Slide 1: Absa Group FY19 results presentation
Absa Group FY19 results presentation 11 March 2020
Slide 2: Daniel Mminele, Chief Executive
Daniel Mminele Chief Executive
Slide 3: Initial impressions of Absa
Initial impressions of Absa • Absa has great potential, solid businesses, a wide product range, strong brand, talented and committed people • Focus on transforming culture, consistent execution and harnessing digital • Strategic choices match our growth ambitions • Need to be responsive to fast-chan
Slide 4: We aspire to be a globally respected African organisation
We aspire to be a globally respected African organisation The strategy comprises of a guiding purpose, three strategic priorities that outline the business’ objectives in terms of what is required to succeed and three enablers which will change the way we operate and define exactly how we will achie
Slide 5: Reflecting on our FY19 performance
Reflecting on our FY19 performance • Resilient performance considering challenging macro backdrop - SA’s GDP growth has consistently disappointed the past 5 years • Maintained balance sheet momentum • Underlying costs remain well contained • Maintained solid balance sheet • RoE decline indicative of
Slide 6: Restore leadership in our core businesses
Restore leadership in our core businesses Retail & Business Bank Corporate & Investment Bank Absa Regional Operations Customer Franchise: Customer Franchise: Customer Franchise: CUSTOMER #’S CUSTOMER #’S CUSTOMER #’S PRIMARY CUSTOMER BASE CUSTOMER PRIMACY CUSTOMER PRIMACY RETAIL BUSINESS BANK PRODUC
Slide 7: Digital innovation
Digital innovation Mobile lending and Digital lending and Vehicle Asset savings proposition savings platform Finance system Digital capabilities Digitisation Digital Fraud JUMO Timiza Bolt Automation Warranty Offers a convenient way to Virtual banking proposition We are able to deliver A first in th
Slide 8: Jason Quinn, Financial Director
Jason Quinn Financial Director 8 |
Slide 9: Key FY19 takeaways
Key FY19 takeaways • Macros were tougher • Net interest margin stabilized in the second half • Continued delivery on cost initiatives • Regional Operations again underpinned group growth • Separation from Barclays almost complete • Focusing on balance sheet coverage, capital and liquidity 9 |
Slide 10: Resilient normalised salient features
Resilient normalised salient features FY18 FY19 % % Diluted headline EPS growth 4 1 Dividend per share growth 4 1 Net asset value per share growth 4 5 Return on equity 16.8 15.8 Profit after regulatory capital charge (Rbn) 2.9 2.1 Net interest margin 4.64 4.50 Operating JAWS (1.7) (0.5) Cost to inco
Slide 11: Income statement shape broadly in line with guidance
Income statement shape broadly in line with guidance Change Normalisation FY18 FY19 Rm (%) adjustments Net interest income 43 425 46 306 7 195 Non-interest income 32 235 33 655 4 (36) Total income 75 660 79 961 6 159 Impairment losses 6 324 7 816 24 - Operating expenses 43 642 46 357 6 (2 410) Other
Slide 12: Loan growth momentum maintained
Loan growth momentum maintained … Gross customer loans (Rbn) RBB SA gross customer loans (Rbn) 600 5% 7% 500 FY18 FY19 243 232 FY18 FY19 400 9% 300 12% 128 9% 114 200 87 80 18% 100 9% 21% 14% 38 44 21 24 0 RBB CIB RBB CIB Home Loans VAF Personal Credit Relationship loans cards Banking South Africa A
Slide 13: As deposit growth also improved
… as deposit growth also improved Deposits (Rbn) 10% 373 FY18 FY19 338 19% 207 13% 174 150 134 6% 91 96 RBB SA CIB Absa Regional Operations Treasury and other South Africa up 12% 13 |
Slide 14: Funding and endowment reduce net interest margin
Funding and endowment reduce net interest margin Change in net interest margin* (basis points) (7) 464 3 (4) (6) (3) 5 (2) 450 1 (1) Loans Deposits (4) (13) FY18 Pricing Mix Pricing Mix Endowment Capital Hedge ** ARO *** Other FY19 Note: * average interest bearing assets; ** interest rate risk manag
Slide 15: Core non-interest income growth emerging
Core non-interest income growth emerging Non-interest income mix FY19 (%) Non-interest income by division (Rbn) 6% 23.4 3 22.1 12 FY18 FY19 15 70 17% (18%) 6.0 5.2 4.6 3.8 Fee and commission Net trading Net insurance income Other RBB South Africa CIB South Africa Absa Regional Operations 15 |
Slide 16: Underlying cost growth well contained
Underlying cost growth well contained FY19 Change Mix Rm % % Adjusted costs (Rbn) Staff 25 696 7 55 6% 0.6 Property-related 1 937 (42) 4 22.1 46.4 0.4 Technology 3 717 16 8 0.4 0.5 3% 21.2 0.5 Depreciation 3 564 54 8 20.8 44.9 Professional fees 2 263 5 5 43.6 Marketing 1 538 (4) 3 Communication 1 50
Slide 17: Unpacking the increase in our credit impairments
Unpacking the increase in our credit impairments Credit impairments (Rbn) Reported 24% 7.8 0.9 6.9 0.7 Underlying 8% 0.6 6.3 6.2 6.2 5.7 5.7 Underlying CIB FY18 single FY18 FY19 New business Coverage FY19 FY18 name items reported reported strain adjusted 17 |
Slide 18: Credit loss ratio increased
Credit loss ratio increased … Credit impairments (Rbn) Credit loss ratio (%) FY18 FY19 38% (63%) 53% 24% RBB SA 0.92 1.18 1.7 (0.6) 0.4 7.8 Everyday Banking 4.13 5.50 6.3 Vehicle and Asset Finance 1.37 1.34 Home Loans 0.05 0.08 Relationship Banking 0.25 0.26 CIB SA 0.36 0.11 Absa Regional Operations
Slide 19: But remains relatively low
… but remains relatively low Credit loss ratio (bps) 120 FY19 and expected range through-the cycle (bps): 110 100 FY18 FY19 Range 90 Range 75-100 • RBB SA 92 118 110 to 155 80 79 80 70 73 • Total CIB 32 14 20 to 30 60 50 • ARO 78 98 100 to 140 40 30 20 10 0 FY18 1H19 FY19 19 |
Slide 20: Capital levels remain strong
Capital levels remain strong Absa Group normalised common equity tier 1 ratio (%) 1.8 (1.1) Board target range 11.0% - 12.0% 12.0 (0.9) 11.8 FY18 RWA movement Profit Dividends FY19 20 |
Slide 21: Lower SA returns outweighed improved ARO RoE
Lower SA returns outweighed improved ARO RoE Divisional return on regulatory capital (%) 23.3 FY18 FY19 21.4 19.0 18.1 15.9 13.3 RBB SA CIB SA Absa Regional Operations * Note: * return on equity 21 |
Slide 22: Continue to benefit from a diversified portfolio
Continue to benefit from a diversified portfolio Divisional headline earnings (Rm) Headline earnings mix FY19 (%) * (2%) 5 FY18 FY19 9 722 9 510 17 58 20 16% (6%) 3 422 3 635 3 230 3 140 RBB SA CIB SA CIB ARO RBB ARO RBB SA CIB SA Absa Regional Operations Note: * excluding Group centre and adjusting
Slide 23: Solid pre-provision profit growth despite CIB SA
Solid pre-provision profit growth despite CIB SA Divisional pre-provision profits (Rbn) FY18 FY19 5% 33.6 32.0 7% 20.9 19.6 17% (15%) 7.9 6.7 5.4 4.5 RBB SA CIB SA Absa Regional Operations Group 23 |
Slide 24: RBB SA earnings grew excluding Everyday Banking
RBB SA earnings grew excluding Everyday Banking … Headline earnings (Rm) FY18 FY19 4 024 7% (13%) 3 672 3 500 3 439 1% 1 588 10% 1 565 1 162 1 273 212 41% 299 Home Loans Vehicle and Asset Finance Everyday Banking Insurance Cluster Relationship Banking 24 |
Slide 25: As unsecured lending offset improving transactional
… as unsecured lending offset improving transactional Headline earnings (Rm) 4 024 (13%) 3 500 FY18 FY19 9% 2 242 2 058 1 482 (40%) 894 (25%) 484 364 Everyday Banking Card Personal Loans Transactional and Deposits Pre-provision profit growth: 5% 19% 7% 25 |
Slide 26: Unpacking Card and Personal Loans credit charge
Unpacking Card and Personal Loans credit charge … SA Card and Personal Loans credit impairments (Rbn) Reported 60% 4.1 0.8 Underlying 0.3 17% 3.3 3.0 3.0 2.6 FY18 FY19 reported New business strain Coverage FY19 adjusted 26 |
Slide 27: Where we wrote high quality new business
… where we wrote high quality new business Card new business 2019 (% high quality) Personal loans new business 2019 (% high quality) 70 70 60 peer average 60 peer average 50 50 40 40 30 30 20 20 10 10 0 0 Absa Peer 1 Peer 2 Peer 3 Peer 4 Absa Peer 1 Peer 2 Peer 3 Peer 4 27 |
Slide 28: Retail loan production and pricing momentum continues
Retail loan production and pricing momentum continues Retail SA YoY loan production (%) New business pricing change YoY (bps) 24 23 74 11 8 8 (1) 0 Home Loans Vehicle and Personal Loans Credit card Home Loans Vehicle and Personal Credit card Asset Finance Asset Finance Loans 28 |
Slide 29: Prudent mortgage growth at the right price
Prudent mortgage growth at the right price Big 4 bank share of LTV >100% mortgages in 2019 Mortgage pricing to prime (bp) (%) 60 45 40 50 Absa Peer 1 Peer 2 Peer 3 35 40 30 30 25 20 20 10 15 0 10 5 -10 0 -20 Absa Peer 1 Peer 2 Peer 3 2H16 1H17 2H17 1H18 2H18 1H19 2H19 29 |
Slide 30: Strong CIB ARO growth offsets lower SA earnings
Strong CIB ARO growth offsets lower SA earnings Headline earnings (Rm) 3% 5 794 5 946 FY18 FY19 (10%) 8% 2 220 2 007 1 951 2% 1 814 1 202 1 223 37% 765 558 Corporate Investment Bank Corporate Investment Bank Total CIB CIB SA down 6% CIB ARO up 15% 30 |
Slide 31: CIB earnings mix well balanced
CIB earnings mix well balanced Headline earnings (Rm) Headline earnings FY19 (%) 47 46 53 54 Corporate Investment Bank South Africa ARO 31 |
Slide 32: CIB Markets performance diverged
CIB Markets performance diverged CIB SA Markets revenue (Rbn) CIB Markets revenue (Rbn) 0.4 FY18 FY19 3.5 1.3 1.3 (28%) 2.5 25% 2.1 1.8 1.7 1.7 (0.5) FY18 FY19 Corporate Institutional Client facilitation risk SA ARO 32 |
Slide 33: Africa Regions enhances our earnings growth and returns
Africa Regions enhances our earnings growth and returns Africa Regions to group headline earnings (%) Absa Regional Operations RoE (%) 22 19.0 18.1 19 19 18 16.6 15.1 FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19 33 |
Slide 34: Separation largely complete
Separation progress to date Separation largely complete 34 |
Slide 35: 2020 outlook and beyond
2020 outlook and beyond 2020 Medium-term • Tough and uncertain macro backdrop • We expect solid balance sheet growth • Net interest margin expected to be similar to 2019 • Costs will remain well controlled and we expect • We expect to steadily improve cost to income positive JAWS ratio over the next
Slide 36: Daniel Mminele, Chief Executive
Daniel Mminele Chief Executive 36 |
Slide 37: 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