 12 000 3
Slide 5: Delivering on strategy as we make progress on targets
Delivering on strategy as we make progress on targets RoE (%) sustainably above 17% 17.5 16.7 16.4 15.3 2.6 1H19 1H20 1H21 1H22 1H23 RoE RoE ambition Cost-to-income ratio in the low 50s (%) 56.7 53.9 54.9 51.2 49.8 1H19 1H20 1H21 1H22 1H23 Cost-to-income Cost-to-income ambition 5 |
Slide 6: We are diversifying our construct …
We are diversifying our construct … Pre-provision profit geographic split (%) Pre-provision profit business split (%) 19 29 28 33 81 71 71 66 1H18 1H23 1H18 1H23 SA Africa regions Other CIB 6 |
Slide 7: … while growing our business and generating capital
… while growing our business and generating capital Headline earnings (Rbn) and Group CET1 (%) 14000 13.0 13.0% 14.0% 11.9 13.1 11.0 12.4 12000 12.0% 10000 11.2 11.2 10.0% 8000 1.5 10.9 8.0% 8.3 6000 6.0% 4000 4.0% 2000 2.0% 8.6 0 0.0% 1H18 1H19 1H20 1H21 1H22 1H23 Headline earnings CET 1 7 |
Slide 8: Primary partner of our clients
Primary partner of our clients New to bank Pricing changes Bancassurance Client mandates have deepened Transactional accounts 78% of SA retail loan 273 new Corporate client relationships applicants selected a acquisitions mandates won YTD ▲29% in 2023 Rewards linked credit life product Registrations
Slide 9: Digitally powered business
Digitally powered business Digitally active customers Everyday Self-service Insurance SA (millions) Banking digital ATM Value-Added- 8% sales Services ▲ 91% Activate new cagr 17% 2 825 business volumes 2 609 ▲57% to account for Over-the-counter ▲18% 18% of all sales branch transactions 1 495 ▼ 20% 1
Slide 10: Winning, talented and diverse team
Winning, talented and diverse team • Colleague engagement at record levels o Retaining top talent o Rated best South African company to work and grow a career (Linkedin) • Investing in a future fit workforce o >50% of training spend focused on critical, scarce and future skills • Diverse and Inclusi
Slide 11: Active force for good in everything we do
Active force for good in everything we do Market leader in renewable energy deals (53% of REIPP) R3.6bn in mobile lending Committed to net zero disbursements in ARO RBB emissions by 2050 ▲44% Financial Climate Active Inclusion force Partnered with Khula! to R4.5bn IFC loan to promote for promote inc
Slide 12: Continued to deliver shareholder value
Continued to deliver shareholder value Pre-provision profit (Rbn) Normalised diluted HEPS (c) 16% 3% cagr: 12% cagr: 8% 26.2 1 281 1 317 22.6 18.6 976 1 018 18.5 16.9 173 1H19 1H20 1H21 1H22 1H23 1H19 1H20 1H21 1H22 1H23 Dividend per share (c) NAV per share (c) 5% 7% cagr: 8% 650 685 cagr: 7% 16 323
Slide 13: Jason Quinn, Financial Director
Jason Quinn Financial Director
Slide 14: Strong revenue underpinned earnings growth
Strong revenue underpinned earnings growth Normalised headline earnings (Rbn) Pre-provision profit up 16% (15% CCY) 8% 10% (8% CCY) 16% 1.5 (2.3) 60% 4.5 (3.1) 4% 2% 0.0 (0.3) 11.2 10.9 1H22 Net interest Non-interest Operating Credit Other* 1H23 income income expenses impairments Revenue up 13% (12%
Slide 15: Healthy net interest margin widened further
Healthy net interest margin widened further Change in net interest margin* (basis points) (29) 14 15 11 (5) 0 (8) 7 5 13 4 0 461 454 441 Loans Deposits 9 21 1H21 1H22 Pricing Mix Pricing Mix Endowment Capital ** Hedge *** Other 1H23 Note: * average interest bearing assets; ** group equity endowment;
Slide 16: Structural hedge generates value through-the-cycle
Structural hedge generates value through-the-cycle Structural hedge historical performance (Rbn) 7 20 Hedge reserve 6 Income statement release 5 Cumulative P&L release (right hand side) 15 4 3 2 10 1 0 5 -1 -2 0 -3 -4 -5 -5 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2
Slide 17: Continued targeted customer loan growth
Continued targeted customer loan growth Net customer loans (Rbn) 11% 7% 7% 448 9% 409 1H21 1H22 1H23 404 383 377 352 7% 7% 133 142 9% 124 20% 9% 17% 69 80 58 64 57 66 Product Solutions Everyday Banking Relationship Banking ARO RBB CIB Cluster Note: ARO RBB grew 16% and CIB 10% in constant currency.
Slide 18: Home Loans production is slowing, in line with market
Home Loans production is slowing, in line with market South Africa retail banking net customer loans (Rbn) 6% 9% 298 282 1H21 1H22 1H23 257 9% 8% 111 94 102 10% 10% 42 46 8% 6% 38 18 19 21 Home Loans Vehicle and Asset Credit card Personal loans Finance 18 |
Slide 19: Broad based deposit growth remains an opportunity
Broad based deposit growth remains an opportunity Customer deposits (Rbn) 12% 1H21 1H22 1H23 4% 465 416 401 6% 7% 297 279 261 11% 11% 211 190 170 21% 16% 124 102 88 Everyday Banking Relationship Banking ARO RBB CIB Note: In constant currency, ARO RBB grew 16% and CIB 10%. 19 |
Slide 20: Insurance drove non-interest income growth
Insurance drove non-interest income growth Non-interest income (Rbn) Non-interest income by division (Rbn) 3% 3% 15% 1H22 1H23 1H22 1H23 12.5 5.9 6.0 12.1 5.8 5.2 1% 20% 9% 22% 2.5 2.5 2.4 4.5 2.3 4.1 1.9 2.0 35% 112% 1.9 1.4 0.2 0.4 Net fee and Net trading Insurance Other Product Everyday Relations
Slide 21: Costs well managed with focus on franchise investment
Costs well managed with focus on franchise investment 1H23 Change Mix Cost-to-income ratio (%) *** Rm % % Staff 14 710 12 56 56.7 Property 930 4 4 54.9 Technology 2 915 10 11 53.9 Depreciation 1 509 (3) 6 51.2 Professional fees 1 215 (9) 5 49.8 Marketing 936 21 4 Communication * 778 8 3 Cash transpo
Slide 22: Increased credit charge, particularly in RBB SA
Increased credit charge, particularly in RBB SA Credit impairments (Rm) 70% 2 367 1H22 1H23 51% 14% 1 526 1 396 1 334 258% 1 175 975 1 010 20% 111% 684 572 28% 488 379 272 297 231 Home Loans Vehicle and Asset Card Personal Loans Relationship ARO RBB CIB Finance Banking Note: Excludes Head Office cre
Slide 23: South Africa’s credit impairments substantially higher
South Africa’s credit impairments substantially higher Credit impairments (Rm) Credit loss ratio (bps) 68% 138 7 509 1H22 1H23 1H22 1H23 91 93 4 468 66 9% 708 771 South Africa Africa regions South Africa Africa regions 23 |
Slide 24: Credit loss ratio well above through-the-cycle range
Credit loss ratio well above through-the-cycle range Group credit loss ratio (bps) Credit loss ratio (%) 1H22 1H23 127 TTC range 75-100 Product Solutions Cluster 0.75 1.11 Home Loans 0.19 0.65 91 88 Vehicle and Asset Finance 2.24 2.34 Everyday Banking 5.97 9.22 Relationship Banking 0.35 0.68 ARO RBB
Slide 25: Consistent Home Loans origination strategy
Consistent Home Loans origination strategy Home Loans risk-adjusted NIM by period originated Home Loans market share (%) (bps) 133 23.5 23.7 23.8 23.7 127 23.0 23.1 23.1 23.2 113 111 110 87 87 Pre-2H20 2H20 1H21 2H21 1H22 2H22 1H23 FY19 1H20 FY20 1H21 FY21 1H22 FY22 1H23 Source: Statutory returns 25
Slide 26: Credit impairments reflect stage migration
Credit impairments reflect stage migration Customer loans by stage (Rbn) Non-performing loans (%) 10% 944 919 5.82 857 1H22 FY22 1H23 5.29 5.29 11% 19% 92 95 102 64 67 76 Stage 1 Stage 2 Stage 3 1H22 FY22 1H23 26 |
Slide 27: NPL and total loan coverage remain strong
NPL and total loan coverage remain strong NPL coverage (%) Total loan coverage (%) 4.1 4.0 46.1 45.9 3.9 45.4 1H22 FY22 1H23 1H22 FY22 1H23 27 |
Slide 28: Tangible benefit from portfolio diversification …
Tangible benefit from portfolio diversification … Headline earnings (Rbn) 32% 1H22 1H23 5.9 4.5 (9%) (21%) (13%) 2.0 2.0 1.8 84% 1.3 1.5 1.1 0.9 0.5 0.6 (129%) (0.2) Product Everyday Relationship ARO RBB CIB Head Office, Solutions Banking Banking Treasury, other Pre-provision 18% 17% 0% 44% 25% - pr
Slide 29: … evident in earnings contributions and returns
… evident in earnings contributions and returns Group earnings mix (%) * Return on regulatory capital (%) 1H22 1H23 10 31.9 14 27.5 26.5 23.8 23.0 22.4 52 16 13.9 8 12.2 9.7 10.0 Product Solutions Cluster Everyday Banking Relationship Banking ARO RBB Product Everyday Relationship ARO RBB CIB CIB Sol
Slide 30: Secured lending credit charge reduced PSC earnings
Secured lending credit charge reduced PSC earnings Headline earnings (Rm) 1H22 1H23 (13%) 1 289 1 133 1 124 (38%) 40% 705 653 467 (31%) 52 36 (26%) (270) (363) Home Loans Vehicle and Asset Insurance SA Non-Banking Financial Product Solutions Finance Services and Other Cluster Pre-provision profit gr
Slide 31: Lending businesses reduced Everyday Banking earnings
Lending businesses reduced Everyday Banking earnings Headline earnings (Rm) 1H22 1H23 1 968 1% (21%) 1 513 1 525 1 547 (85%) 14% 336 52 (472%) 155 176 (36) (206) Card Personal Loans Transactions and Other Everyday Banking Deposits Pre-provision profit growth: 26% 30% 5% - 17% 31 |
Slide 32: Relationship Banking investing for growth
Relationship Banking investing for growth Headline earnings (Rm) 5% 10% 383 396 111% 2023 (9%) (9%) 257 Pre-provision profit flat 1833 80 1H22 Revenue Operating Credit Other * 1H23 expenses impairments Note: * Includes other expenses, JVs and associates, taxation, headline earnings adjustments 32 |
Slide 33: CIB benefits from its improving scale and diversification
CIB benefits from its improving scale and diversification Headline earnings (Rm) 32% 1H22 1H23 5 926 29% 4 500 3 897 5% 3 196 3 347 98% 3 031 38% 2 579 2 029 1 469 1 304 Corporate Bank Investment Bank Total CIB South Africa ARO Pre-provision profit growth: 42% 16% 25% 4% 64% 33 |
Slide 34: Africa regions drove group revenue and earnings growth
Africa regions drove group revenue and earnings growth Revenue (Rbn) Normalised headline earnings (Rm) 5% 36.9 9 029 35.1 1H22 1H23 1H22 1H23 (17%) 7 503 36% 97% 15.4 3 656 11.3 1 859 South Africa Africa regions South Africa Africa regions Note: In constant currency, Africa regions revenue grew 31%
Slide 35: ARO RBB substantial operational improvement
ARO RBB substantial operational improvement Pre-provision profit (Rbn) Headline earnings (Rbn) 84% 44% 0.9 48% 2.9 >(100)% 2.0 0.5 1.3 (0.0) 1H21 1H22 1H23 1H21 1H22 1H23 RoRC (%) Cost-to-income ratio (%) 13.9 75.5 10.0 69.4 65.0 (0.3) -0.3 1H21 1H22 1H23 1H21 1H22 1H23 35 |
Slide 36: CET1 ratio remains strong and above Board target range
CET1 ratio remains strong and above Board target range Group common equity tier 1 ratio (%) (0.2) 12.1 1.0 (0.6) 12.8 13.0 Board target range 11.0% - 12.5% FY22 Dividend Profit RWA 1H23 36 |
Slide 37: 2023 outlook
2023 outlook 2023 expectations Revenue growth expected to slow in 2H23, partly due to material base effects. High Revenue single digit revenue 2023 growth, driven by net interest income given balance sheet growth and higher policy rates. Balance sheet Low double-digit growth in customer loans and de
Slide 38: 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