Slide 1: Absa Group 1H21 results presentation
Absa Group 1H21 results presentation 16 August 2021
Slide 2: Jason Quinn, Interim Chief Executive
Jason Quinn Interim Chief Executive
Slide 3: Macro backdrop improved, but remains challenging
Macro backdrop improved, but remains challenging Real GDP growth (%) • Strong global rebound from historic decline • South Africa recovery better than expected 4.3 4.0 - Strong 1Q growth, signs of softening in 2Q - Growth uneven across sectors - Consumer and business confidence remains fragile - GDP
Slide 4: Covid-19 pandemic and load shedding pose risks
Covid-19 pandemic and load shedding pose risks SA Covid-19 infections (7 day moving average, k) South Africa load shedding (GWh) 21 19 First wave 1798 Second wave 17 Third wave 15 1325 1352 1284 13 11 9 7 5 203 192 3 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 Days 2014 2015 2016 2017 2
Slide 5: Impact of recent South African civil unrest
Impact of recent South African civil unrest Purchasing Managers’ Indexes (50 = neutral) Limited near-term direct impact on Absa • Focus on safety of colleagues and customers 65 Absa manufacturing PMI • 22 branches, 233 ATMs damaged or vandalised 60 IHS Markit whole economy PMI • Some impact on sales
Slide 6: We are well positioned
We are well positioned Diluted normalised HEPS (c) • We have demonstrated resilience in delivering 487% - Barclays separation is firmly behind us 3% 1018.2 975.8 - Earnings rebound to above pre-Covid levels - Strong underlying performance - Leading balance sheet coverage • Capital and funding to sup
Slide 7: 1H21 salient features
1H21 salient features Pre-provision profit (Rbn) Credit loss ratio (bps) 9% 1% 18.6 277 18.5 16.9 88 79 1H19 1H20 1H21 1H19 1H20 1H21 RoE (%) NAV per share (R) 6% 6% 16.4 138.59 15.3 130.80 123.35 2.6 1H19 1H20 1H21 1H19 1H20 1H21 7 |
Slide 8: Material recovery in divisional earnings and returns
Material recovery in divisional earnings and returns Normalised headline earnings (Rm) Return on regulatory capital (%) 1H20 1H21 1H20 1H21 811% 22.7 146% 4 192 4 049 15.3 9.0 1 645 460 1.6 RBB CIB RBB CIB 8 |
Slide 9: Punki Modise, Interim Financial Director
Punki Modise Interim Financial Director
Slide 10: Significantly lower credit charge drove earnings growth
Significantly lower credit charge drove earnings growth Normalised headline earnings (Rbn) (68%) 124% 10.0 (3.0) 491% Pre-provision profit up 1% (5% CCY) 8.6 6% (2%) 5% (9% CCY) 1.5 (0.4) (1.0) 1.5 1H20 Net interest Non-interest Operating Credit Other* 1H21 income income expenses impairments Revenue
Slide 11: Moderate group customer loan growth …
Moderate group customer loan growth … Net customer loans (Rbn) 8% 410 379 1H20 1H21 2% 306 311 3% 121 124 (7%) (18%) 61 57 65 53 Retail SA Relationship Banking RBB ARO CIB SA CIB ARO SA Note: *RBB ARO grew 12% in constant currency and CIB ARO 1% 11 |
Slide 12: … despite targeted production in secured retail lending
… despite targeted production in secured retail lending Retail banking South Africa net customer loans (Rbn) 8% 257 238 1H20 1H21 14% 94 83 6% 36 38 (9%) 20 18 Home Loans Vehicle and Asset Credit card Personal loans Finance 12 |
Slide 13: Deposit growth outstrips loans and improves funding mix
Deposit growth outstrips loans and improves funding mix Gross customer loans and deposits (Rbn) Group funding mix (%) 2% 10% 15.2 14.8 10.5 7% 12% 15% 999 1010 975 7.7 912 920 10.8 9.0 12% 81.8 798 74.0 76.2 1H19 1H20 1H21 1H19 1H20 1H21 Gross customer loans Customer deposits Customer deposits Bank
Slide 14: Strong growth in South African deposits
Strong growth in South African deposits Customer deposits (Rbn) 35% 329 9% 1H20 1H21 263 242 243 13% 170 150 (7%) 94 (12%) 88 78 68 Retail SA Relationship Banking SA RBB ARO CIB SA CIB ARO Note: *RBB ARO grew 13% in constant currency and CIB ARO 7% 14 |
Slide 15: Net interest margin increased noticeably
Net interest margin increased noticeably Change in net interest margin* (basis points) 11 441 Equity endowment (10) 15 4 0 (10) 423 6 (8) (7) 10 Loans Deposits (3) 4 (12) 0 1H20 Pricing Mix Pricing Mix Endowment Capital ARO ** Hedge *** Prime reset Other 1H21 Note: * average interest bearing assets;
Slide 16: Insurance reduced non-interest income materially
Insurance reduced non-interest income materially Non-interest income (Rbn) Non-interest income by division (Rbn) (2%) (2%) Banking Insurance 1.4 (12%) 0.2 2.6 2.3 1.1 (49%) (87%) 10.9 10.6 2.2 3.7 20% 3.1 (3%) 11.6 10.6 10.8 1% 38% 4.9 38% 3.5 1H19 1H20 1H21 1H20 1H21 1H20 1H21 Fees and commission N
Slide 17: Solid underlying non-interest income performance
Solid underlying non-interest income performance Adjusted non-interest income (Rm) 6% 17 570 286 (50) 1 359 570 16 526 16 006 300 (2%) 15 625 1H20 Fair value, Other 1H20 1H21 Other Life RBB SA fee 1H21 private equity adjusted adjusted insurance action 17 |
Slide 18: Strong Global Markets revenue growth, particularly in SA
Strong Global Markets revenue growth, particularly in SA Global Markets revenue (Rbn) Change: 3.8 21% SA ARO 42% 1.4 3.2 1% 2% (5%) 1.4 2.7 (12%) 2.5 1.0 2.2 0.8 2.4 1.0 35% 1.7 1.7 1.8 1.2 1H17 1H18 1H19 1H20 1H21 Note: Markets ARO grew 22% in constant currency in 1H21 18 |
Slide 19: Operating expenses remain well managed …
Operating expenses remain well managed … 1H21 Change Mix Rm % % Cost-to-income ratio (%) Staff 12 667 6 56 56.7 56.7 Property 902 (3) 4 Technology 2 368 18 10 55.6 Depreciation 1 691 (6) 7 54.9 Professional fees 985 2 4 53.9 Marketing 522 (2) 2 Communication * 691 (2) 3 Cash transportation 606 9 3 A
Slide 20: … with sub-inflationary underlying cost growth
… with sub-inflationary underlying cost growth Adjusted operating expenses (Rm) 5% (894) 22 605 (326) 21 613 (87) (107) (222) (0%) (236) 21 197 21 149 1H20 Bonus Cost to Other 1H20 1H21 Other Cost to Bonus 1H21 provisions achieve adjusted adjusted achieve provisions 20 |
Slide 21: Credit impairments improved materially across the board
Credit impairments improved materially across the board Credit impairments (Rbn) Credit loss ratio (%) 1H20 1H21 (64%) 14.7 (7.6) RBB 3.88 1.33 Everyday Banking 11.76 5.72 Vehicle and Asset Finance 4.91 1.58 (82%) Home Loans 1.43 (0.22) 0.0 (2.3) Relationship Banking 2.15 1.14 (68%) 0.0 4.7 RBB ARO
Slide 22: Delinquency stages improved slightly year-to-date
Delinquency stages improved slightly year-to-date Group stage 2 loans to total (%) Group stage 3 loans to total (%) 6.3 11.1 10.7 5.6 5.7 5.6 10.0 5.3 5.1 4.8 4.7 9.0 8.7 7.9 7.7 1H18 FY18 1H19 FY19 1H20 FY20 1H21 1H18 FY18 1H19 FY19 1H20 FY20 FY20 1H21 new * Note: * FY20 new uses the new definition
Slide 23: While total loan coverage remained robust
While total loan coverage remained robust Stage 1 loan coverage (bp) Stage 2 loan coverage (bp) 94 94 722 707 92 623 1H20 FY20 1H21 1H20 FY20 1H21 Stage 3 loan coverage (%) Total loan coverage (bp) 47.1 454 451 45.4 446 42.5 1H20 FY20 1H21 1H20 FY20 1H21 23 |
Slide 24: Strong divisional earnings growth
Strong divisional earnings growth Normalised headline earnings (Rbn) Group normalised headline earnings mix (%) 491% 1.0 8.6 146% 2.4 0.0 811% 3.7 49 51 1.5 1H20 RBB CIB Head office, 1H21 RBB CIB Treasury and other Note: Group normalised headline earnings mix excludes Head office, Treasury and other
Slide 25: RBB franchises all rebounded sharply, besides Insurance
RBB franchises all rebounded sharply, besides Insurance Headline earnings (Rm) 1H20 1H21 357% 53% (599%) 1 607 1 462 1 368 953 (282%) 642 (125%) 352 140 240 (146%) (274) (297) (77) (961) Home Loans Vehicle and Everyday Insurance Relationship RBB ARO Asset Finance Banking Banking Pre-provision profit
Slide 26: Strong earnings growth across CIB franchises
Strong earnings growth across CIB franchises Headline earnings (Rm) 146% 4 049 1H20 1H21 158% 203% 2 890 2 717 78% 121% 1 645 1 332 1 159 1 120 896 749 525 Corporate Bank Investment Bank Total CIB South Africa ARO Pre-provision profit growth: (4%) 26% 15% 39% (13%) 26 |
Slide 27: Opportunity remains in Africa regions
Opportunity remains in Africa regions Group earnings mix (%) Group revenue mix (%) 17 23 77 83 South Africa Africa regions South Africa Africa regions 27 |
Slide 28: Capital at the top end of board target range
Capital at the top end of board target range Group common equity tier 1 ratio (%) 12.1 Board target range 1.7 1.7 (0.2) 12.4 11.0% - 12.5% 0.5 (0.6) 11.0 1H20 RWA movement Foreign currency Earnings Other 1H21 translation reserve 28 |
Slide 29: Jason Quinn, Interim Chief Executive
Jason Quinn Interim Chief Executive
Slide 30: 2021 outlook
2021 outlook • Mid-single digit growth in net interest income, based on an improved net interest margin • Non-interest income growth is expected to decline slightly due to elevated Insurance claims and reserving • We expect low single digit growth in operating expenses, resulting in broadly flat ope
Slide 31: 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