Absa Group Limited · JSE:ABG
Absa — Barclays Africa Group — H1 2014 Earnings Presentation
40 slides from Absa's earnings presentation, 2014
Slide 1: Barclays Africa Group Limited 1H14 financial results
Barclays Africa Group Limited 1H14 financial results
Slide 2: Strategic update
Strategic update Maria Ramos
Slide 3: Our commitments
Our commitments Top 3 by revenue in our 5 biggest markets - South Africa, Kenya, Ghana, Botswana and Zambia RoE 18% to 20% Cost to income ratio in the low 50s Rest of Africa 20% to 25% of total revenue 3
Slide 4: Financial review
Financial review David Hodnett
Slide 5: Pre-provision profit drove earnings growth
Pre-provision profit drove earnings growth 1H14 1H13 Change Pre-provision profit (Rbn) Rm Rm % 5% Net interest income 17 197 15 695 10 4% 13.4 12.7 Non-interest income 13 487 12 878 5 12.2 Total revenue 30 684 28 573 7 Credit losses (3 568) (3 836) (7) Operating expenses (17 297) (15 872) 9 Other (5
Slide 6: African acquisition enhanced revenue growth
African acquisition enhanced revenue growth Revenue growth (YoY, Rm) Group revenue split 1H14 (%) 12% 7% 1.5 6% 640 30 684 1 471 20 28 573 80 1H13 South Africa Rest of Africa 1H14 South Africa Rest of Africa 6
Slide 7: Scope to improve revenue rankings in key markets
Scope to improve revenue rankings in key markets Ghana #4 2013 Kenya #4 1Q14 Botswana #2 2013 Zambia #4 1Q14 South Africa #3 2013 7
Slide 8: Non-interest income growth moderate
Non-interest income growth moderate 1H14 Change Mix Non-interest income to total Rm % % revenue (%) Net fees and commissions 8 664 3 64 47 − Retail Banking SA 5 383 4 40 − Business Banking SA 1 423 3 11 − RBB Rest of Africa 993 2 7 45 − CIB 865 4 6 44 WIMI 2 298 5 17 Markets – net trading result 2 3
Slide 9: Solid lending growth outside of property
Solid lending growth outside of property Change in gross customer loans (YoY, Rbn) 19% (14%) 5% 23.5 (1.8) 631.4 7% 13% 2% 5.7 (2%) 8% 4.4 0.4 599.9 (5.2) (2%) 5.2 (0.8) 1H13 Retail CPF * VAF ** Credit Personal RBB CIB **** Other 1H14 Mortgages Cards Loans other *** Note: * Commercial property finan
Slide 10: Wider margin reflects several moving parts
Wider margin reflects several moving parts YoY change in net interest margin* (basis points) 2 (10) 2 2 6 0 456 9 (1) 1 445 Loans 0 Deposits +17 1H13 Pricing Mix Pricing Mix Endowment Capital Hedge ** Rest of Africa 1H14 Note: * Percent of average interest bearing assets; ** interest rate risk manag
Slide 11: Secured loan credit impairments improved
Secured loan credit impairments improved 9% 8% SA retail unsecured Credit loss ratio (1H14) 7% 6% 5% Size = credit impairment 4% 3% RBB Rest of Africa Business 2% Banking SA 1% SA retail CIB secured 0% -75% -50% -25% 0% 25% 50% 75% 100% >100% 125% Credit impairments change (YoY) 11
Slide 12: Credit loss ratio and NPL cover improved
Credit loss ratio and NPL cover improved 1H14 1H13 1H14 FY13 Credit loss ratio (%) NPL cover (%) Retail and Business Banking 1.55 1.73 43.2 41.4 Retail Banking South Africa 1.60 1.75 42.5 39.1 Overdrafts 1.24 1.85 63.4 58.3 Credit Cards 5.03 3.31 66.1 65.9 Store cards - Edcon 15.01 9.57 78.8 81.0 Ve
Slide 13: Continue to build portfolio provisions
Continue to build portfolio provisions Portfolio provisions (Rbn) Portfolio provisions to performing loans (%) Unidentified Identified (performing loans) 0.70 2.4 0.64 2.4 0.52 1.7 0.47 0.43 1.8 1.4 1.1 FY12 FY13 1H14 FY10 FY11 FY12 * FY13 * 1H14 * Note: * Barclays Africa Group 13
Slide 14: Higher cost growth reflects investment
Higher cost growth reflects investment 1H14 Change Mix Operating expenses drivers Rm % % (Rm, YoY change) 3% Staff costs 9 108 11 53 7% (4%) 4% 9% Property-related costs 2 782 7 16 (605) 1 151 603 17 297 Information technology 1 155 7 7 Communication 679 3 4 2% Marketing costs 589 10 3 276 15 872 Pr
Slide 15: Crucial to achieve positive JAWS from 2015
Crucial to achieve positive JAWS from 2015 Cost-to-income (%) JAWS – revenue minus cost growth (%) 59 6.7 5.9 57 4.6 1.3 55 0.6 53 (0.7) (2.1) (1.6) 51 49 (13.7) 47 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 1H14 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 1H14 15
Slide 16: Deposit growth funded lending to customers
Deposit growth funded lending to customers Sources of funds (YoY, Rbn) Use of funds (YoY, Rbn) (3.3) 31.0 (3.8) 26.9 (1.4) (1.6) 0.1 Customer Equity Long-term Other funding Other assets Liquid assets Customer loans deposits funding 16
Slide 17: Solid growth in most deposit franchises
Solid growth in most deposit franchises Customer deposits (Rbn) Custody sale reduced deposits Significant Corporate growth outside CIB 3% South Africa Strong increase in SA retail WIMI 15% investment products Competition, lower term deposits in Retail Banking SA 8% RBB Rest of Africa Busin
Slide 18: Capital levels remain strong
Capital levels remain strong Barclays Africa Group Common Equity Tier 1 ratio (%) 1.14 (0.67) 0.12 (0.81) 12.10 (0.12) 11.76 Board range 9.5% - 11.0% FY13 RWA RWA growth Profit Dividend Other 1H14 optimisation 18
Slide 19: RoE improved noticeably
RoE improved noticeably 22% RoE RoA (RHS) 1.50% 1.45% 20% 1.40% Target 1.35% RoE 18% 1.30% 1.25% 16% 1.20% 1.15% 14% 1.10% 12% 1.05% 1.00% 10% 0.95% FY09 FY10 FY11 FY12 * 1H13 * 1H14 * FY14 FY15 Note: * Barclays Africa Group 19
Slide 20: Well diversified group
Well diversified group Headline earnings growth (YoY, Rm) 24% (0%) 76% 368 (3) (142) 10% 6 110 19% (1%) 9% 131 (4) 206 5 554 14% 1H13 Retail Banking Business RBB Rest of CIB WIMI Head Office 1H14 SA Banking SA Africa and other 1H14 growth in pre-provision profit 1% 7% 10% 26% 1% 5% 20
Slide 21: Retail Banking SA turnaround continues
Retail Banking SA turnaround continues Home Loans drove earnings growth Headline earnings* (Rm) Net interest margin improved with rising rates (2%) 1H13 Higher investment spend on 1 336 1H14 1 303 channels and marketing Solid deposit growth >100% 896 (20%) Stabilising revenue as customer 7
Slide 22: Retail customer trends turning
Retail customer trends turning YoY change in customer numbers* (%) Rewards customers (m) 10 1.8 8 1.6 6 1.4 4 1.2 2 1.0 0 0.8 -2 0.6 -4 0.4 -6 Mass Middle Affluent Total 0.2 (excluding Sekulula) 0.0 New to bank growth (YoY) 2009 2010 2011 2012 2013 1H14 0% 5% 78% 3% Note: * Excludes 4.7m cards in is
Slide 23: Stabilising Business Banking SA
Stabilising Business Banking SA Reduced equity portfolio losses Headline earnings (Rm) Credit impairments continue to 4% 19% improve 856 822 824 Lower loans despite higher payouts 693 Solid 13% deposit growth Transaction migration to cash centres and digital channels Coverage model impro
Slide 24: Positive early signs in customer numbers
Positive early signs in customer numbers SA Commercial customer numbers (k) Business Banking SA revenue split (1H14) 60.0 59.6 59.2 41% 58.8 59% 58.4 58.0 2/13 3/13 4/13 5/13 6/13 7/13 8/13 9/13 1/14 2/14 3/14 4/14 5/14 6/14 10/13 11/13 12/13 Commercial Enterprise Note: * Enterprise customer turnove
Slide 25: CIB strategy on track
CIB strategy on track Headline earnings (Rm) Strong asset growth drove higher revenue 14% 8% Systems and IT investment 760 243 21% 25% increased costs 120 24% 29 1 903 Delivery well on track outside South Africa 1 535 1H13 Net Expenses Tax Other 1H14 revenue 25
Slide 26: Core divisions growing strongly
Core divisions growing strongly Net revenue (Rm) Strong Investment Banking 10% 14% performance driven by asset 17% (48%) (>100%) 259 6 026 322 (28) (17) growth 35% 224 Markets had good customer 5 266 flows and Africa desk traction Corporate revenue up despite volume pressure; Investment Bank n
Slide 27: Bancassurance investing in sales capacity …
Bancassurance investing in sales capacity … Change in headline earnings (Rm) Pro-actively implementing customer focused initiatives for sustainability 11% (1%) (>100%) 36% 9 Wealth and Investments margins 24% 5 53 9 improve 11% 11 26 Pan-African Life embedded value of (0%) new business increas
Slide 28: … evidenced by growing new business and footprint
… evidenced by growing new business and footprint Embedded value of new business Adviser footprint (number) (Rm, YoY growth) 244 351 211 1H 2H 366 355 161 29% 65 91 236 519 500 474 183 151 680 565 565 FY12 FY13 1H14 1H13 FY13 1H14 Life Insurance Financial planners Academy Short-term 28
Slide 29: Operations outside of South Africa enhance growth
Operations outside of South Africa enhance growth Revenue +12% to R6.1bn Profit before tax (Rm) Headline earnings +34% to R1.0bn 16% 1H13 – Contributed 17% of earnings 993 27% 1H14 895 – Acquisition earnings accretive 856 Scope to improve RoE 705 – Substantial surplus capital Profitable Reta
Slide 30: Our commitments
Our commitments Top 3 by revenue in our 5 biggest markets - South Africa, Kenya, Ghana, Botswana and Zambia RoE 18% to 20% Cost to income ratio in the low 50s Rest of Africa 20% to 25% of total revenue 30
Slide 31: Appendix
Appendix @ BARCLAYS
Slide 32: Well diversified revenue…
Well diversified revenue… Net revenue by type Revenue by segment (1H14) (1H14) 8% 20% 46% 50% 50% 13% 13% Non-interest income Retail Banking SA Business Banking SA Net-interest income after impairments RBB Rest of Africa CIB WIMI 32
Slide 33: … and earnings
… and earnings Headline earnings by segment * Headline earnings by geography (1H14) (1H14) 11% 17% 9% 40% 20% 7% 83% 13% Retail Banking SA Business Banking SA South Africa Rest of Africa RBB Rest of Africa CIB SA CIB Rest of Africa WIMI Note: * Excludes head office, inter-segment eliminations and ot
Slide 34: Credit quality normalises
Credit quality normalises Group credit loss ratio (%) 2.5 2.0 1.5 1.0 0.5 0.0 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 1H14 Note: Dark blue line shows ratio excluding UniFer; grey is Barclays Africa Group 34
Slide 35: Most NPL categories continue to decline
Most NPL categories continue to decline NPLs to loans and advances (%) Group NPLs as a percent of loans and advances to customers (%) 1H13 1H14 8 7 11.9% 6 10.2% 5 9.5% 7.9% 4 7.4% 7.4% 6.6% 6.5% 3 5.4% 5.2% 2 3.2% 1 2.2% 0 Mortgages Credit Cards Personal VAF Retail Business FY98 FY99 FY00 FY01 FY02
Slide 36: Better mortgage NPL construct
Better mortgage NPL construct Falling mortgage NPLs (Rbn)… … and properties in possession 1.1 Properties in possession (Rm, RHS) 3 Months 1.1 Properties in possession (Number) 0.8 4000 800 4 Months 0.7 3500 753 700 0.5 5 Months 1H13 0.4 1H14 3000 600 0.9 6 Months + 0.3 2500 529 500 2.2 Arrangements
Slide 37: Focus on writing quality new business
Focus on writing quality new business Risk mix of new personal loans Mortgage vintage curves 6% 25% 9% 10% 8% 2005 12% 2006 19% 14% 2007 14% 2008 23% 20% 2009 23% 27% 2010 31% 2011 Cumulative Default Rate 2012 15% 2013 59% 2014 53% 51% 10% 42% 5% 0% 102 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90
Slide 38: Solid dividend growth
Solid dividend growth Ordinary dividends per share (cents) Ordinary dividend payout ratio (%) 1H 2H * 470 59 392 369 56 55 53 50 14% 40 41 220 230 400 350 315 292 225 225 2009 2010 2011 2012 2013 2014 FY09 FY10 FY11 FY12 1H13 FY13 1H14 38
Slide 39: 2014 Investment Bank key awards and deals
2014 Investment Bank key awards and deals Key awards Key deals IBD Award IBD Award IBD Award 2014 2014 2014 USD 3 billion ZAR7,000m ZAR 7,805m Syndicated Term Loan Convertible Bond ABB and Overall African Deal of Solar Deal of the Year African Renewable Revolving Credit Facility the Year Energy Deal
Slide 40: 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
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