Slide 1: Absa Group Limited 2011 Results Presentation
Absa Group Limited 2011 Results Presentation
Slide 2: Review
Review Maria Ramos Group Chief Executive
Slide 3: Delivering on our commitments
Delivering on our commitments • Double digit non-interest income growth √ • Single digit cost growth √ • Achieved positive JAWS √ • Reduced credit loss ratio √ • Improved profitability √ • Strengthened our balance sheet further √ Strong earnings growth Declared a record dividend 3
Slide 4: Creating significant value
Creating significant value 10000 800 Nine-year CAGR: 9000 684 700 DPS 22% 8000 595 NAV per share 16% 560 600 7000 473 6000 445 455 500 5000 400 295 4000 300 3000 182 145 200 2000 116 1000 100 2 354 2 589 2 996 3 862 4 717 5 537 6 998 7 038 7 838 8 690 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 5: Ensuring long term sustainability
Ensuring long term sustainability Strengthening capital Improving liquidity Credit quality normalising Core Tier 1 capital Surplus liquid assets 27 Credit loss ratio* (%) (Rbn) (%) 13.0 1.7 11.5 11.7 17 1.2 1.2 10.4 1.0 89 8.9 06 0.6 4 0 1 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008
Slide 6: Delivering on our strategy
Delivering on our strategy • Established our Corporate Bank • Forex platform performing well • Wealth gaining traction • Retail continues to innovate for customers • Business Bank growing electronic banking • Financial Services entered rest of Africa • Progressed our Africa strategy 6
Slide 7: Strong combined franchise
Strong combined franchise • Leading retail bank • Solid business bank with scope to grow • Absa Ab C Capital it l strong t iin ttargeted t d areas • Quality bancassurance franchise ... operating as One Absa 7
Slide 8: Financial Review
Financial Review David Hodnett Group Financial Director
Slide 9: Delivered a strong performance
Delivered a strong performance Change 2011 2010 % Headline earnings (Rm) 9 719 8 041 21 Pre-provision profit (Rm) 20 374 18 744 9 Diluted headline earnings per share (cents) 1 350 350.0 0 1 115 115.7 7 21 Dividends per ordinary share (cents) 684 455 50 Net interest margin on interest-bearing assets
Slide 10: Solid earnings growth
Solid earnings growth 2011 2010 Change Rm Rm % Headline earnings (Rm) Net interest income 24 429 23 340 5 24% 6% 21% Non interest income Non-interest 21 403 19 474 10 9 719 Total revenue 45 832 42 814 7 Credit losses (5 081) (6 005) (15) 8 041 7 621 Operating expenses (25 458) (24 070) 6 Other (
Slide 11: Moderate net interest income growth
Moderate net interest income growth 30000 4.5 4.11 3.94 3.83 3.81 4 3.72 3.65 25000 3.5 2.94 2.93 20000 3 2 62 2.62 2.37 2.25 2.5 15000 1 69 1.69 2 10000 1.5 1 5000 0.5 14 887 18 890 22 106 21 854 23 340 24 429 0 0 2006 2007 2008 2009 2010 2011 Net interest income (Rm) Margin on average interest-bea
Slide 12: Hedging preserved net interest margin
Hedging preserved net interest margin 4.0 % % 16 YoY ∆ bps 15 3.5 Loans and advances to customers 11 14 g in client rates • Change 10 13 • Change in composition 1 3.0 Deposits due to customers (7) 12 • Client pricing (1) 2.5 • Change in composition (1) 11 • Endowment (5) 10 C it l Capital (6) 2.0 St
Slide 13: Grew non-interest income in target areas
Grew non-interest income in target areas 2011 Change Mix Non-interest income ((Rm)) Rm % % Retail net fees and 3% 4% 10% 10 493 6 49 commissions ABB net fees and 21 403 3 719 8 17 commissions Financial Services 3 994 11 19 Markets – net trading results 2 166 1 10 20 232 Revaluations – CPF and 1
Slide 14: Credit quality improved
Credit quality improved 2011 2010 2011 2010 % % % % Credit loss ratio NPL coverage ratio Retail Banking 1 23 1.23 1 48 1.48 26 0 26.0 28 7 28.7 • Mortgages 0.97 0.98 17.1 19.1 • Vehicle and Asset 48.2 41.9 1 88 1.88 2 16 2.16 Fi Finance 64.6 71.8 • Card 1.05 2.57 60.5 68.7 • Personal Loans 3.87 4.76
Slide 15: Declining NPL inflows
Declining NPL inflows New home loan NPLs (number) Debt counselling book (Rm) 5000 10000 4500 9000 4000 8000 3500 7000 3000 6000 2500 5000 2000 4000 1500 3000 1000 2000 500 1000 0 0 Jan-10 Mar-10 Jan-11 Mar-11 Jul-10 Sep-10 Jul-11 Sep-11 May-10 May-11 Nov-10 Nov-11 2006 2007 2008 2009 2010 2011 15
Slide 16: Sustainable cost containment
Sustainable cost containment 2011 Change Mix Cost-to-income ((%)) Rm % % 58 1 2 Staff costs 13 642 9 54 (1) 0 Accommodation, cco oda o , 56 56.2 property and 4 388 16 17 55.5 -2 equipment-related 54 -4 Information technology 2 241 7 9 Communication and 52 -6 2 092 (3) 8 marketing -8 Professional and
Slide 17: Underlying returns improved further
Underlying returns improved further 2007 2008 2009 2010 2011 % % % % % Revenue as a percentage of RWAs 10.2 11.1 10.9 10.6 11.1 Cost-to-income ratio 51.7 49.2 49.6 56.2 55.5 Credit losses as a percentage of income 6.7 13.6 21.3 14.0 11.1 Operating margin * 26.1 23.1 18.1 18.8 21.2 Return on risk-wei
Slide 18: Strengthened our balance sheet
Strengthened our balance sheet Source of funds (Rbn) Use of funds (Rbn) 0.4 0.7 (9.3) 6.3 5.3 (56.8) 53 4 53.4 Customer Equity Long term Short term Liquid assets Loans & Other assets deposits funding funding advances Note: 2010 restated 18
Slide 19: Core Tier 1 ratio improved
Core Tier 1 ratio improved 221 bps (89 bps) (15bps) 13.0% (3 bps) 10 bps 2 bps 11.7% 2010 Credit risk Equity risk Market risk Profit Dividend Other 2011 19
Slide 20: Limited Basel capital impact
Limited Basel capital impact (90 bps) 13 0% 13.0% (90 bps) c 70 bps c.70 11.9% 2011 Basel II Basel II.5 Basel III *AIRB 2011 adjusted Note: *Advanced Internal Rating-Based on wholesale book 20
Slide 21: Strong core deposit growth
Strong core deposit growth 2011 Change Mix D Deposits it ddue to t customers t (Rbn) (Rb ) Rbn % % Cheque accounts 135 15 31 139 18% Savings and 118 75 10 17 transmission Fixed deposits 125 10 28 13% 175 156 C ll deposits Call d it 56 2 13 116 9% 126 Other 50 51 11 2010 2011 Total 441 14 Retai
Slide 22: Improving funding mix and term
Improving funding mix and term Total funding mix (%) Proportion of long term funding (%) 24.5 72 24.3 68 64 23.1 30 29 21.1 22 3 6 6 Deposits due to Deposits from banks Debt securities in 2008 2009 2010 2011 customers issue 2009 2010 2011 Note: 2009 and 2010 restated 22
Slide 23: Focussed loan strategy
Focussed loan strategy 2011 Change Mix Gross loans and advances to customers Rbn % % (Rbn) Retail Banking 328 (2) 64 59 6% 63 • Credit cards 21 4 4 • Instalment finance 39 2 8 130 4% 125 • Mortgages 243 (4) 47 • Other 25 3 5 334 2% 328 Absa Business Bank 125 (4) 24 Absa Capital 63 6 12 Total 5
Slide 24: Changing retail loan mix
Changing retail loan mix 85 Return on economic 75 capital (%) 65 Personal Loans Card 55 U Unsecured d lending l di 45 35 25 VAF Cost of equity 14.0% 15 Home Loans 5 -5 Headline earnings (Rm) -15 -25 0 300 600 900 1200 1500 1800 2100 Note: Bubble size represents 2011 loans and advances 24
Slide 25: Retail drove growth and improving returns
Retail drove growth and improving returns 45 Return on economic capital (%) 40 Financial Services * 35 Retail Banking 30 Absa Business Bank 25 20 Absa Capital 15 Cost of equity 14.0% 10 5 Headline earnings growth YoY (%) 0 -40 -20 0 20 40 60 80 100 Note: Bubble size represents headline earnings; dot
Slide 26: Segmental Performance
Segmental Performance Louis von Zeuner Deputy Group Chief Executive
Slide 27: Retail Banking: Balanced set of results
Retail Banking Balanced set of results Operating results (Rm) 2011 2010 Headline earnings (Rm) 4 179 3 137 Non-interest income / Revenue 7% 24 640 44.0 44.8 total revenue (%) 23 090 Cost-to-income ratio (%) 56.7 57.6 C dit losses Credit l 17% 3 965 4 763 Credit loss ratio (%) 1.23 1.48 Operating
Slide 28: Retail Banking: Strong performance across products
Retail Banking Strong performance across products • Improved profitability Headline earnings (Rm) • Grew unsecured loans >100% 71% 19% 40% 0% 1 757 • Lower credit losses in all portfolios 1 481 • Increased risk-based pricing • Grew acquiring income 780 783 720 I d efficiency • Improved ffi i 5
Slide 29: Retail Banking: Deepening relationship with existing customers
Retail Banking Deepening relationship with existing customers • Increased customers Advances - new sales (%) New Existing • Growth focused on existing customers customers customers Home Loans VAF Card Personal Loans • Maintained leading individual market 6 6 11 share in deposits 19 47 14 15 15 • Imp
Slide 30: Retail Banking: Non-interest income reflects change in customer behaviour
Retail Banking Non-interest income reflects change in customer behaviour Transaction volumes (%) Muted increase, despite solid 2010 2011 transactional volume growth 42 45 • Accelerated migration 58 55 – Traditional to digital channels Traditional channels – Pay as you go to management Electronic cha
Slide 31: Retail Banking: Quality of advances portfolio continues to improve
Retail Banking Quality of advances portfolio continues to improve 50 Payers (value) in legal book • Declining credit loss ratio 45 % 40 • NPLs and legal portfolio reduced 35 • Portfolio performance improved 30 25 – Construct of performing book 20 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Jun-11 Jul-11 Aug-
Slide 32: Absa Business Bank: Returning to growth
Absa Business Bank Returning to growth Operating results (Rm) 2011 2010 Headline earnings (Rm) 2 948 2 811 Revenue 11 545 3% 11 839 Non-interest income / 34.5 34.7 total income (%) Cost-to-income ratio (%) 55.3 53.9 Credit losses 1 144 24% 873 Credit loss ratio (%) 0.72 0.93 Operating 5% 6 218 6
Slide 33: Absa Business Bank: Solid underlying earnings
Absa Business Bank Solid underlying earnings • Core business grew 11% Headline earnings (Rm) 5% 11% • Strong deposit growth 3 157 • Reduced commercial property l loans, b butt selected l t d growth th iin other th debt products • Improved credit quality 2 948 • Low cost growth 2 838 2 811 • Equity
Slide 34: Absa Business Bank: Transactional strategy successful
Absa Business Bank Transactional strategy successful • Strong 15% transactional growth Non-interest income (Rm) – Cash revenue up 21% 21% 12% 7% 64% – Electronic banking revenue up 12% 1 782 1 664 • Enhanced functionality, security and accessibility 1 248 • Cheque volumes decreased in line 1 113
Slide 35: Absa Business Bank: Leveraging our large customer base
Absa Business Bank Leveraging our large customer base Scope for growth (clients with a product) • Over 500 000 clients (61% are primary) Lending and deposit Pi Primary banking b ki clients li t • Pricing strategy based on behaviour and orientated usage Long term loans 4% 23% • Improved I d credit di
Slide 36: Retail and Business Bank: Do the basics brilliantly
Retail and Business Bank Do the basics brilliantly • Bed down new operating model • Sharper focus on customer value delivery • Improve p cross selling g to p primary y customers • Enhance our market leading sales and service capabilities • Build on our strong positions in key products • Continue to
Slide 37: Absa Capital: Stable performance in uncertain markets
Absa Capital Stable performance in uncertain markets Operating results (Rm) 2011 2010 Headline earnings (Rm) 1 495 1 659 Revenue 0% 5 519 5 508 Cost-to-income ratio (%) 59.7 54.9 Credit losses 96 69 28% Credit loss ratio (%) 0.11 0.15 Operating 3 025 9% 3 295 expenses Return on risk-weighted 1 62
Slide 38: Absa Capital: Diversified revenue base
Absa Capital Diversified revenue base • Markets client franchise offset Net revenue (Rm) difficult market conditions 3% 20% 33% >100% >100% • Lower structured lending reduced 3 544 Investment Banking margin revenue 3 436 • Strong performance in Absa Wealth – Higher margins and fee income – Redu
Slide 39: Absa Capital: Resilient Markets revenue
Absa Capital Resilient Markets revenue underpinned by strong client franchise • SA business resilient in spite of Revenue mix (Rm) difficult markets 7% 11% 10% 14% 65% – Strong growth in client revenue 1 508 1 398 – Successful FX strategy – Fixed Income results affected by 1 027 market dislocat
Slide 40: Absa Capital: Increased client contribution improved quality of earnings
Absa Capital Increased client contribution improved quality of earnings Daily Markets revenue showing an improved profile 25 % of business days 20 15 10 5 0 -5 to < 0 < -35 > 50 --35 to < -30 --30 to < -25 --25 to < -20 --20 to < -15 --15 to < -10 -10 to < -5 0 to < 5 5 to < 10 10 to < 15 15 to < 20
Slide 41: Absa Capital: Investment Banking client franchise grew strongly
Absa Capital Investment Banking client franchise grew strongly Revenue mix (Rm) • Strong growth in fee business 44% 27% – Benefit of integrating Corporate 1 431 – Concluded a number of landmark transactions 1 041 167 241 • Drop in margin business Fee business Margin business – Reduced structured
Slide 42: Absa Capital: Integrated Corporate and Investment Bank in 2012
Absa Capital Integrated Corporate and Investment Bank in 2012 • Implement an integrated Corporate and Investment Bank • Leverage the global platform • CIBW in Africa • Ongoing capital and liquidity optimisation • Infrastructure leveraging 42
Slide 43: Financial Services: Earnings from operations up 21%
Financial Services Earnings from operations up 21% 2011 2010 Operating results (Rm) Headline earnings 13% 5% 5% 16% 16% 21% 1 375 1 291 ((Rm)) 271 (425) Investment income 562 (127) 198 332 15 shareholders (Rm) Cost efficiency ratio 1 686 25.2 26.4 (%) 1 390 Return on equity (%) 32.0 34.8 Retur
Slide 44: Financial Services: Well diversified revenue streams
Financial Services Well diversified revenue streams Net operating income (Rm) • Strong Life and Short term insurance 28% 5% 26% 27% p performances 919 • Investments grew net AUMs 3% to R168 billion • Africa 719 – Established operations in Botswana and Mozambique – Gross premiums of R200m 409
Slide 45: Financial Services: Absa Life maintained growth momentum
Financial Services Absa Life maintained growth momentum Profit before tax (Rm) • Gross premiums up 22% 12% 993 884 74 • Strong operational earnings 165 55% growth g o o of 28% 8% 28% 919 719 • Embedded value of new business 2010 2011 R369m Net operating income Investment income Net insurance p
Slide 46: Financial Services: Absa Investments grew external AUM mandates
Financial Services Absa Investments grew external AUM mandates to R168 billion Assets under management (Rbn) • Customers continue to benefit from 12% 42% 23% 0% 7% pq top quartile investment p performance 66 • Delivering on our strategy to grow 58 equity mandates 44 45 • Exiting Dividend I
Slide 47: Financial Services: Short term insurance grew operational earnings 26%
Financial Services Short term insurance grew operational earnings 26% Gross premium income (Rm) • Gross premiums grew 10% 424 316 34% 1 258 1 156 • Crop underwriting results 9% recovered in 2H 1 948 6% 2 074 • Loss ratio of 67.4% (2010: 68.5%) 2010 2011 P Personal l lines li C Commercial i l A
Slide 48: Financial Services: Capturing growth opportunities
Financial Services Capturing growth opportunities • Continue to expand into the rest of Africa, with immediate focus on Zambia and Kenya • Implement revised advisor operating model • Further increase cross sell into Absa’s customer base through integration, leads management and trigger event solutio
Slide 49: Prospects
Prospects Maria Ramos Group Chief Executive
Slide 50: Uncertain macro backdrop
Uncertain macro backdrop Global uncertainty persists SA not immune • EU debt issues likely to stall growth • GDP growth slowing ‘ • US growth remains modest • Household consumption resilient • Manyy emerging g g markets tightening g g • Inflationary pressure increasing policy and growth is moderatin
Slide 51: Progressed our Africa strategy
Progressed our Africa strategy • Africa is important to us and Barclays • We have a leading, well-established presence • Our strategy is gaining momentum - Moved Barclays Africa head office to Johannesburg - Formed an Africa Executive Committee - Established Africa Customer and Community Investment
Slide 52: What to expect in 2012
What to expect in 2012 • Driving the Africa opportunity • Growing in targeted areas • Efficiency an ongoing priority • Continue to strengthen our balance sheet • Customer, customer, customer 52
Slide 53: What you can measure
What you can measure • Improved revenue growth • Lower cost-to-income ratio • Improved credit loss ratio • Increased profitability • Africa synergies 53
Slide 54: Disclaimer
Disclaimer Forward-looking statements Certain statements in this document are forward looking g that relate to,, among g other things, g , the plans, objectives, goals, strategies, future operations and performance of Absa Group Limited (“Absa”). Words such as “anticipates”, “estimates”, “expects”,