Absa Group Limited · JSE:ABG
Absa — Barclays Africa Group — FY2017 Earnings Presentation
33 slides from Absa's earnings presentation, February 2018
Slide 1: Barclays Africa Group Limited 2017 financial results presentation
Barclays Africa Group Limited 2017 financial results presentation
Slide 2: Performance review
Performance review Jason Quinn
Slide 3: Lower credit charge drove growth
Lower credit charge drove growth FY16 FY17 Change Adjustment FY17 Change Rm Rm % normalised % Rm Net interest income 42 003 42 644 2 (325) 42 319 1 Non-interest income 30 391 30 661 0 (80) 30 581 1 Total income 72 394 73 305 1 (405) 72 900 1 Impairment losses 8 751 7 022 (20) - 7 022 (20) Operating
Slide 4: Salient features (normalised)
Salient features (normalised) FY16 FY17 % % Diluted headline EPS growth 5 4 Dividend per share growth 3 4 Growth in net asset value per share 4 5 Return on equity 16.6 16.4 Return on assets 1.34 1.38 Net interest margin 4.95 4.95 Cost to income ratio 55.2 56.8 Credit loss ratio 1.08 0.87 4
Slide 5: Stable net interest margin
Stable net interest margin Change in net interest margin* (basis points) 495 (2) 4 0 (2) 2 495 1 (1) (3) 1 Loans (5) Deposits 1 FY16 Pricing Mix Pricing Mix Endowment Capital Hedge ** Rest of Other FY17 FY16 Pricing Mix Pricing Mix Endowment Capital Hedge ** Rest of Other FY17 Africa Africa Note: *
Slide 6: Modest loan growth, particularly in Retail
Modest loan growth, particularly in Retail Net customer loans (Rbn) Retail SA net customer loans (Rbn) 450 0% 225 225 400 2% 350 FY16 FY17 FY16 FY17 300 250 8% 8% 200 101 94 150 100 (1%) 7% 50 (4%) 4% 38 37 6% 16 17 0 Retail Business CIB RBB CIB Home Loans Vehicle & Card Personal Asset Finance Loans
Slide 7: Large annuity component in non-interest income
Large annuity component in non-interest income Non-interest income by type (Rbn) Non-interest income by division (Rbn) 25 25 5% 4% 20 20 FY16 FY17 15 FY16 FY17 15 10 10 (10%) (7%) 6% 5 (6%) 5 0 0 Fees and Trading Other SA Banking Rest of Africa WIMI commission Banking 7
Slide 8: Costs remain well contained as continue to invest
Costs remain well contained as continue to invest FY17 Change Mix Rm % % Cost to income ratio (%) Staff 23 138 5 56 Property-related 3 337 -1 8 56,8 Technology 3 143 0 8 56,0 Depreciation 1 984 19 5 55,2 Professional fees 1 975 (4) 5 Marketing 1 709 8 4 Communication 1 400 (7) 3 Cash transportation
Slide 9: Negative JAWS reduced pre-provision profits
Negative JAWS reduced pre-provision profits Group operating JAWS * (%) Pre-provision profit (Rbn) 10% (3%) 8% 32,4 31,5 1,6 29,5 1,4 (2.9) FY15 FY16 FY17 FY15 FY16 FY17 Note: * revenue growth minus operating expenses growth 9
Slide 10: Credit impairments improved noticeably
Credit impairments improved noticeably FY17 FY16 FY17 FY16 Non-performing loans (%) Credit loss ratio NPL cover (%) (bps) 3,9 SA Banking 80 103 41 43 RBB SA 110 133 41 42 3,7 Retail Banking 120 139 42 43 Cards 453 541 71 72 3,5 VAF 87 114 47 44 Mortgages * 30 40 20 21 Personal Loans 609 568 66 66 Bu
Slide 11: Capital levels remain strong
Capital levels remain strong Barclays Africa Group Common Equity Tier 1 ratio (%) 2.2 (1.4) 1.4 13,5 (0.3) 12,1 (0.5) 12.1 Board range 10.0% - 11.5% FY16 FY16 RWA movement RWA Profit Profit Dividend Dividend Other FY17 Normalised Other Impact Barclaysfrom FY17 of separation basis Plc Barclays FY17 F
Slide 12: Strong returns across a well-diversified portfolio …
Strong returns across a well-diversified portfolio … Divisional RoE (%) Headline earnings mix FY17 (%) ** FY16 7 21,7 20,9 20,8 FY17 20,1 7 18 14 16,6 40 15,1 4 20 14 75 Retail Banking SA Business Banking SA CIB SA RBB Rest of Africa CIB Rest of Africa WIMI SA Banking * ROA Banking WIMI Note: * retu
Slide 13: … evident in overall earnings growth
… evident in overall earnings growth Group normalised headline earnings growth (Rm) 7% (8%) 6% 4% 4% 198 (102) (40) 0 15 558 522 14 980 14% FY16 SA Banking Rest of Africa WIMI Head office & FY17 Banking other 13
Slide 14: CIB drove SA Banking earnings growth
CIB drove SA Banking earnings growth South Africa Banking headline earnings (Rm) 0% 6 524 6 546 FY16 FY17 1% 22% 2 298 2 328 2 183 8% 1 793 1 063 1 143 Retail Banking Business Banking Corporate Investment Banking RBB up 1% CIB up 16% 14
Slide 15: Retail Banking SA remains a priority …
Retail Banking SA remains a priority … • Asset strategies aim to improve Headline earnings* (Rm) low loan growth • Progress on customer experience and product suite 2689 (8%) FY16 FY17 • Continued cost management 2470 funded increased digital and marketing spend 5% 3% • Credit quality improved acros
Slide 16: … and momentum improved in the second half
… and momentum improved in the second half Retail SA YoY loan production (%) Retail Banking SA YoY growth (%) 22 12 19 1H17 2H17 16 11 00 5 2 (1) (7) 1H17 2H17 (11) (10) Home Loans Vehicle and Personal Loans Card Asset Finance Pre-provision profit Headline earnings 16
Slide 17: Further investment in Business Banking SA
Further investment in Business Banking SA • Improved second half momentum Headline earnings (Rm) • Robust underlying non-interest revenue growth (53%) 11% 307 (579) • Reduced non-core equity portfolio 3% materially 295 (5%) 1% 2 298 7 2 328 • Continued investment in electronic channels and frontline
Slide 18: CIB SA posts strong earnings growth again
CIB SA posts strong earnings growth again • Revenue continues to benefit from Headline earnings (Rm) diversification (44%) 2% >100% • Scope to gain share in lending and 453 (119) (208) 16% transactional revenue 3% 3 326 • Substantial drop in credit charge 344 • Costs remain well contained to 2 856 p
Slide 19: One-offs dampened WIMI’s performance
One-offs dampened WIMI’s performance • Large one-off items reduced WIMI underlying FY17 earnings growth earnings (%) – Unwinding Life deferred tax asset 4 6 raised in 2016 – Single client impairment in Wealth 6 – Far higher catastrophe claims • Healthy underlying South African short-term underwritin
Slide 20: Stronger Rand a drag on rest of Africa growth …
Stronger Rand a drag on rest of Africa growth … Rand to ROA currencies (weighted) Rand impact on Rest of Africa Banking (%) Weaker ZAR 9 5 (11) Stronger ZAR FY16 FY17 (17) Revenue Headline earnings 2015 2016 2017 20
Slide 21: … but ROA continues to enhance earnings growth
… but ROA continues to enhance earnings growth Headline earnings growth (%) Return on regulatory capital (%) 24 17 17 22 20 12 18 16 9 14 12 10 2 2 8 FY13 FY14 FY15 FY16 FY17 FY15 FY16 FY17 South Africa Rest of Africa SA Banking ROA Banking 21
Slide 22: Outlook for 2018
Outlook for 2018 • Loan and deposit growth to improve • Net interest margin is expected to decline slightly • Costs will remain well controlled to improve our operating JAWS from 2017 • Credit loss ratio largely unchanged • RoE is likely to improve slightly • Dividend cover will remain the same 22
Slide 23: Separation update
Separation update Jason Quinn
Slide 24: Significant planning completed, execution underway
Significant planning completed, execution underway PLC shareholding (%) 21.9 14.9 Today June 2020 23.4 50.1 62.3 Day 1 6 June 2017 Services delivered by Barclays PLC to BAGL Minister of Finance approval 25 May 2017 Execution Divestiture announced Re-mobilisation for 1 March 2016 execution phase Stra
Slide 25: Robust governance structure in place
Robust governance structure in place Joint governance structure Barclays Africa Barclays PLC Group Limited Board Board level Separation oversight Oversight Committee Independent assurance External advisory panel Joint transition forum Group Change Committee Separation and service Joint delivery revi
Slide 26: Dedicated team managing separation
Dedicated team managing separation Programme structure Programme resources Executive Committee oversight Chief Separation Officer Resources RBB SA CIB ROA WIMI TECH Functions ± 360 spend >70% of time on separation ±200 Technology specialists Planning and design Risk ±80 CIB PMO and regulatory engage
Slide 27: Clear risk management framework
Clear risk management framework Services secured via Transitional Services Agreement (TSA) Resource strategy Internal capacity enhanced through external resources Knowledge enhanced with external subject matter experts Draw on Barclays PLC pool of resources Implementation approach ‘Lift and drop’ Bu
Slide 28: Continuous dialogue with regulators
Continuous dialogue with regulators Prudential Regulatory Engagements: Authority (PRA) • Keep regulators informed of progress US Federal Reserve Financial • Context and requests pertaining to various regulatory approvals Conduct • Manage expectations/requirements for obtaining regulatory deconsolida
Slide 29: MSS termination
Project delivery matched to PLC service runoff 7 material service schedules MSS termination terminated in line with TSA profile 4 Service Delivery from Technical support services Rest of Africa Corporate channels 20 projects completed Rest of Africa core banking in line with plan Project Delivery Pa
Slide 30: Separation contribution
Separation contribution Separation contribution (Rbn) Investment to date (%) 3,3 12,6 9.3 17 18 1 9,3 8,3 8,3 24 27 14 Capital Separation MSA Total contribution expenses termination Spent GBP USD T-bills Liquid assets payment 30
Slide 31: Major spend on technology and brand
Major spend on technology and brand Spend to date Total expected spend (%) Project execution ROA 46% SA 54% • HR re-platform • Technology infrastructure 31 • Barclays.net impairment 46 • Remove ‘Member of Barclays’ in SA and brand development Separation support 21 • Transaction advisory, planning an
Slide 32: Separation journey is on track
Separation journey is on track • Barclays PLC shareholding reduced to 14.9% • Three key elements – operational separation, brand and strategy • Robust governance in place • Maintaining dialogue with regulators • Project programme well structured • Sufficient financial and people resources • Aware of
Slide 33: 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