Absa Group Limited · JSE:ABG
Absa — H1 2024 Earnings Presentation
30 slides from Absa's earnings presentation, Aug 19, 2024
Slide 1: Absa Group 1H24 financial results
Absa Group 1H24 financial results 19 August 2024
Slide 2: Arrie Rautenbach, Group Chief Executive
Arrie Rautenbach Group Chief Executive
Slide 3: The macro backdrop remains difficult
The macro backdrop remains difficult Global environment Sub-Saharan Africa South Africa • Inflation pressures moderated, • Policy rates elevated • Prime remained at peak levels but slower than expected • Inflation remains high • Inflation moderated further • Monetary policy remained • Fiscal constra
Slide 4: Key performance metrics
Key performance metrics 1H23 1H24 Change (%) Diluted HEPS (c) 1 289 1 228 (5) Ordinary interim DPS (c) 685 685 0 RoE (%) 15.7 14.0 Net interest margin (bps) 462 469 Cost-to-income ratio (%) 50.6 52.7 NPLs to gross loans and advances (bps) 582 614 Credit loss ratio (bps) 127 123 NAV per share (R) 170
Slide 5: Deon Raju, Group Financial Director
Deon Raju Group Financial Director
Slide 6: Costs and lower non-interest income reduced earnings
Costs and lower non-interest income reduced earnings Headline earnings (Rbn) Pre-provision profit down 1% 7% (2%) 8% 2.2 (0.5) (2.1) 0% 3% 0.2 (5%) 10.7 (2.1) (0.0) (0.2) 10.2 1H23 Net interest Non-interest Operating Credit Other* 1H24 income income expenses impairments Revenue up 3% 6 Note: * Inclu
Slide 7: Loan pricing improved net interest margin
Loan pricing improved net interest margin Change in net interest margin* (basis points) 10 (1) (3) 3 (3) 2 (4) 3 7 7 469 462 454 Loans Deposits 9 (3) 1H22 1H23 Pricing Mix Pricing Mix Endowment Capital ** Hedge *** Other 1H24 7 Note: * average interest bearing assets; ** group equity endowment; ***
Slide 8: Moderate loan and deposit growth
Moderate loan and deposit growth Group net loans and advances mix (Rbn) Group deposit mix (Rbn) 1400 1 306 4% 1600 1 251 1 395 5% 73 (24%) 1400 1 324 1200 96 133 10% 121 1200 1000 1000 800 800 600 1 233 7% 1 155 1 262 5% 600 1 203 400 400 200 200 0 0 1H23 1H24 1H23 1H24 Customer Banks Customer Banks
Slide 9: Solid SA retail and Relationship Banking deposit growth
Solid SA retail and Relationship Banking deposit growth Customer deposits (Rbn) 1H22 1H23 1H24 1% 12% 4% 465 470 416 8% 6% 7% 320 297 11% 279 11% 7% 235 211 190 4% 21% 16% 123 128 102 Everyday Banking Relationship Banking ARO RBB CIB 9
Slide 10: Loan growth remained robust across most divisions
Loan growth remained robust across most divisions … Net customer loans (Rbn) 10% 1H22 1H23 1H24 11% 495 7% 4% 11% 449 7% 423 409 404 383 7% 7% 7% 142 153 5% 9% 7% 133 20% 20% 9% 69 74 80 84 64 66 Product Solutions Everyday Banking Relationship Banking ARO RBB CIB Cluster 10
Slide 11: While retail South Africa slows
… while retail South Africa slows South Africa retail net customer loans (Rbn) 3% 6% 9% 307 298 282 1H22 1H23 1H24 9% 5% 8% 111 116 102 10% 10% 8% 42 46 49 8% 6% 1% 19 21 21 Home Loans Vehicle and Asset Credit card Personal loans Finance 11
Slide 12: Lower retail and RB charge in SA offset by CIB increase
Lower retail and RB charge in SA offset by CIB increase Credit impairment charge (Rm) (4%) 4 259 4 080 1H23 1H24 (6%) 2 309 2 180 141% 4% 915 (10%) 711 684 488 439 379 Product Solutions Cluster Everyday Banking Relationship Banking ARO RBB CIB 12 Note: Excludes Head Office credit impairment charge o
Slide 13: Credit loss ratio remains above through-the-cycle target
Credit loss ratio remains above through-the-cycle target Group credit loss ratio (bps) Credit loss ratio (%) 1H23 1H24 127 123 TTC range 75-100 Product Solutions Cluster 1.11 1.00 Home Loans 0.65 0.49 91 Vehicle and Asset Finance 2.34 2.32 Everyday Banking 9.22 8.47 Relationship Banking 0.68 0.57 AR
Slide 14: NPL growth slowed, coverage remains strong
NPL growth slowed, coverage remains strong Non-performing loans (%) NPL coverage (%) 45.9 45.0 47.1 6.05 6.14 5.82 1H23 FY23 1H24 Total loan coverage (%) 4.1 4.1 4.2 1H23 FY23 1H24 1H23 FY23 1H24 14
Slide 15: Lower trading and insurance reduce non-interest income
Lower trading and insurance reduce non-interest income Non-interest income (Rbn) Non-interest income by division (Rbn) 2% 12.5 2% 12.3 (2%) 6.0 6.1 5.9 1H23 1H24 5.8 1H23 1H24 5% (5%) 2% (17%) 2.4 2.5 2.4 2.4 2.5 4.5 2.3 3.7 (12%) 1.7 1.5 22% 0.6 0.7 Net fee and Net trading Insurance Other Product E
Slide 16: Cost growth reflects continued investment
Cost growth reflects continued investment 1H24 Change Mix Cost-to-income ratio (%) Rm % % Staff 16 178 10 57 56.4 Property 975 5 3 Technology 3 336 14 12 52.7 52.3 Depreciation 1 559 (0) 6 50.6 Professional fees 1 350 11 5 Marketing 1 099 17 4 Communication * 786 1 3 Cash transportation 619 7 2 Amor
Slide 17: CET1 ratio slightly above our Board target range
CET1 ratio slightly above our Board target range Group common equity tier 1 ratio (%) (0.2) 12.1 0.9 (0.5) 12.7 12.5 Board target range 11.0% - 12.5% FY23 Profit RWA consumption Dividend 1H24 17
Slide 18: Arrie Rautenbach, Group Chief Executive
Arrie Rautenbach Group Chief Executive
Slide 19: Divisional earnings growth outweighed by central losses
Divisional earnings growth outweighed by central losses Headline earnings (Rbn) (0%) 5.9 5.9 1H23 1H24 1% 9% 2.0 2.0 7% 1.6 (12%) 1.4 1.1 1.2 1.0 0.9 86% (0.7) (1.3) CIB Relationship Everyday Product ARO RBB Head Office, Banking Banking Solutions Treasury, other Pre-provision 7% 1% 0% (1%) 3% - prof
Slide 20: CIB continues to benefit from its diversification
CIB continues to benefit from its diversification Headline earnings (Rm) (0%) 1H23 1H24 5 907 5 892 (8%) 3 915 (6%) 3 588 7% 3 308 3 108 16% 2 599 2 784 2 304 1 992 Corporate Bank Investment Bank Total CIB South Africa ARO Pre-provision profit growth: 12% 4% 7% 1% 14% 20 Note: In constant currency t
Slide 21: Relationship Banking has invested in growth
Relationship Banking has invested in growth Headline earnings (Rm) 6% 10% 429 (405) (10%) 4% 1% 1 994 (49) 36 2 005 Pre-provision profit up 1% 1H23 Revenue Operating Credit Other* 1H24 expenses impairments 21 Note: * Includes other expenses, JVs and associates, taxation, headline earnings adjustment
Slide 22: Card and Personal Loans drove EB earnings growth
Card and Personal Loans drove EB earnings growth Headline earnings (Rm) 1H23 1H24 1 811 (10%) 9% 1 629 1 565 1 437 217% 64 204 (90%) 8% ( 211) (22) ( 227) (246) Card Personal Loans Transactions and Other Everyday Banking Deposits Pre-provision profit growth: 10% 2% (7%) - 0% 22
Slide 23: Home Loans underpinned PSC earnings growth
Home Loans underpinned PSC earnings growth Headline earnings (Rm) 1H23 1H24 7% 1 100 1 173 17% (10%) 727 621 653 588 253% 14 48 1% (188) (190) Home Loans Vehicle and Asset Insurance SA Advice and Product Solutions Finance Investments Cluster Pre-provision profit growth: (4%) 6% - - (1%) 23
Slide 24: Stronger Rand reduced ARO RBB earnings off high base
Stronger Rand reduced ARO RBB earnings off high base Headline earnings (Rm) 991 (12%) (2%) 1H23 1H24 860 875 846 (78%) 131 28 Banking operations Insurance operations ARO RBB 24 Note: In constant currency ARO RBB headline earnings grew 1%, with Banking Operations up 12%
Slide 25: Scope to improve PSC and ARO RBB returns
Scope to improve PSC and ARO RBB returns Return on regulatory capital (%) 25.8 26.2 1H23 1H24 23.5 23.1 21.4 22.1 14.6 12.6 10.3 9.4 Relationship Banking CIB Everyday Banking ARO RBB Product Solutions Cluster 25
Slide 26: Deon Raju, Group Financial Director
Deon Raju Group Financial Director
Slide 27: 2024 outlook
2024 outlook Mid-single digit revenue growth with broadly similar growth in net interest income and Revenue non-interest revenue. Balance sheet Mid- to high single digit customer loan and customer deposit growth. Credit loss ratio expected to improve slightly from 118bps in 2023 and exceed through-
Slide 28: Pathway to our medium-term targets
Pathway to our medium-term targets 1H24 1H24 to 2026 2026 Grow capital lite revenue Cost-to-income + Cost-to-income 52.7% Credit loss ratio normalises back to low 50s through-the-cycle range + RoE Productivity focus We will update market on RoE 14.0% + target in 4Q24 Faster growth in Africa regions
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
Slide 30: Appendix: Substantial income statement items
Appendix: Substantial income statement items Rm 1H23 2H23 1H24 Non-interest income impact Naira loss 0 718 401 Operating expenses impact Barclays separation 627 610 412 eKhaya BEE deal 0 241 290 Headline earnings impact Naira loss 0 511 293 Ghana hyperinflation accounting 0 403 253 Barclays separati