Slide 1: Absa Group 1H18 financial results presentation
Absa Group 1H18 financial results presentation 6 August 2018 Maria Ramos and Jason Quinn
Slide 2: Strategic review
Strategic review Maria Ramos 01
Slide 3: Performance review, separation update
Performance review, separation update Jason Quinn 02
Slide 4: Normalised performance in line with guidance
Normalised performance in line with guidance Change Normalisation 1H17 1H18 Rm (%) adjustments Net interest income 20 791 21 188 2 175 Non-interest income 15 294 15 854 4 413 Total income 36 085 37 042 3 588 Impairment losses 3 773 3 431 (9) - Operating expenses 20 038 20 834 4 (1 364) Other* (716)
Slide 5: Salient features
Salient features 1H17 1H18 % % Diluted headline EPS growth 7 3 Dividend per share growth 3 3 Net asset value per share growth 4 4 Return on equity 16.8 16.9 Net interest margin 4.81 4.76 Operating JAWS (4) (1) Cost to income ratio 55.5 56.2 Credit loss ratio 0.96 0.83 5
Slide 6: Slight net interest margin compression
Slight net interest margin compression Change in net interest margin* (basis points) 481 (6) (1) (1) 3 (3) (1) (1) 3 2 476 Loans Deposits (4) (1) 1H17 Pricing Mix Pricing Mix Endowment Capital Hedge ** Rest of Other 1H18 Africa Note: * average interest bearing assets; ** interest rate risk managemen
Slide 7: Group loan growth improving
Group loan growth improving Gross customer loans (Rbn) Retail SA gross customer loans (Rbn) 450 5% 1% 400 228 231 1H17 1H18 350 1H17 1H18 300 250 14% 12% 200 109 150 97 100 1% 9% 12% 15% 42 43 10% 50 18 20 0 Retail Business CIB RBB CIB Home Loans Vehicle & Card Personal Asset Finance Loans South Afr
Slide 8: Increase in annuity non-interest income
Increase in annuity non-interest income Non-interest income by type (Rbn) Non-interest income by division (Rbn) 4% 5% 11.0 8.8 10.6 8.3 1H17 1H18 1H17 1H18 11% 7% (2%) (8%) 19% 2.8 2.5 2.4 2.6 2.6 2.1 2.3 2.4 2.4 2.0 Fees and Trading Other RBB South CIB South Rest of WIMI commission Africa Africa Af
Slide 9: Continued to manage costs while investing
Continued to manage costs while investing 1H18 Change Mix Rm % % YoY constant currency growth (%) 12 Staff 11 647 4 56 Property-related 1 633 (1) 8 10 Revenue Technology 1 592 1 8 Operating expenses Depreciation 1 125 20 5 8 Professional fees 877 (6) 4 6 Marketing 731 (0) 4 Communication 629 (6) 3 4
Slide 10: Credit impairments improved across most portfolios
Credit impairments improved across most portfolios Credit loss ratio (bps) Retail SA credit loss ratio (bps) 249 621 587 1H17 1H18 1H17 1H18 536 423 153 139 124 62 62 60 101 114 30 5 18 41 16 16 Retail Business CIB RBB CIB Home Loans Vehicle & Card Personal Asset Finance Loans South Africa Rest of A
Slide 11: IFRS9 impacted credit impairments …
IFRS9 impacted credit impairments … Change from IAS39 provision to Change from IAS39 NPL to IFRS9 expected credit loss (Rbn) IFRS9 stage 3 ratio (%) 27.8 5.53 4.2 5.31 Stage 1 21.9 IIS 3.0 4.9 Stage 2 IIS 0.37 3.75 PL 5.6 18.7 Stage 3 NPL 13.3 31 December 2017 1 January 2018 NPL30 NPL Stage Stage 3
Slide 12: … and coverage ratios
… and coverage ratios Change from IAS39 NPL coverage to Change from IAS39 performing loan IFRS9 stage 3 coverage (%) coverage to IFRS9 stage 1 and 2 coverage (bp) 107 105 43.1 42.0 40.7 70 NPL30 NPL Stage Stage 3 3 1 StageStage 3 303June Performing NPL 30 Stage31+2 1 Stage Stage Stage 1+2 3 30 June
Slide 13: Maintaining strong capital levels
Maintaining strong capital levels Absa Group Common Equity Tier 1 ratio (%) 2.0 (1.2) 12.2 12.1 (0.6) 2.2 (0.1) Board target range 10.0% - 11.5% 1H17 RWA movement IFRS9 Profit Dividend 1H18 13
Slide 14: Group returns have trended upwards
Group returns have trended upwards Group return on assets (%) Group return on equity (%) 16.8 16.9 1.41 1.40 16.4 16.0 16.1 1.33 1.29 1.27 14.3 1.22 1H13 1H14 1H15 1H16 1H17 1H18 1H13 1H14 1H15 1H16 1H17 1H18 14
Slide 15: Solid underlying divisional returns
Solid underlying divisional returns Divisional return on regulatory capital (%) 23.0 1H17 1H18 22.5 21.9 20.3 19.6 17.3 17.4 15.9 RBB SA CIB SA Rest of Africa Banking * WIMI * 15 Note: * return on equity
Slide 16: We benefit from a well-diversified portfolio
We benefit from a well-diversified portfolio Divisional headline earnings (Rm) Headline earnings mix 1H18 (%) * 4% 4 209 4 039 8 1H17 1H18 15 37 6 (6%) 8% 21 1 783 1 683 15 1 636 1 512 5% 616 646 Retail Banking SA Business Banking SA CIB SA RBB Rest of Africa RBB SA CIB SA Rest of Africa WIMI CIB Re
Slide 17: Regaining RBB leadership in SA a priority
Regaining RBB leadership in SA a priority • Recalibrated RBB SA’s operating model Headline earnings drivers (Rm) with a focus on growth and agility 4% (6%) 7% 183 (827) 826 • Returns remain healthy, but we aim to 1% 4% improve revenue and earnings growth (12) 4 209 4 039 • Grow consumer finance busi
Slide 18: Retail SA maintained new business momentum
Retail SA maintained new business momentum Retail SA YoY loan production (%) Rewards customers (m) 9% 29 1H17 2H17 1H18 13% 2.8 18% 2.6 22 19 2.3 16 15 14 12 9 5 2 (1) (11) Home Loans Vehicle and Personal Card Asset Finance Loans 1H16 1H17 1H18 18
Slide 19: Home Loans and Card drove RBB SA growth
Home Loans and Card drove RBB SA growth Headline earnings (Rm) 1H17 1H18 1% 1191 1208 1157 (9%) 16% 1048 901 19% 774 717 604 (6%) 432 406 10% 182 201 Home Loans Vehicle and Card and Transactional Personal Loans Business Banking Asset Finance Payments and deposits 19
Slide 20: Positive underlying momentum in WIMI
Positive underlying momentum in WIMI • Aligning more closely to RBB to enhance Growth in embedded value of new collaboration 19 • Solid growth in continuing line earnings • Strong growth in Life embedded value of 14 new business • Assets under management lower YTD • Significant improvement in Short-
Slide 21: Credit impairments dampen CIB SA earnings
Credit impairments dampen CIB SA earnings Headline earnings (Rm) • Revenue continues to benefit from diversification 5% 79% 262 (168) • Opportunity remains to gain share in 10% (285) lending and transactional revenue 1 783 (15% (6%) ) • Increased cost growth reflects investment 91 1 683 • Large sing
Slide 22: Rest of Africa Banking enhances our growth
Rest of Africa Banking enhances our growth Headline earnings growth (%) Rest of Africa Banking return on equity (%) 19 19.6 South Africa Rest of Africa Banking 16.6 15.1 13.5 12.6 12.6 8 5 2 1H17 1H18 FY13 FY14 FY15 FY16 FY17 1H18 22
Slide 23: Progress to date in line with plan
Progress to date in line with plan Finish 22 material services terminated in rebranding line with Transitional Services rest of Africa Agreement Corporate channels Rest of Africa FX core banking trading 83 projects completed in line with plan India IT CLS resource Back office payments outsourcing An
Slide 24: Separation journey is on track
Separation journey is on track • Sufficient financial and people Separation spend and remaining contribution (Rbn) resources 12.6 (4.9) • Execution is well underway • Robust governance and assurance in 1.0 8.7 place • Proactive and effective risk management PLC Spent Revenue Remaining contribution c
Slide 25: Outlook for 2018
Outlook for 2018 • Loan and deposit growth to improve • Net interest margin is expected to decline slightly • Costs will remain well controlled and improve our operating JAWS from 2017 • Credit loss ratio is expected to improve • RoE is likely to improve slightly • Dividend cover will remain the sam
Slide 26: Disclaimer
Disclaimer Forward-looking statements 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, objectiv