Slide 1: Absa Group Performance: Presentation to the IAS
ABSA GROUP PERFORMANCE ABSA GROUP PERFORMANCE BUSINESS UNIT PERFORMANCE PRESENTATION TO THE IAS For the six months ended 30 June 2006 For the six months ended 30 June 2006 For the six months ended 30 June 2006 BUSINESS UNIT PERFORMANCE PRESENTATION TO THE IAS Absa Group Limited 2006 Interim financia
Slide 2: Contents
62573 Cover presentation 27/7/2006 17:43 Page 2 62573 Cover buiness unit 27/7/2006 17:42 Page 2 62573 Absa cover and ifc 27/7/2006 17:40 Page 2 CONTENTS CONTENTS BUSINESS UNIT PERFORMANCE ABSA GROUP PERFORMANCE Profit contribution by business area 36 Financial highlights 1 Segmental reporting per ma
Slide 3: Agenda
Agenda Putting the building blocks for progress in place Steve Booysen Financial overview Jacques Schindehütte Prospects and key differentiators Steve Booysen 2 1
Slide 4: Operating environment
Operating environment Stable domestic growth in a strong global economy Global growth the best in three decades Positive domestic economic conditions persisted – GDP growth picked up slightly from the end of 2005 – Inflation and interest rates started to rise – Consumer demand continued at a strong
Slide 5: Domestic developments; Financial highlights
Domestic developments Intense focus on consumerism – National Credit Act – Competition Commission enquiry into transaction fees Basel ll Financial Sector Charter Growing interest in sub-Saharan Africa 5 Financial highlights For the six months ended 30 June 2006 Headline earnings © 22.4% Headline ear
Slide 6: What did we achieve? Retail banking
What did we achieve? Keeping our eye on the ball Focus on core operations resulted in: – A growing customer base – Strengthening our overall market position – Further expanding our infrastructure and reach Made good progress on realising synergy benefits Attracted top talent 7 Retail banking Leverag
Slide 7: Retail banking market share and Absa Card
Retail banking Market share (May 2006) – Growth in majority of the counters Total market Individual market Share Position Change* Share Position Change* % % % % Mortgage advances 32.4 1 © 0.5 37.0 1 © 0.2 Instalment finance 25.9 2 © 1.1 26.9 2 © 0.5 Credit card debtors 23.5 3 © 1.1 23.6 3 © 0.7 Over
Slide 8: Corporate and Business Banking Services; Absa Capital
Corporate and Business Banking Services Realigned and re-engineered Realigned the corporate and business banking models Enhanced our customer offering and relationship management Value aligned performance measurement (VAPM) methodology Enhanced industry sector focus Market volatility impacted commer
Slide 9: Bancassurance; Barclays related synergies
Bancassurance Solid operational performance Short-term insurance underwriting cycle hardening Repositioning of investment businesses to enhance product offering and extract value Sound investment performance but lower than previous year’s record highs Integrated bancassurance offering extended to pa
Slide 10: Group income statement
Group income statement Six months ended 30 June 2006 2005 (Unaudited) (Unaudited) (Pro forma) Change Rm Rm % Net interest income 7 163 5 588 © 28.2 Impairment charge (594) (568) © 4.6 Non-interest income 6 600 6 417 © 2.9 Operating expenses (7 936) (6 824) © 16.3 Taxation (1 391) (1 216) © 14.4 Othe
Slide 11: Headline earnings per share; Business unit performance
Headline earnings per share 900 827.2 800 740.4 688.5 700 600 528.1 © 20.4% 500 © 22.5% © 14.4% 520.7 400 454.8 © 39.6% 432.3 300 © 15.2% 371.2 324.5 200 232.5 100 0 Cents Mar 2003 Mar 2004 Mar 2005 *Dec 2005 Jun 2005 Jun 2006 (Pro forma) Interim Final Note: The comparative for March 2005 has been r
Slide 12: Gross loans and advances; Deposits due to customers and banks
Gross loans and advances to customers © 25.7% 400 350 372 296 300 250 © 35.1% 200 © 14.6% 142 191 150 © 21.5% 103 100 © 49.1% 45 118 50 6 8 55 0 R billion Mortgages* Credit card Instalment Overdrafts and Total gross advances finance other loans advances 30 June 2005 30 June 2006 *Includes commercial
Slide 13: Change in net interest margin; Non-interest income
Change in net interest margin Percentage Jan 2006 Apr 2005 Net interest margin – Opening position 3.36 3.25 Composition change of deposits and advances (0.08) 0.00 Pricing impact of deposits (0.02) (0.07) Pricing impact of advances (0.00) (0.06) International and African operations 0.00 0.03 Impact
Slide 14: Non-interest income; Credit impairments and provisioning
Non-interest income Credit related and secondary market income growth Six months ended 30 June 2006 2005 Change Rm Rm % Net fee and commission income 4 841 4 657 4.0 Credit cards 632 533 18.6 Cheque accounts 1 162 1 046 11.1 Electronic banking 1 055 958 10.1 Other transaction related fees and commis
Slide 15: Credit impairment trends; Operating expenses
Credit impairment trends 5 4.6 4 3.0 3 1.8 2 2.0 1 1.7 1.3 0.87 0.55 0 0.35 0.26 0.41 0.35 % Sep 2003 Sep 2004 Sep 2005 *Dec 2005 Jun 2005 Jun 2006 (pro forma) Impairment ratio** Non-performing loans and advances ratio*** Note: The comparative for September 2004 has been restated for International F
Slide 16: Operating expenses vs top-line revenue; Investments facilitating future growth
Operating expenses vs top-line revenue Six months ended 30 June 2006 Cost-to- Top-line Cost income growth growth ratio % % % Retail banking 18.5 16.0 61.9 – Segment-focused* 17.0 14.3 75.4 – Absa Home Loans 16.2 16.2 45.5 – Absa Card 32.7 34.3 46.2 – AVAF 17.6 14.9 46.0 Corporate and Business Bankin
Slide 17: Barclays related synergies and implementation costs
Barclays related synergies and implementation costs 1 400 1 500 1 200 Synergies 1 000 750 500 300 30 67 197 0 2005 2006 2007 2008 2009 0 211 262 220 240 500 670 670 1 000 Implementation costs R million Forecast synergy benefits Actual synergy benefits – five months Actual synergy benefits – interim
Slide 18: Barclays related synergies; Absa's capital position
Barclays related synergies Implementation costs Sarbanes-Oxley (expected spend of R200 million to R250 million) Upgrading capabilities in Absa Capital, Absa Card and Absa Corporate and Business Banking Services Delivering IT and operations benefits Renewing platforms across the Barclays operations i
Slide 19: Dividends per share and dividend cover; RoA and advances growth
Dividends per share and dividend cover Dividend payout ratio (%) Final 29.5 29.2 42.6 47.4 n/a Interim 25.8 22.5 26.3 36.6 40.1 600adequacy ratio (%) Capital Bank 11.5 12.3 11.4 10.7 12.7 500 Group 12.5 13.0 12.0 11.3 12.9 400 295.0 295.0 300 © 30.0%** 200 182.0 © 68.4% 145.0 208.0 © 31.9% 160.0 100
Slide 20: RoE decomposition; Shareholder value creation
RoE decomposition Six months ended 30 June 2006 2005 % % Headline RoA 1.60 1.67 Net interest income 3.27 3.29 Non-interest income 3.05 3.78 Expenses (including indirect taxes (3.86) (4.28) and impairments) Impairment charge (0.27) (0.33) Taxation (0.63) (0.72) Other 0.04 (0.07) Leverage 15.4 14.5 He
Slide 21: Prospects
Prospects More challenging operating environment Inflation expected to accelerate ¨ economic growth likely to slow somewhat Household credit growth expected to decelerate – Slowdown to be evident in mortgages, motor vehicle sales and credit cards Impairment charges to normalise Infrastructure invest
Slide 22: Key market challenges; Key differentiators
Key market challenges Increased pressure to deliver Consumerism to gather pace Low levels of savings in the household sector Competitive conditions intensifying Regulatory and compliance cost pressures to continue Increased pressure to deliver on operational efficiency initiatives 39 Key differentia
Slide 23: Our commitments
Our commitments Shareholders To build the pre-eminent bank in South Africa and the rest of Africa To deliver sustainable returns over time Customers To empower our customers through increasing choice and education Employees Ensuring that our employees are highly capable, empowered and motivated Tran
Slide 24: Disclaimer
Disclaimer This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended and Section 27A of the US Securities Act of 1933, as amended with respect to certain of the plans, current goals and expectations of Absa Group
Slide 25: Administrative information
ABSA GROUP PERFORMANCE ABSA GROUP PERFORMANCE BUSINESS UNIT PERFORMANCE PRESENTATION TO THE IAS For the six months ended 30 June 2006 For the six months ended 30 June 2006 For the six months ended 30 June 2006 BUSINESS UNIT PERFORMANCE PRESENTATION TO THE IAS Absa Group Limited 2006 Interim financia
Slide 26: Administrative information
ABSA GROUP PERFORMANCE ABSA GROUP PERFORMANCE BUSINESS UNIT PERFORMANCE PRESENTATION TO THE IAS For the six months ended 30 June 2006 For the six months ended 30 June 2006 For the six months ended 30 June 2006 BUSINESS UNIT PERFORMANCE PRESENTATION TO THE IAS Absa Group Limited 2006 Interim financia