Absa Group Limited · JSE:ABG
Absa — H1 2022 Earnings Presentation
29 slides from Absa's earnings presentation, Aug 15, 2022
Slide 1: Absa Group 1H22 results presentation
Absa Group 1H22 results presentation 15 August 2022
Slide 2: Arrie Rautenbach, Chief Executive
Arrie Rautenbach Chief Executive
Slide 3: Consistent execution delivering strong performance
Consistent execution delivering strong performance • Strong results reaffirm the strategic choices made in 2018 • Turnaround phase of the execution journey is completed • Strong, experienced and stable leadership team in place • Evolved the operating model • Laid a strong foundation for the next pha
Slide 4: Strategy to regain RBB leadership gaining traction
Strategy to regain RBB leadership gaining traction “Fix” phase … … the next phase • Delayered the business • Smart growth with targeted customer acquisition • End-to-end accountability in business • Deliver superior customer experience with • Integrated bancassurance model a focus on primacy • Impro
Slide 5: CIB has a solid foundation for further growth
CIB has a solid foundation for further growth Successful Barclays separation … … the next phase • Rebuilt core capabilities • Shift from a balance sheet-led strategy • Digital migration • Primary partner for clients • Stable and experienced management team • Growing the CIB ARO franchise • Embedded
Slide 6: Divisions grew earnings and improved returns
Divisions grew earnings and improved returns Normalised headline earnings (Rm) Return on regulatory capital (%) 34% 1H21 1H22 1H21 1H22 24.1 5 593 22.8 19.9 5% 4 279 4 161 4 059 15.2 RBB CIB RBB CIB 6 |
Slide 7: Maintained our positive momentum
Maintained our positive momentum Pre-provision profit (Rbn) Diluted normalised HEPS (c) 23% 27% 9% 1% 22.8 487% 1296 7% 3% 18.5 18.6 1018 16.9 976 (82%) 173 1H19 1H20 1H21 1H22 1H19 1H20 1H21 1H22 RoE (%) Dividend per share (c) 110% 17.7 16.4 3% 650 15.3 505 310 2.6 nil 0 1H19 1H20 1H21 1H22 1H19 1H
Slide 8: Jason Quinn, Financial Director
Jason Quinn Financial Director
Slide 9: Revenue growth drove strong increase in earnings
Revenue growth drove strong increase in earnings Normalised headline earnings (Rbn) Pre-provision profit up 23% (23% CCY) 18% 7% (6% CCY) 2.8 (1.5) 10% 26% 12% 27% (0.5) 0.0 (1.4) 3.0 11.0 8.6 1H21 Net interest Non-interest Operating Credit Other* 1H22 income income expenses impairments Revenue up 1
Slide 10: Net interest margin recovery continued
Net interest margin recovery continued Change in net interest margin* (basis points) (1) 6 (4) (2) 13 6 0 0 1 0 454 7 18 441 423 Loans Deposits 7 6 1H20 1H21 Pricing Mix Pricing Mix Endowment Capital ** Hedge *** Other 1H22 Note: * average interest bearing assets; ** group equity endowment; *** inte
Slide 11: Broad-based loan growth
Broad-based loan growth Net customer loans (Rbn) 9% 447 1H21 1H22 410 5% 341 324 7% 124 133 17% 18% 57 66 63 53 Retail SA Relationship Banking SA RBB ARO CIB SA CIB ARO Note: In constant currency, RBB ARO grew 10% and CIB ARO 9% 11 |
Slide 12: Consistent loan growth across Retail Banking SA
Consistent loan growth across Retail Banking SA Retail Banking South Africa net customer loans (Rbn) 9% 282 1H21 1H22 257 8% 102 94 10% 42 8% 38 18 19 Home Loans Vehicle and Asset Credit card Personal loans Finance 12 |
Slide 13: Continued deposit momentum across the board
Continued deposit momentum across the board Customer deposits (Rbn) 1% 1H21 1H22 332 336 7% 281 263 11% 190 170 16% 17% 102 88 80 68 Retail SA Relationship Banking RBB ARO CIB SA CIB ARO SA Note: In constant currency, RBB ARO grew 7% and CIB ARO 7% 13 |
Slide 14: Substantial deposit growth improved liquidity
Substantial deposit growth improved liquidity Total deposits (Rbn) Group funding mix (%) 10% 15.2 12.6 7% 1 214 12% 1 105 9.2 10.8 14% 1 028 78.2 74.0 914 1H19 1H22 1H19 1H20 1H21 1H22 Customer deposits Bank deposits Debt securities 14 |
Slide 15: Insurance drove non-interest income rebound
Insurance drove non-interest income rebound Non-interest income (Rbn) Non-interest income by division (Rbn) 18.4 18% 12.8 22% 16.0 2.7 130% 1.5 721% 15.6 10.4 Insurance SA 2.3 1.2 11.3 10% 0.2 1H22 4.1 12% 3.1 3.7 10.2 1H21 11.6 7% 10.6 10.8 6% 4.9 5.2 1H20 1H21 1H22 1H21 1H22 1H21 1H22 Fees and com
Slide 16: Costs well managed as we continue to invest
Costs well managed as we continue to invest 1H22 Change Mix Cost-to-income ratio (%) Rm % % Staff 13 189 4 55 56.7 56.7 Property 895 (1) 4 54.9 Technology 2 643 12 11 53.9 Depreciation 1 563 (8) 6 51.4 Professional fees 1 334 35 6 Marketing 771 48 3 Communication * 720 4 3 Cash transportation 574 (5
Slide 17: Credit loss ratio increased slightly
Credit loss ratio increased slightly Credit impairments (Rbn) Credit loss ratio (%) 1H21 1H22 16% (42%) 10% 0.7 (0.2) 5.2 RBB 1.33 1.44 4.7 Everyday Banking 5.72 6.01 Vehicle and Asset Finance 1.58 2.24 Home Loans (0.22) 0.19 Relationship Banking 1.14 0.34 RBB ARO 1.74 1.70 CIB 0.24 0.13 Group 0.88
Slide 18: Coverage of declining NPLs remains robust
Coverage of declining NPLs remains robust Non-performing loans (%) Stage 3 loan coverage (%) 47.4 47.1 FY21 1H22 6.3 45.4 44.6 5.6 5.4 5.3 37.0 30.8 FY20 1H21 FY21 1H22 RBB CIB Total 18 |
Slide 19: Broad-based earnings and pre-provision profit growth
Broad-based earnings and pre-provision profit growth Headline earnings (Rm) 27% 1H21 1H22 11.0 8.6 34% 5.6 5% 4.2 4.1 4.3 173% 0.4 1.1 RBB CIB Head offic, Treasury and Group other Pre-provision 24% 6% 23% profit growth: 19 |
Slide 20: RBB franchises all grew pre-provision profit
RBB franchises all grew pre-provision profit Headline earnings (Rm) 34% 1H21 1H22 2 016 4% 1 598 1 658 1 501 1 400 (23%) 1 080 (316%) 869% 642 (90%) 523 248 26 54 (297) Home Loans Vehicle and Everyday Insurance SA Relationship RBB ARO Asset Finance Banking Banking Pre-provision profit growth: 6% 11%
Slide 21: CIB benefits from its diversity
CIB benefits from its diversity Headline earnings (Rm) 5% 4 279 1H21 1H22 4 059 (1%) 7% 2 990 2 974 2 955 2 766 22% 2% 1 305 1 293 1 324 1 069 Corporate Bank Investment Bank Total CIB South Africa ARO Pre-provision profit growth: 29% (2%) 6% 2% 15% 21 |
Slide 22: Africa regions improved revenue and earnings growth
Africa regions improved revenue and earnings growth Revenue (Rbn) Normalised headline earnings (Rm) 13% 26% 35.7 9 215 31.6 1H21 1H22 1H21 1H22 7 286 17% 11.2 9.6 32% 1 769 1 342 South Africa Africa regions South Africa Africa regions 22 |
Slide 23: Common equity tier 1 ratio above Board target range
Common equity tier 1 ratio above Board target range Group common equity tier 1 ratio (%) 2.1 (0.7) 13.1 12.1 12.4 (0.7) Board target range 11.0% - 12.5% 1H21 RWA movement Profit Dividend 1H22 23 |
Slide 24: Modest GDP growth expectations, with downside risk
Modest GDP growth expectations, with downside risk South Africa real GDP growth (%) 6 4 4.9 2 2.3 1.8 2.0 0.3 1.3 0 -2 -4 -6 -6.3 (6.4) -8 2019 2020 2021 2022F 2023F 2024F 2025F Source: Absa Research 24 |
Slide 25: Rates rising faster with increased inflationary pressure
Rates rising faster with increased inflationary pressure South Africa prime rate forecast (%) South Africa inflation forecast (%) 11.5 8.5 11.0 8.0 10.5 7.5 10.0 7.0 9.5 6.5 9.0 6.0 8.5 5.5 8.0 5.0 7.5 4.5 4.0 7.0 1Q23 1Q22 2Q22 3Q22 4Q22 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 3.5 1Q22 2Q22 3Q22 4Q22 1Q
Slide 26: We are well positioned for a tougher macro backdrop
We are well positioned for a tougher macro backdrop Group capital ratios (%) Total loan coverage (%) 16.9 17.0 16.0 4.5 4.5 4.5 14.9 2.7 2.2 2.7 4.1 1.7 4.0 3.0 1.8 0.8 0.9 3.3 12.5 12.4 13.1 11.0 1H19 1H20 1H21 1H22 FY19 1H20 FY20 1H21 FY21 1H22 CET1 Other tier 1 Tier 2 26 |
Slide 27: 2022 outlook
2022 outlook • Low double-digit revenue growth likely, with non-interest income slightly higher than net interest income - High single digit customer loan growth and low to mid-single digit increase in customer deposits. Net interest margin benefits from rising rates • Credit loss ratio likely to in
Slide 28: Medium-term targets
Medium-term targets Cost-to-income ratio (%) RoE (%) 55.2 Sustainably Bottom half > 17.0 75-100bp 15.8 Low 50s FY21 … FY24 FY21 … FY24 28 |
Slide 29: Disclaimer
Disclaimer 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, objectives, goals, strategies, futu