Absa Group Limited · JSE:ABG
Absa — Merrill Lynch Conference 2009
30 slides from Absa's conference presentation, Mar 23, 2009
Slide 1: Absa Group Limited Investor Presentation
Absa Group Limited Investor Presentation Merrill Lynch Conference 23 – 25 March 2009 1
Slide 2: Introduction
Introduction • Leading retail bank in South Africa • Total Assets R773,8 billion • Market capitalisation R61,9 billion 1 ; free float 41,4% • Over 10 million customers bank with Absa • Largest distribution footprint • Leading banking brand • Number of staffed outlets 1 192; Number of ATMs 9 104 1 As
Slide 3: Group Structure
Group Structure Absa Group Limited Absa Bank Limited Absa Financial Services Limited Other subsidiaries Associated undertakings and other interests Retail banking + Absa Wealth + Retail Bank + Absa Home Loans. + Absa Card + Absa Vehicle and Asset Finance Corporate and commercial banking + Absa Corpo
Slide 4: Breakdown of Advances Book
Contribution by Business Area Profit Contribution by Breakdown of business area2 Advances Book 12% 15.40% 35.80% 23% 21.70% 65% 27.10% 2. Calculated after the allocation of capital, funding and corporate centre if the VISA profit of R636m is included in December 2008, the contributions will be as fo
Slide 5: Strategy
Strategy 5
Slide 6: Near Term Priorities
Near Term Priorities • Focus on liability management • Profitability vs market share Maintain Profitability • Maximise cross selling • Transaction volumes and asset pricing • Specific capital demand targets • Free cash flow generation Preserve Capital • RWA relief initiatives • Higher hurdle rates •
Slide 7: Long Term Strategy Remains on Track
Long Term Strategy Remains on Track To be the Best Financial Services Provider in South Africa and Selected African markets Build a well diversified business Embed market leadership in retail financial services Build the leading investment bank Accelerate growth in commercial business Grow and build
Slide 8: Financial Performance 2008
Financial Performance 2008 8
Slide 9: FY08 Financial Highlights
FY08 Financial Highlights • Attributable earnings of R10,6bn ( 10%) • Headline earnings of R9,9 billion ( 5%) • Diluted headline earnings per share of 1 412 cents ( 7%) • Dividends per share of 595 cents ( 6%) • Net asset value per share of 6 950 cents ( 26%) • Return on equity of 23.4% • Tier
Slide 10: Strong Growth From Commercial & Investment Banking
Strong Growth From Commercial & Investment Banking Earnings Earnings Earnings growth composition RoE Rm % % % Retail Bank 3 706 (25) 35 20 Commercial Bank 2 806 30 26 25 Absa Capital 2 249 30 21 21 Bancassurance 1 597 6 15 40 Corporate Centre 691 - 7 - Preference Dividends (457) (46) (4) - Absa Grou
Slide 11: A Resilient Performance
A Resilient Performance 2008 2007 Change Rm Rm % Net interest income 21 795 18 890. 15 Non-interest income 21 115 16 756. 26 Top line revenue 42 910 35 646 20 Impairment charge (5 839) (2 433) 140 Operating expenditure (21 935) (19 209) 14 Taxation (3 966) (4 052) 2 Attributable earnings
Slide 12: Advances Growth Slowing, 32% rise in Deposits
Advances Growth Slowing, 32% rise in Deposits Dec Dec Change Market Gross Loans and Advances (Rm) 2008 2007 % share1 Mortgage loans 252 704 225 713 12 1 Vehicle finance 47 798 47 159 1 3 Card advances 19 522 13 831 41 2 Instalment loans 14 665 12 459 18 2 Total net loans and advances Rm 34
Slide 13: Strong Growth in Non-interest Income
Strong Growth in Non-interest Income 2008 Change Mix Rm % % Net fee and commission income 13 343 15 66 Net trading income 2 111 92 10 Bancassurance – premium income and 2 156 12 11 policyholders‟ benefits Hedging activities and other income 1 062 21 5 Investment income 1 703 6 8 Non-intere
Slide 14: Interest Margin Remains Under Pressure
Interest Margin Remains Under Pressure Margin Basis Points Compression Decline in margin on total assets 35 • Increase in non-interest earning assets (15) Decline in margin on interest-earnings assets 20 Represented by: • Advances pricing and composition 3 • Endowment impact on capital 7 • Deposit p
Slide 15: Prolonged Higher Rates Impact on Recovery Values
Prolonged Higher Rates Impact on Recovery Values NPLs Impairment Ratios 2008 2007 2008 2007 2008 Impairments % % % % H1 % Retail Bank 5.0 2.2 1.68 0.74 1.21 • Home loans 5.4 2.2 1.19 0.26 0.81 • AVAF 3.3 1.5 2.31 1.14 1.57 • Card 7.5 7.6 5.65 3.50 4.46 • Instalment / products 9.8 6.5 8.15 5.34 8.01
Slide 16: Strong Capital Position
Strong Capital Position 2008 Mix Capital Demand Capital Adequacy (%) Bank Group Rbn % Credit risk 294 77 Core Tier I 9.7 10.3 • Retail 141 48 Tier I 11.0 11.6 Tier II 3.0 2.5 • ACBB 69 23 Total 14.0 14.1 • Absa Capital 55 19 • Africa and other Capital Generation (Rbn) 29 10 assets Operational risk 4
Slide 17: Outlook
Outlook 17
Slide 18: Prospects
Prospects • Rising Impairments will remain a challenge – Corporate and Commercial Banking – Retail • Slowing volume growth • Margins under pressure • Key drivers – Unemployment – Global macro conditions – Rand volatility 18
Slide 19: Conclusion
Conclusion • Protect our earnings • Selectively grow our market share • Maintain ongoing focus on cost reduction • Efficient management and allocation of capital 19
Slide 20: Addendum
Addendum Financial Results For the year ended 31 December 2008 20
Slide 21: Retail Bank Financial Highlights
Retail Bank Financial Highlights Attributable Earnings (Rm) 6000 • Revenue of R24.9 billion ( 15%) 5000 • Attributable earnings of R3.7billion ( 25%) 4000 • Contribution to Group 3000 earnings of 35.8% (F07 contribution: 47.8%) 2000 • Sharp rise in impairments 3 706 4 943 of 159% 1000 • Cost to in
Slide 22: Quality Long Dated Home Loans Book
Quality Long Dated Home Loans Book 16% Age Analysis • 60% of book older than 2 years • Less than 1 year granted under more stringent criteria – Loan to value caps 23% 60% – Affordability – Ability to repay Less than 1 year Between 1 & 2 years More than 2 years Loan to Value 11% • 76% of book has les
Slide 23: Key Highlights - ACBB
Key Highlights - ACBB Attributable Earnings (Rm) • Attributable earnings of R2.8billion ( 30%) 3000 • Revenue of R8.7billion ( 20%) 2500 • Transaction volumes up 10% 2000 • Impairments well controlled, impairment ratio of 0.28 % 1500 • Cost to income ratio improves from 51.8% to 49.8% 1000 2 806 2
Slide 24: ACBB Product and Sector Diversification
ACBB Product and Sector Diversification % 100 2 2 3 6 9% 80 37 8% 38 60 39% 17% 40 50 48 7% 20 20% 8 6 0 Dec Dec 2007 2008 Corporate Large Medium CPF CAF Term CPF Equities Africa Cheque accounts Specfin Other* 24
Slide 25: AFS Financial Highlights
AFS Financial Highlights Business Unit Growth • Attributable earnings of Earnings Mix (%) R1 597m ( 6.3%) 28% • Operational earnings ( 16.4%) 19 29 14 47% • Investment income contribution to earnings of 19% (FY07: 29%) 10 14 4% 15 • Net inflow of non - money 18 16% market mandates of R9,4b
Slide 26: Absa Capital Revenue breakdown
Absa Capital Revenue breakdown Revenue (Rm6) • Revenue of R5.3billion ( 38%) CAGR 46% 5 348 („06–‟08) • Attributable earnings of R2.2billion ( 30%) • Contribution to Group earnings 3 869 2 098 of 21.7% (F07 contribution: 16.8%) 2 519 1 638 • Growth in non-interest income mainly due to continued st
Slide 27: Acquisitions as a result of Single Stock Futures Defaults
Acquisitions as a result of Single Stock Futures Defaults Number of % of Issued Acquisition Share Name shares Ordinary Cost Accounting basis (million) Shares Rm Pinnacle Point Group 1 259.6 28 931.4 Equity accounted Sekunjalo Investments 84.9 17 36.5 Equity accounted7 Blue Financial Services 95.9 16
Slide 28: Absa's profile
Absa‟s profile • Absa Group Limited (Absa), listed on the JSE Limited, is one of South Africa's largest financial services groups, offering a complete range of banking, bancassurance and wealth management products and services • Absa's business is conducted primarily in South Africa. In addition, th
Slide 29: Contact Details
Contact Details Contacts Telephone Telefax (+2711) (+2711) Head: Investor Relations • Nerina Bodasing 350 2598 3505924 Manager Investor Relations Registered Address: • Nwabisa Piki 350 5926 350 5924 3rd Floor, Absa Towers East, Transfer secretaries 170 Main Street, Computershare Investor Services 20
Slide 30: 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