Slide 1: Presentation to the IAS
to the IAS Presentation Presentation to the IAS
Slide 2: Slide 2
Slide 3: Improving competitiveness
Steve Booysen Improving competitiveness 2 1
Slide 4: Making the most of a strong market; Financial highlights
Making the most of a strong market • Global economic growth continued but uncertainties increased • Domestic economic expansion remained solid • Changes in the drivers of growth became evident • Demand for household credit remained strong • Increasing inflationary pressures and interest rates • Incr
Slide 5: Improving competitiveness by focusing on the basics; Retail banking forging ahead
Improving competitiveness by focusing on the basics • Growing the customer base through enhanced value propositions • Improving diversity of earnings • Building a winning team • Investing in technological improvement to support customer service and efficiencies • Improving compliance to world-class
Slide 6: Uplift in corporate and business banking; Continued growth in Absa Capital
Uplift in corporate and business Attributable earnings up 46% to R740m RoE of 29.6% (2006: 21.6%) banking • Strong earnings performance • Improved quality of advances book • Income diversification strategies gaining momentum • Leveraging the customer base • New operating model emphasizing sales and
Slide 7: Bancassurance showing promise; Re-shaping African operations for the future
Attributable earnings up 34% to R750m Bancassurance showing promise RoE of 38.4% (2006: 33.0%) • Solid performance from insurance operations • Market conditions assisted new business volumes • Support from strong equity markets • Re-positioning our investment management business • Focus on efficienc
Slide 8: More complex demands changing the role of banks; A changing regulatory environment
More complex demands changing the role of banks • Banks supporting national priorities beyond credit and risk – Banks are pivotal in South Africa’s growth strategy – AsgiSA – Capacity limitations require infrastructure investment – Culture of savings and investment now vital – Facilitating access to
Slide 9: Shifting gears in a different economic environment; Positioned for growth
Shifting gears in a different economic environment • Inflation risks expected to result in continued interest rate pressure • Household indebtedness and rising credit costs to impact affordability • Increased investment in infrastructure and manufacturing capacity • Growth rates to remain healthy, b
Slide 10: Group income statement
Jacques Schindehütte Financial overview 15 Group income statement For the six months ended 30 June 2007 2006 Change Rm Rm % Net interest income 8 577 6 891 © 25 Impairment charge (985) (594) © 66 Non-interest income 8 411 6 869 © 22 Operating expenditure* 9 590 8 356 © 15 Taxation (1 900) (1 389) ©
Slide 11: Value for shareholders; Sound advances growth
Value for shareholders Cents per share 265 240 215*** 208 180*** 661.1 651.3 522.5 520.7 432.3 © 20.4%* © 26.5%* © 25.1%* 1H2005** 2H2005 ** 1H2006 2H2006 1H2007 Headline earnings per share (cents) Dividends per share (cents) *Growth based on comparable six months **Pro-forma figures *** Dividends r
Slide 12: Interest margins remained stable; Credit impairments – consumers under pressure
Interest margins remained stable Percentage Jan 2007 Jan 2006 Net interest margin – opening position 3.30 3.27 Abacas* adjustment (0.01) − Net interest margin – adjusted 3.29 3.27 • Composition change of deposits (0.04) (0.10) • Pricing change of deposits (including risk strategies) 0.10 0.10 • Impa
Slide 13: Volumes drive growth; Stable asset yields and improved efficiency
Volumes drive growth For the six months ended 30 June 2007 2006 Change Rm Rm % • Net fee and commission income 5 626 4 805 17 • Investment income 1 084 588 84 • Trading and banking income 930 610 53 • Net insurance premium income 1 653 1 408 17 • Net insurance claims and benefits paid (778) (607) (2
Slide 14: Accelerated synergy realisation continues; Capital management – Absa Bank
Accelerated synergy realisation continues Synergies Implementation costs 1 400 1 200 753 750 670 670 640 650* 300* 300 240 220 211 67 30 Dec 2005 Dec 2006 Dec 2007 Dec 2008 Dec 2009 Dec 2005 Dec 2006 Dec 2007 Dec 2008 Communicated targets (Rm) Actual synergies/Implementation costs (Rm) *Six months e
Slide 15: Favourable, albeit tougher trading conditions
Favourable, albeit tougher trading conditions • Solid progress on all fronts • Improved diversification • Synergy target within reach • Well positioned for market opportunities 25 Addendum 26 13
Slide 16: Executing our strategy to enhance competitiveness; Earnings diversification
Executing our strategy to enhance competitiveness Developing the franchise Retail banking Corporate and Solidifying the Customer Investment Product Distribution Bancassurance business foundations segment banking offerings network banking propositions Talent Operations and Driving towards best-in-cla
Slide 17: Continued growth in the Group's customer base; Facilitating enhanced access to financial services
Continued growth in the Group’s customer base Thousands © 8.4% © 8.4% © 12.8% © 12.0% 8 796 8 709 8 118 8 035 7 246 7 122 © 11.6% © 14.6% 4 859 4 356 © 6.4% © 9.9% 3 802 3 246 3 052 2 777 © 5.6% ª 33.5% 124* 82 87 Mass market Middle market Total retail Absa Corporate Total Absa and Business Bank Jun
Slide 18: Strong operational performance from bancassurance; Gross loans and advances to customers
Strong operational performance from bancassurance For the six months ended 30 June Life insurance 2007 2006 Change % • Embedded value (Rm) 2 328 2 045 14 • Embedded value on new business (Rm) 142 131 8 • Return on embedded value (%) 30.3 31.5 • Net income after tax (Rm) 308 216 43 Short-term insuran
Slide 19: Non-interest income growth; Credit impairment trends
Non-interest income growth R million Percentage 50.7 51.8 53.4 49.9 49.5 © 22.4% © 7.0% 2 785 © 10.0% 2 064 © 16.7% 1 760 1 494 5 626 1 960 4 805 4 657 4 049 3 078 Sep 2003 Sep 2004 Jun 2005* Jun 2006 Jun 2007 Net fee and commission income (Rm) Other non-interest income (Rm) Non-interest income cont
Slide 20: Operating expenses; Operating leverage enhancing growth
Operating expenses R million Percentage 58.6 59.0 56.8 57.7 53.6 © 14.8% © 16.3% 4 280 © 9.9% 4 082 © 8.5% 3 312 3 217 2 949 4 833 3 512 3 853 2 801 3 101 Sep 2003 Sep 2004 Jun 2005* Jun 2006 Jun 2007 Staff expenses (Rm) Other expenses (Rm) Cost-to-income ratio (%) *Pro forma figures 35 Operating le
Slide 21: Headline earnings per share; Total funding
Headline earnings per share Cents per share 1 181.8 954.8 661.1 827.2 522.5 688.5 456.0 364.0 651.3 520.7 432.3 324.5 371.2 © 39.6% © 14.4% © 20.4% © 25.1% Mar 2004 Mar 2005 Dec 2005* Dec 2006 Jun 2007 Interim (cents) Final (cents) ©% Interim headline earnings per share growth (%) *Pro forma figures
Slide 22: 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