Slide 1: Absa Group FY21 results presentation
Absa Group FY21 results presentation 14 March 2022
Slide 2: Jason Quinn, Interim Chief Executive
Jason Quinn Interim Chief Executive
Slide 3: Improved macro backdrop …
Improved macro backdrop … South Africa real GDP growth (%) Africa regions real GDP growth (%) 5.7 4.9 5.0 0.2 (0.3) (6.4) 2019 2020 2021 2019 2020 2021 Source: Absa Research Source: Absa Research 3 |
Slide 4: … not without challenges
… not without challenges South Africa load shedding index SA Covid-19 infections (7 day moving average, k) 100 24 First wave 90 21 Second wave 80 Third wave 18 70 Fourth wave 60 15 50 12 40 30 9 20 6 10 (6.4) 0 3 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97 1 5 9 101 105 109 113
Slide 5: Record FY21 performance
Record FY21 performance Group revenue (Rbn) Diluted normalised HEPS (c) 6% 132% 85.9 2 193 1% 2% 6% 1 923 81.4 80.0 (51%) 946 FY19 FY20 FY21 FY19 FY20 FY21 5 |
Slide 6: FY21 salient features
FY21 salient features Pre-provision profit (Rbn) Credit loss ratio (bps) 7% 7% 5% 38.5 35.8 192 33.6 80 77 FY19 FY20 FY21 FY19 FY20 FY21 RoE (%) NAV per share (R) 13% 4% 149 15.8 15.8 5% 126 131 7.2 FY19 FY20 FY21 FY19 FY20 FY21 6 |
Slide 7: Stronger momentum evident in the second half
Stronger momentum evident in the second half Pre-provision profit drivers – YoY growth (%) 14 1H21 2H21 12 8 6 5 4 3 2 1 (2) Net interest Non-interest Revenue Operating Pre-provision income income costs profits 7 |
Slide 8: Positive balance sheet trends
Positive balance sheet trends Group capital ratios (%) RBB SA customer deposits (Rbn) 17.0 13% 15.8 469 15.0 2.4 12% 2.8 10% 416 2.8 1.8 0.9 373 1.0 12.1 12.8 11.2 FY19 FY20 FY21 CET 1 Other tier 1 Tier 2 FY19 FY20 FY21 8 |
Slide 9: Substantial recovery in divisional earnings and returns
Substantial recovery in divisional earnings and returns Normalised headline earnings (Rm) Return on regulatory capital (%) 141% FY20 FY21 FY20 FY21 10 209 21.6 54% 18.5 7 760 13.5 5 054 4 239 7.6 RBB CIB RBB CIB 9 |
Slide 10: Punki Modise, Interim Financial Director
Punki Modise Interim Financial Director
Slide 11: Significantly lower credit charge drove earnings growth
Significantly lower credit charge drove earnings growth Normalised headline earnings (Rbn) (59%) 56% 12.1 (4.1) Pre-provision profit up 7% (10% CCY) 133% 18.6 9% 0% 4% (7% CCY) 4.5 (0.0) (1.8) 8.0 FY20 Net interest Non-interest Operating Credit Other* FY21 income income expenses impairments Revenue
Slide 12: Moderate customer loan growth
Moderate customer loan growth Net customer loans (Rbn) 9% FY20 FY21 429 395 6% 338 319 3% 122 126 15% 14% 55 64 53 60 Retail SA Relationship Banking RBB ARO CIB SA CIB ARO SA Note: In constant currency, RBB ARO grew 8% and CIB ARO 6% 12 |
Slide 13: Targeted production in secured retail lending
Targeted production in secured retail lending Retail Banking South Africa net customer loans (Rbn) 9% 270 248 FY20 FY21 10% 98 89 7% 39 1% 36 18 19 Home Loans Vehicle and Asset Credit card Personal loans Finance 13 |
Slide 14: Deposit growth outstrips loans and improves funding mix
Deposit growth outstrips loans and improves funding mix Deposits and gross customer loans (Rbn) Group funding mix (%) 12% 7% 1076 12.2 10.0 1059 988 7.5 7.5 958 80.3 82.5 Customer deposits Gross customer loans FY20 FY21 FY20 FY21 Customer deposits Bank deposits Debt securities 14 |
Slide 15: Solid deposit growth across the board
Solid deposit growth across the board Customer deposits (Rbn) 11% 12% FY20 FY21 321 280 289 249 13% 188 167 21% 25% 101 84 88 71 Retail SA Relationship Banking RBB ARO CIB SA CIB ARO SA Note: In constant currency, RBB ARO grew 9% and CIB ARO 15% 15 |
Slide 16: Net interest margin recovered strongly
Net interest margin recovered strongly Change in net interest margin* (basis points) 450 29 10 446 13 16 (10) 6 (3) 8 (33) (9) 417 (2) Loans Deposits 3 (3) FY19 FY20 Pricing Mix Pricing Mix Endowment Capital ** Hedge *** Prime reset Other FY21 Note: * average interest bearing assets; ** group equity
Slide 17: Insurance reduced non-interest income
Insurance reduced non-interest income Non-interest income (Rbn) Non-interest income by division (Rbn) 33.7 32.6 32.6 (0%) 24.3 23.2 (4%) 5.1 3.4 (31%) Insurance SA 5.0 2.4 1.3 (46%) FY21 21.9 22.0 5.0 7.1 17% 0% 6.0 FY20 23.6 21.6 22.1 2% 22% 9.3 7.6 FY19 FY20 FY21 FY20 FY21 FY20 FY21 Fees and commi
Slide 18: Strong Global Markets revenue growth, particularly in SA
Strong Global Markets revenue growth, particularly in SA Global Markets revenue (Rbn) Change: SA ARO 7.1 14% 2.7 6.2 2% 2.6 5.2 5.0 1.7 4.7 1.8 2.1 4.4 24% 3.5 3.6 3.2 2.5 FY17 FY18 FY19 FY20 FY21 Note: Markets ARO grew 14% in constant currency in FY21 18 |
Slide 19: Operating expenses remain well managed …
Operating expenses remain well managed … FY21 Change Mix Rm % % Cost-to-income ratio (%) Staff 26 147 4 55 57.7 58.0 Property 1 879 0 4 56.7 56.0 Technology 4 928 19 10 55.2 Depreciation 3 465 (9) 7 Professional fees 2 358 2 5 Marketing 1 287 16 3 Communication * 1 441 3 3 Cash transportation 1 135
Slide 20: … while continuing to invest in technology
… while continuing to invest in technology Group operating expenses (Rbn) Total technology-related spend (Rbn) 4% 13% 6% (2%) 47.4 11.5 46.4 9% 45.6 18% 10.1 43.6 9.3 7.9 FY18 FY19 FY20 FY21 FY18 FY19 FY20 FY21 20 |
Slide 21: Credit impairments improved materially across the board
Credit impairments improved materially across the board Credit impairments (Rbn) Credit loss ratio (%) FY20 FY21 (54%) 20.6 (9.3) RBB 2.78 1.21 Everyday Banking 8.42 5.02 Vehicle and Asset Finance 3.45 1.45 (78%) Home Loans 0.88 (0.05) (2.6) (123%) (59%) Relationship Banking 1.61 0.67 (0.2) 8.5 RBB
Slide 22: Several drivers of lower non-performing loans
Several drivers of lower non-performing loans Stage 3 ratio (basis points) 628 (55) (12) (2) (26) 51 2 543 (41) FY20 Definition of Debt sales Write-offs Loan growth Payment relief Other FY21 default 22 |
Slide 23: Loan coverage remained robust
Loan coverage remained robust Stage 1 loan coverage (basis points) Stage 2 loan coverage (basis points) 100 707 92 688 660 81 639 55 FY19 FY20 FY20 adjusted FY21 FY19 FY20 FY20 adjusted FY21 Stage 3 loan coverage (%) Total loan coverage (basis points) 43.7 44.3 44.6 454 442 42.5 408 327 FY19 FY20 FY
Slide 24: Strong divisional earnings growth
Strong divisional earnings growth Normalised headline earnings (Rbn) Group normalised headline earnings mix * (%) 147% 133% 54% 1.9 18.6 2.7 141% 6.0 43 57 8.0 FY20 RBB CIB Head office, FY21 RBB CIB Treasury and other Note: * Group normalised headline earnings mix excludes Head office, Treasury and
Slide 25: RBB franchises all rebounded sharply, besides Insurance
RBB franchises all rebounded sharply, besides Insurance Headline earnings (Rm) FY20 FY21 63% 3 930 49% 3 459 374% 2 531 2 405 2 317 (165%) 993 (304%) 534 605 (93%) 462 68 (227) (927) Home Loans Vehicle and Everyday Insurance SA Relationship RBB ARO Asset Finance Banking Banking Pre-provision profit
Slide 26: Strong earnings growth across CIB franchises
Strong earnings growth across CIB franchises Headline earnings (Rm) 54% FY20 FY21 7 760 48% 62% 5 473 5 054 5 133 3 701 39% 69% 3 170 2 627 2 287 1 884 1 353 Corporate Bank Investment Bank Total CIB South Africa ARO Pre-provision profit growth: 0% 15% 10% 18% (2%) 26 |
Slide 27: Opportunity remains in Africa regions
Opportunity remains in Africa regions Group earnings mix (%) Group revenue mix (%) 16 24 76 84 South Africa Africa regions South Africa Africa regions 27 |
Slide 28: Common equity tier 1 ratio above board target range
Common equity tier 1 ratio above board target range Group common equity tier 1 ratio (%) 0.1 12.8 2.0 (0.3) 12.1 0.5 Board target range 11.2 11.0% - 12.5% (0.2) 0.0 FY20 RWA movement Profit Dividend Other FY21 28 |
Slide 29: Jason Quinn, Interim Chief Executive
Jason Quinn Interim Chief Executive
Slide 30: Completed strategy refresh
Completed strategy refresh 30 |
Slide 31: ESG strategy: active force for good in everything we do
ESG strategy: active force for good in everything we do 31 |
Slide 32: Making solid progress on sustainability
Making solid progress on sustainability • Our global ESG ratings all improved Absa S&P SAM ESG rating (percentile global banks) • Significant sustainable finance growth 86 - CIB’s ESG-related financing almost double target - Financing bulk of SA renewables 5th round 79 - African Rainbow Energy and P
Slide 33: Modest growth expectations, with downside risk
Modest growth expectations, with downside risk South Africa real GDP growth (%) South Africa prime interest rate (%) 4.9 10.00 10.00 10.00 9.00 8.25 2.1 1.7 1.7 1.8 7.25 0.2 7.00 (6.4) -6.4 2019 2020 2021 2022F 2023F 2024F 2025F 2019 2020 2021 2022F 2023F 2024F 2025F Source: Absa Research Source: Ab
Slide 34: 2022 outlook
2022 outlook • We expect high single digit revenue growth - Driven by improved non-interest income growth (partly due to lower life insurance claims) - High single digit customer loan and deposit growth. Net interest margin benefits from rising rates • We expect mid-single digit operating expense gr
Slide 35: Medium-term targets – 2024
Medium-term targets – 2024 Cost-to-income ratio (%) RoE (%) 55.2 Bottom > 17.0half 75-100bp Low 50s 15.8 FY21 … FY24 FY21 … FY24 35 |
Slide 36: 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