Absa Group Limited · JSE:ABG
Absa — Barclays Africa Group — H1 2017 Earnings Presentation
29 slides from Absa's earnings presentation, Jul 28, 2017
Slide 1: Barclays Africa Group Limited 1H17 results presentation
Barclays Africa Group Limited 1H17 results presentation 28 July 2017
Slide 2: Strategic update
Strategic update Maria Ramos
Slide 3: Financial review
Financial review Jason Quinn
Slide 4: Normalisation principles
Normalisation principles Items that will be normalised PLC investment Endowment benefit Hedging linked to separation activities Change spend Depreciation, amortisation and impairment Transitional Services Agreement costs Consequential tax impact of above items 4
Slide 5: Lower credit charge drove solid underlying growth
Lower credit charge drove solid underlying growth 1H16 1H17 Change Adjustment 1H17 Change Rm Rm % normalised % Rm Net interest income 21 093 20 837 (1) 46 20 791 (1) Non-interest income 15 415 15 487 - 238 15 249 (1) Total income 36 508 36 324 (1) 284 36 040 (1) Impairment losses 5 197 3 773 (27) -
Slide 6: Salient features (normalised)
Salient features (normalised) 1H16 1H17 % % Diluted headline EPS growth 7 7 Dividend per share growth 2 3 Return on equity 16.1 16.8 Return on assets 1.29 1.40 Net interest margin 5.01 4.93 Cost to income ratio 53.4 55.6 Credit loss ratio 1.29 0.96 6
Slide 7: Noticeable currency impact on our results
Noticeable currency impact on our results Currency impact on rest of Africa (%) Currency impact on group (%) 1H16 4 Revenue 1H17 26 Headline earnings 3 15 (16) (3) (31) (4) 1H16 1H17 Revenue Headline earnings 7
Slide 8: Net interest margin declines …
Net interest margin declines … Net interest margin* (%) Net interest margin * (%) 5.01 1H16 1H17 7.29 7.15 4.93 4.70 4.50 4.47 4.56 1H14 1H15 1H16 1H17 South Africa Rest of Africa Note: * average interest bearing assets 8
Slide 9: … reflecting regulatory and mix changes
… reflecting regulatory and mix changes Change in net interest margin* (basis points) 501 (5) 7 (3) (3) 3 (4) (4) 0 1 493 Loans (8) Deposits (1) 1H16 1H16 Pricing Pricing Mix Pricing Mix Mix Endowment Capital Endowment Capital Hedge ** Rest Restofof Other 1H17 1H17 Mix Pricing Hedge ** Other Africa
Slide 10: Modest loan growth, particularly in Retail
Modest loan growth, particularly in Retail Net customer loans (Rbn) Retail SA net customer loans (Rbn) (1%) 400 1% 228 225 350 1H16 1H17 1H16 1H17 300 250 6% 200 6% 150 96 90 100 7% (3%) 50 (12%) 6% 38 37 3% 16 17 0 Retail Business CIB RBB CIB Home Loans Vehicle & Card Personal Asset Finance Loans S
Slide 11: Lower non-interest income
Lower non-interest income 1H17 Change Mix * Non-interest income/total revenue Rm % % (%) South African Banking 10 452 3 69 • Retail 6 512 4 43 43.1 • Business Banking SA 1 832 4 12 • CIB 2 108 0 14 42.3 42.2 Rest of Africa Banking 2 469 (7) 16 • RBB 1 257 (14) 8 • CIB ** 1 212 3 8 WIMI 2 509 0 16 He
Slide 12: Resilient fee income
Resilient fee income Group non-interest income mix Change in non-interest income (Rbn) 5 (YoY, %) 3% 10.6 4 10.3 1H16 1H17 3 2 1 0 (2%) 2.7 2.6 (18%) 2.4 2.0 -1 -2 Fees & Trading Other 1H17 2016 London Currency Underlying branch closure 1H17 commissions 12
Slide 13: Costs remain well managed while investing
Costs remain well managed while investing 1H17 Change Mix Rm % % Cost to income ratio (%) Staff 11 276 4 55 55.9 55.6 Technology 1 677 15 8 Property-related 1 654 0 8 53.4 Professional fees 1 157 19 6 Depreciation 937 14 5 Marketing 785 29 4 Communication 666 (14) 3 Amortisation 348 11 2 Other * 199
Slide 14: Negative JAWS reduced pre-provision profits
Negative JAWS reduced pre-provision profits Group operating JAWS * (%) Pre-provision profit (Rbn) 19% 5.1 17.0 (6%) 16.0 7% 14.3 0.9 (4.1) 1H15 1H16 1H17 1H15 1H16 1H17 Note: * revenue growth minus operating expenses growth 14
Slide 15: Credit impairments declined noticeably …
Credit impairments declined noticeably … 1H17 1H16 1H17 1H16 Non-performing loans (%) Credit loss ratio NPL cover (%) (bps) 4.1 SA Banking 91 128 42 42 RBB SA 128 143 42 42 3.8 Retail Banking 139 148 43 43 3.7 Cards 538 595 72 71 3.5 VAF 101 113 47 41 Mortgages * 41 44 21 22 Personal Loans 623 585 6
Slide 16: … while portfolio provisions remain conservative
… while portfolio provisions remain conservative Portfolio provisions to performing Macroeconomic unidentified loans* (bps) impairments (Rm) 11% 76 43% 1 457 72 1 311 57% 918 65 1H15 1H16 1H17 1H15 1H16 1H17 Note: * loans and advances to customers and banks 16
Slide 17: Capital levels remain very healthy
Capital levels remain very healthy Barclays Africa Group Common Equity Tier 1 ratio (%) 1.6 13.7 1.0 (0.7) (0.3) (0.0) 12.1 12.1 Board range 10.0% - 11.5% FY16 FY16 RWA movement RWA Profit Profit Dividend Dividend Other 1H17 Normalised Other Impact Barclaysfrom 1H17 of separation basis Plc Barclays
Slide 18: Returns improved despite the macro backdrop
Returns improved despite the macro backdrop Return on assets (%) Return on equity (%) 1.40 16.8 16.4 1.33 16.1 16.1 1.29 1.27 1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 18
Slide 19: Strong returns across a well-diversified portfolio
Strong returns across a well-diversified portfolio Divisional RoE (%) Headline earnings mix 1H17 1H16 20.8 1H17 21.1 20.2 19.3 7% 19% 17.4 15% 38% 4% 13.5 22% 14% 74% Retail Banking SA Business Banking SA CIB SA RBB Rest of Africa CIB Rest of Africa WIMI SA Banking * ROA Banking WIMI Note: * return
Slide 20: Rest of Africa Banking drove earnings growth
Rest of Africa Banking drove earnings growth Group headline earnings growth (Rm) 19% (8%) 15% 7% 6% 246 (47) (38) 0 7 770 357 7 252 14% 1H16 SA Banking Rest of Africa WIMI Head office & 1H17 Banking other 20
Slide 21: CIB underpins SA Banking growth
CIB underpins SA Banking growth South Africa Banking headline earnings (Rm) 3 443 (10%) 3 092 1H16 1H17 105% (5%) 1 168 1 113 1 206 35% 558 588 413 Retail Banking Business Banking Corporate Investment Banking RBB down 9% CIB up 76% 21
Slide 22: Retail Banking SA remains a priority
Retail Banking SA remains a priority • Asset strategies aim to improve Headline earnings* (Rm) low loan growth • Regulatory changes and higher liquidity premiums reduced net 1H16 1H17 1392 interest margin (14%) • Progress in some targeted 1204 customer segments • Continued cost management (9%) 838 f
Slide 23: Continued investment in Business Banking SA
Continued investment in Business Banking SA • Higher funding costs offset solid Headline earnings (Rm) loan growth (41%) 9% • Robust underlying non-interest 136 (248) 1% revenue growth (5%) (5%) 1 168 27 • Continued investment in electronic 30 1 113 channels and frontline staff • Lower new defaults
Slide 24: Substantial growth from CIB South Africa
Substantial growth from CIB South Africa • Continue to grow revenue Headline earnings (Rm) through diversification (81%) 4% • Focus shifts to transactional (104) >100% 888 revenue as loan growth slows (270) 76% • Significant improvement in credit 1 764 impairments • Cost growth contained despite 5%
Slide 25: Natural disaster claims reduce WIMI earnings
Natural disaster claims reduce WIMI earnings • Earnings fell due to claims on two Change in continuing line catastrophic events headline earnings (Rm) (6%) • Life South Africa impacted by single premium guaranteed product and 612 (24) 0% (15%) 19% 48% new business strain 1 (14) 12 (14) 573 • Continu
Slide 26: Strong Rest of Africa growth improves its returns…
Strong Rest of Africa growth improves its returns… Headline earnings growth * (%) Return on equity (%) 19 33 18 17 1H16 1H17 16 15 14 19 13 12 11 South Africa 10 Rest of Africa 5 9 3 8 South Africa Rest of Africa 1H14 1H15 1H16 1H17 Note: * normalised 26
Slide 27: … reflecting CIB's performance
… reflecting CIB’s performance • Strong growth outweighed Rest of Africa Banking earnings (Rbn) Rand appreciation (21%) 3% • Continued to benefit from a 10% 0.1 20% 0.2 well diversified portfolio 0.2 0.8 50% • Regulatory changes and 1.9 0.4 tough macro backdrop 19% reduced RBB revenue 1.5 1.3 • Subs
Slide 28: Outlook for 2017 unchanged
Outlook for 2017 unchanged • Low to mid-single digit loan growth, with CIB above RBB • Net interest margin is expected to decline slightly • Slower revenue growth likely to produce negative JAWS, despite continued cost management • Credit loss ratio is expected to improve from 2016 • RoE is likely t
Slide 29: 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
Barclays Africa Group — H1 2017 Earnings Presentation on 6ix