National Bank Of Canada · TSX:NA
National Bank Of Canada — Investor Presentation (November 2018)
48 slides from National Bank Of Canada's investor presentation, Nov 2, 2018
Slide 1: ABA Bank and Cambodia: Two Years Later
ABA BANK AND CAMBODIA: TWO YEARS LATER Investors Meeting November 2, 2018
Slide 2: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements From time to time, the Bank makes written and oral forward-looking statements, such as those contained in the Outlook for National Bank and the Major Economic Trends sections of this Annual Report, in other filings with Canadian securities regulators, and
Slide 3: Progress and Opportunities in Cambodia
Progress and Opportunities in Cambodia LOUIS VACHON PRESIDENT AND CHIEF EXECUTIVE OFFICER NATIONAL BANK OF CANADA 3
Slide 4: ABA Bank and Cambodia: Two Years Later
ABA Bank and Cambodia: Two Years Later Cambodia is an attractive underbanked market with strong growth potential ABA Bank is generating superior growth and returns Net income CAGR from 2014-2018E of 75% Return on equity in 2018 expected to be ~30% Estimated net income of ~$70M in 2018 Simple banking
Slide 5: Robust Governance and Oversight Structure
Robust Governance and Oversight Structure Control of ABA Bank Board of Directors Risk appetite Funding Key hires Compensation Active, collaborative oversight by International Development Team Ongoing communication and monthly on-site reviews Detailed quarterly performance scorecard, including key ri
Slide 6: The Path Forward
The Path Forward Support ABA Bank management team in the execution of the 2018-2022 plan Potential opportunity to acquire 10% minority interest in July 2019 Moratorium on significant new investments in emerging markets until 2020 6
Slide 7: Strong Leadership Team
Strong Leadership Team NATIONAL BANK INTERNATIONAL ABA BANK DEVELOPMENT TEAM EXECUTIVE TEAM YVES JACQUOT ASKHAT AZHIKHANOV Senior Vice-President Chief Executive Officer International Development ABA Bank DOMINIC JACQUES MADI AKMAMBET Deputy Vice-President Executive Director International Development
Slide 8: Positioned for Sustained Growth in an Attractive Market
Positioned for Sustained Growth in an Attractive Market ASKHAT AZHIKHANOV CHIEF EXECUTIVE OFFICER MADI AKMAMBET EXECUTIVE DIRECTOR 8
Slide 9: ABA Bank Overview / Market Opportunity / Business Model
ABA BANK OVERVIEW MARKET OPPORTUNITY BUSINESS MODEL COMPETITIVE POSITION PERFORMANCE 2014-2018 OUTLOOK 2018-2022 9
Slide 10: Who We Are
Who We Are Best Bank in Cambodia Awards Established in 1996 as Advanced Bank of Asia New ownership in 2009 Refocusing, rebranding and growth as ABA Bank Euromoney 2018, 2017, 2016, 2015, 2014 National Bank acquired 30% in 2014 and reached 90% in 2016 Fastest growing commercial bank in Cambodia Globa
Slide 11: Progress Report Since 2016 Investor Day
Progress Report Since 2016 Investor Day As of August 31, 2016 As of August 31, 2018 CLIENTS BRANCHES SELF-BANKING EMPLOYEES (%) 279,994 59 91 3,610 40% 2X 140% 42 69 125,291 45 2X 1,500 45,664 16 22,577 Borrowers Depositors Transactions Volume 11
Slide 12: Strong Asset and Net Income Growth
Strong Asset and Net Income Growth (US$ M) 2016 Investor Day Total Assets Net Income 2,027 70.0 CAGR +49% 1,639 CAGR +75% 1,777 1,425 46.2 1,098 43.0 806 29.0 32.0 505 15.9 22.0 7.5 2014 2015 2016 2017 1H2018 2014 2015 2016 2017 2018E 12
Slide 13: Key Success Factors
Key Success Factors Attractive market opportunity in a significantly underbanked market Simple banking model and strong execution Focused lending and deposit strategies Branch network expansion into the provinces State-of-the-art digital and self-banking platform National Bank’s financial strength a
Slide 14: ABA Bank Overview / Market Opportunity / Business Model
ABA BANK OVERVIEW MARKET OPPORTUNITY BUSINESS MODEL COMPETITIVE POSITION PERFORMANCE 2014-2018 OUTLOOK 2018-2022 14
Slide 15: Cambodia: Positive Economic and Demographic Indicators
Cambodia: Positive Economic and Demographic Indicators GDP GDP Growth Inflation Population Nominal Average rate Average rate US$22.1B 7.1% p.a. 2.8% 16.1M Per Capita US$1,379 (2012-2017) (2012-2017) Growing 1.6%/year (2017) Foreign Direct Inflation Rate Currency Minimum Wage Investment Growth Age Di
Slide 16: Accelerating Banking Penetration in Loans and Deposits
Accelerating Banking Penetration in Loans and Deposits Strong momentum with acceleration of banking penetration Bank Credit Penetration Bank Deposit Penetration 33% 7% 7% 33% 17% 3% 67% 93% 2015 2017 Unbanked 2015 2017 Unbanked Population Population Source: National Bank of Cambodia, 2017 16
Slide 17: ABA Bank Overview / Market Opportunity / Business Model
ABA BANK OVERVIEW MARKET OPPORTUNITY BUSINESS MODEL COMPETITIVE POSITION PERFORMANCE 2014-2018 OUTLOOK 2018-2022 17
Slide 18: Simple Banking Adapted to Market Needs
Simple Banking Adapted to Market Needs State-of-the-art Omnichannel Banking Platform Micro Simple Business Retail and Commercial Everyday Banking and SME Loans Deposits Transactions Disciplined Risk Management and Strong Governance 18
Slide 19: Lending Strategy: Staying Focused on MSMEs
Lending Strategy: Staying Focused on MSMEs Client Segments Product Execution s Leverage branch network Corporate clients in provinces Micro SME loans Marketing communication Large SMEs $5K - $70K mix (direct, TV, online, and family businesses radio) Micro businesses Small SME loans Refinancing good
Slide 20: MSMEs: Pillars of the Cambodian Economy
MSMEs: Pillars of the Cambodian Economy 99.8% of businesses in Cambodia defined as Micro or SMEs MSME-based Economy1 MSMEs employ 73% of the entire workforce SMEs alone contribute about 69% of GDP Significantly 51% of MSMEs do not have a bank account Underbanked1 39% of Cambodians borrow informally
Slide 21: MSME Clients: Diversified, Underbanked and Growing
MSME Clients: Diversified, Underbanked and Growing PRODUCTION OF DRINKING WATER BOUTIQUE HOTEL IN SIEM REAP PRODUCTION OF ZINC CONSTRUCTION MATERIALS AUTOMOTIVE AFTERMARKET RICE MILLING PRODUCTION OF PEPPER 21
Slide 22: Loan Portfolio Diversification – Q2 2018
Loan Portfolio Diversification – Q2 2018 99% of loan book US$-denominated 100% of debt is collateralized BY AMOUNT BY INDUSTRY BY CLIENT SEGMENT BY COLLATERAL 2% 2% 4% 14% 5% 34% 5% MSME 96% 16% 94% 26% 98% <US$ 500K Trade Agriculture 62% Micro Biz (<$70K) Real Estate US$ 500K – 1M Services Manufact
Slide 23: Deposit Strategy: Focus on Retail while Penetrating Commercial
Deposit Strategy: Focus on Retail while Penetrating Commercial Client Segments Products and Services Execution Deposit products Leverage digital banking platform (Fixed, Flexi, CASA) (online and off-site account Retail clients opening, etc.) Payments cards (Visa, Master, UPI) - Individuals Internet
Slide 24: Deposit Portfolio Diversification – Q2 2018
Deposit Portfolio Diversification – Q2 2018 Diversified portfolio with 99% of deposits US$-denominated BY AMOUNT BY CLIENT SEGMENT Financial Institutions ˃US$ 1M 1% <US$ 50K Corporate 17% 18% 31% US$ 500K – 1M 12% 13% 26% US$ 50K – 100K 82% Retail US$ 100K – 500K 24
Slide 25: Modern Branch Network Supports Market Penetration
Modern Branch Network Supports Market Penetration 59 branches as of Q2 2018 20 in Phnom Penh 39 in provinces 10 new branches opened in 2016 11 new branches opened in 2017 5 new branches opened as of Q2 2018 5 planned to open in Q3-Q4 2018 Target of 75 branches by end of 2020 25
Slide 26: State-of-the-Art Digital and Self-Banking Platform
State-of-the-Art Digital and Self-Banking Platform Cash Deposit Machines ABA Mobile App On-field Onboarding 24/7 instant cash deposit to The first full-scale mobile On-field account opening any ABA Bank account and bill banking app in Cambodia with by Customer Acquisition payments to various vendors
Slide 27: Latest Digital Developments and Innovations
Latest Digital Developments and Innovations Remote Onboarding ONLINE PAYMENT GATEWAY QR-BASED PAYMENT BRANCHLESS ONBOARDING Cambodia’s #1 online payment Accepts multiple payment Tablet-based application for gateway for e-commerce schemes: VISA, Mastercard, onboarding new clients in field ABA Bank ac
Slide 28: Rapidly Growing Digital and Self-Banking Penetration
Rapidly Growing Digital and Self-Banking Penetration Self-Banking Online Banking TRANSACTIONS NUMBER TRANSACTIONS AMOUNT NUMBER OF USERS NUMBER OF TRANSACTIONS BREAKDOWN, % BREAKDOWN, % (in thousands) (in thousands) 52 61 69 81 91 9 13 16 35 45 3580 3171 156 102 91 87 84 65 44 1024 55 48 39 12 31 13
Slide 29: Madi Akmambet, Executive Director
MADI AKMAMBET EXECUTIVE DIRECTOR 29
Slide 30: ABA Bank Overview / Market Opportunity / Business Model
ABA BANK OVERVIEW MARKET OPPORTUNITY BUSINESS MODEL COMPETITIVE POSITION PERFORMANCE 2014-2018 OUTLOOK 2018-2022 30
Slide 31: Sustained Growth in Market Share
Sustained Growth in Market Share ABA BANK 2017 ABA BANK 2012 GROWTH 5.8% ASSETS > 2X 2.4% 7.3% DEPOSITS > 2X 3.3% 7.7% LOANS > 3X 2.4% 31
Slide 32: Outperforming Cambodian Banking Sector (CAGR 2013-2017)
Outperforming Cambodian Banking Sector (CAGR 2013-2017) ABA Bank Banking Sector 44% ASSETS 21% 41% DEPOSITS 21% 54% LOANS 22% 32
Slide 33: Strong Market Position
Strong Market Position ABA Bank now ranks among the Top 4 commercial banks in Cambodia ABA Bank Ranking ABA Bank Ranking ABA Bank Ranking KPI 2012 2015 2017 Assets #11 #6 #4 Deposits (Retail) #6 #4 #3 Loans #9 #6 #3 Branch network #8 #4 #4 ATM network #6 #2 #2 Cards #7 #5 #2 33
Slide 34: ABA Bank Overview / Market Opportunity / Business Model
ABA BANK OVERVIEW MARKET OPPORTUNITY BUSINESS MODEL COMPETITIVE POSITION PERFORMANCE 2014-2018 OUTLOOK 2018-2022 34
Slide 35: Solid and Consistent Growth in Assets and Equity
Solid and Consistent Growth in Assets and Equity (US$ M) Assets 2016 Investor Day Equity 2,027 CAGR +49% Asset Growth 1,639 1,777 (Actual vs 2016 Investor Day) 1,425 1,099 806 2016 99% 2017 115% 505 233 2018 136% 200 100 129 64 2014 2015 2016 2017 1H2018 35
Slide 36: Solid and Consistent Growth in Deposits and Loans
Solid and Consistent Growth in Deposits and Loans (US$ M) 2016 Investor Day 2016 Investor Day Deposits Loans (Net) 1,590 1,491 CAGR +45% 1,264 CAGR +63% 1,227 856 785 654 482 433 270 2014 2015 2016 2017 1H2018 2014 2015 2016 2017 1H2018 36
Slide 37: Solid and Consistent Net Income Growth
Solid and Consistent Net Income Growth (US$ M) 2016 Investor Day 70.0 CAGR +75% Net Income 46.2 (Actual vs 2016 Investor Day) 43.0 29.0 32.0 2016 132% 15.9 2017 144% 22.0 7.5 2018 153% 2014 2015 2016 2017 2018E NPL 0.27% 0.10% 0.22% 0.79% 0.79% 37
Slide 38: Solid and Consistent Improvement in Profitability Ratios
Solid and Consistent Improvement in Profitability Ratios Return on Average Equity Return on Average Assets 30.3% 28.1% 25.3% 3.6% 19.5% 3.4% 3.0% 14.2% 2.4% 1.8% 2014 2015 2016 2017 1H2018 2014 2015 2016 2017 1H2018 38
Slide 39: Steady Interest Margin Improvement
Steady Interest Margin Improvement Yield on Loans NIM Cost to Deposits 12.20% 12.00% 11.90% 11.50% 11.80% 7.80% 8.40% Improvement in 6.30% 7.10% net interest margin 5.70% is driven by strategic focus on MSME in lending 3.80% 3.50% 3.40% and CASA in 2.90% 2.40% deposits 2014 2015 2016 2017 1H2018 39
Slide 40: Sound Efficiency
Sound Efficiency Cost to Income 58.7% 46.4% 39.4% 37.3% 35.3% Gaining economies of scale despite ongoing investments in infrastructure 2014 2015 2016 2017 1H2018 40
Slide 41: Sound Fundamentals: Liquidity and Capitalization
Sound Fundamentals: Liquidity and Capitalization Credit to Deposit (CDR) Liquidity (LCR) Capital Adequacy (CAR) 116% 98% Benchmarks in 95% 92% 92% Cambodia 74% 73% 63% 55% 54% CDR (avg.) 95% LCR (min.) 80% CAR (min.) 15% 17% 16% 17% 16% 17% 2014 2015 2016 2017 1H 2018 41
Slide 42: ABA Bank Overview / Market Opportunity / Business Model
ABA BANK OVERVIEW MARKET OPPORTUNITY BUSINESS MODEL COMPETITIVE POSITION PERFORMANCE 2014-2018 OUTLOOK 2018-2022 42
Slide 43: Sustained Growth Expected 2018 – 2022
Sustained Growth Expected 2018 – 2022 (US$ M) Total Assets Total Deposits Total Loans 5,990 4,992 Key Assumptions 4,075 4,774 (2019-2022) 4,484 3,196 3,978 3,737 2,459 3,247 3,051 CAGR +25% 1,639 2,547 2,393 Branches 85 1,959 1,841 Credit to 1,264 1,227 Deposit Ratio 95% 2017A 2018E 2019E 2020E 2021
Slide 44: Net Income Growth 2018 – 2022
Net Income Growth 2018 – 2022 NET INCOME (US$ M) 171 CAGR +25% 143 Key Assumptions 116 (2019-2022) 91 70 NPL 1.5% 46 ROAE 23% ROAA 3% 2017A 2018E 2019E 2020E 2021E 2022E 44
Slide 45: Solid Foundation for Profitable Growth
Solid Foundation for Profitable Growth Rapidly growing Cambodian economy and Best Bank in Cambodia Awards significantly underbanked market Simple banking model aligned with domestic needs Euromoney Focused lending and deposit strategies and proven 2018, 2017, 2016, 2015, 2014 ability to execute Stat
Slide 46: Appendix
ABA APPENDIX
Slide 47: Executive Biographies
Executive Biographies ASKHAT AZHIKHANOV, PRESIDENT AND CEO, ABA BANK Askhat Azhikhanov joined ABA in 2009 as Deputy CEO and was appointed CEO in 2012. Mr. Azhikhanov started his career in 1998 in the Banking Supervision Department of the National Bank of Kazakhstan. Between 2001 and 2005, he held ma
Slide 48: Executive Biographies
Executive Biographies MADI AKMAMBET, EXECUTIVE DIRECTOR AND MEMBER OF THE BOARD, ABA BANK Madi Akmambet served as CEO of ABA Bank from March 2009 to June 2012. Since then, he has continued his work for ABA as Executive Director and member of the Board of Directors. Mr. Akmambet started his career in
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