Absa Group Limited · JSE:ABG
Absa — Barclays Africa Group — FY2013 Earnings Presentation
37 slides from Absa's earnings presentation, Feb 11, 2014
Slide 1: Barclays Africa Group Limited FY13 results presentation
Barclays Africa Group Limited FY13 results presentation 11 February 2014
Slide 2: Strategy
Strategy BARCLAYS Maria Ramos
Slide 3: Our commitments
Our commitments Top 3 by revenue in our 5 biggest markets - South Africa, Kenya, Ghana, Botswana and Zambia RoE 18% to 20% Cost to income ratio in the low 50s Rest of Africa 20% to 25% of total revenue 3
Slide 4: Finance
Finance @ BARCLAYS David Hodnett
Slide 5: Lower impairments drove earnings growth
Lower impairments drove earnings growth FY13 FY12 Change Pre-provision profit (Rbn) Rm Rm % 5% Net interest income 32 351 29 302 10 21% ** 26.0 Non-interest income 27 055 25 674 5 24.6 9% Total revenue 59 406 54 976 8 (12%) 20.4 Credit losses (6 987) (8 855) (21) 18.7 Operating expenses (33 420) (30
Slide 6: African acquisition enhanced revenue growth
African acquisition enhanced revenue growth Group revenue (Rbn) 18% 8% 1.5 59.4 6% 3.0 55.0 FY12 Absa Group Barclays Africa Limited Barclays acquisition Africa FY13 Limited acquisition 6
Slide 7: Improving revenue growth across divisions
Improving revenue growth across divisions Revenue growth by division (Rbn) 8% (>100%) 11% (0.8) 8% 1.2 0.3 9% 59.4 3.8 55.0 FY12 Retail and Business CIBW * Financial Services Head office and FY13 Banking other Note: * Corporate, Investment Bank and Wealth 7
Slide 8: Moderate non-interest revenue growth
Moderate non-interest revenue growth FY13 Change Mix Retail SA transaction split (%) Rm % % Net fees and commissions 17 623 6 65 41 47 32 34 29 26 Retail Banking SA 10 757 5 40 Business Banking SA 2 853 2 11 74 71 68 CIBW 2 118 27 8 66 59 RBB RoA 1 895 (2) 7 53 Financial Services 4 353 8 16
Slide 9: Solid growth outside property-related lending
Solid growth outside property-related lending Change in gross customer loans (YoY, Rbn) 23% (71%) 7% 26.8 0.5 621.4 12% 8.8 12% 3% (2%) 10% 3.9 0.6 582.0 (5.3) (2%) 6.0 (0.9) FY12 Retail CPF * VAF** Credit Personal RBB CIBW **** Other FY13 Mortgages Cards Loans other *** Note: * Includes CIBW mortga
Slide 10: Improving momentum in quality lending
Improving momentum in quality lending Improving loan production* (Rbn) Mortgage market share per LTV (3Q13) Rbn Absa share 8 Market value written (LHS) 30% 7% 7 37 25% 20% 6 34 33 20% 5 4 15% 28 3 10% 2 5% 1 0 0% 1H12 2H12 1H13 2H13 <= 70 71 - 80 81 - 90 91 - 100 101 - 110 Loan to value (%) Note: *
Slide 11: Wider margin largely due to Edcon
Wider margin largely due to Edcon Change in net interest margin* (YoY, basis points) 20 8 (6) 7 448 16 (3) (1) (1) 0 428 0 Loans +16 Deposits (4) FY12 Loan pricing Loan mix Deposit Deposit Deposit Capital CIBW Hedging ** Rest of FY13 pricing mix endowment Africa Note: * Percent of average interest b
Slide 12: Far lower asset-backed credit impairments
Far lower asset-backed credit impairments Credit loss ratio 7% 6% SA retail unsecured * 5% 4% Size = credit impairment 3% Business RBB Rest of Africa Banking SA 2% SA retail 1% CIBW secured 0% -100% -50% 0% 50% 100% 150% Credit impairments change (YoY) Notes: * Actual YoY growth was 131%, graph annu
Slide 13: Credit loss ratio and NPL cover improved
Credit loss ratio and NPL cover improved FY13 FY12 FY13 FY12 % % % % Credit loss ratio NPL cover Retail and Business Banking (RBB) 1.50 2.05 41.4 37.8 • Retail Banking South Africa 1.48 1.96 38.6 35.5 - Mortgages 0.74 * 2.09 * 27.8 28.5 - Vehicle and Asset Finance 0.80 1.08 46.2 50.0 - Credit card 5
Slide 14: Most NPL categories continue to decline
Most NPL categories continue to decline NPLs to loans and advances (%) Group NPLs as a percent of loans FY12 FY13 Edcon and advances to customers (%) 8 9.4% 9.0% 7 8.5% 0,8% 7.9% 7.8% 7.7% 6 7,5% 6.8% 5 5.8% 5.4% 4 3 3.1% 2 2.1% 1 0 Mortgages Credit Personal VAF Retail Business FY98 FY99 FY00 FY01 F
Slide 15: Better mortgage NPL construct
Better mortgage NPL construct Falling mortgage NPLs (Rbn)… … and properties in possession Properties in possession (Rm, RHS) 4.2 4000 Properties in possession (Number) 800 Cycle 3 - 6 2.8 2.1 3500 700 3.9 Cycle 6+ 1.4 Pre-legal 3000 600 0.2 2.3 Arrangements 2.4 Legal 2500 500 1.8 1.2 2000 400 Deceas
Slide 16: Decreasing mortgage NPL inflows bode well
Decreasing mortgage NPL inflows bode well Home Loans monthly NPL inflows Mortgage vintage curves 5.0 3.0 25% Number (k) 4.5 Value (Rbn, RHS) 2005 2006 2.5 2007 4.0 20% 2008 2009 2010 3.5 2011 2.0 Cumulative default rate 2012 2013 3.0 15% 2.5 1.5 2.0 10% 1.0 1.5 1.0 5% 0.5 0.5 - 0.0 0% FY06 FY07 FY08
Slide 17: Increased portfolio provisions significantly
Increased portfolio provisions significantly Portfolio provisions (Rbn) Portfolio provisions to performing loans (%) Unidentified Identified (performing loans) 0.64 2.4 1.7 0.52 1.4 0.47 1.1 0.43 FY12 FY13 FY10 FY11 FY12 * FY13 * Note: * Barclays Africa Group 17
Slide 18: Higher cost growth reflects investment
Higher cost growth reflects investment FY13 Change Mix Cost-to-income (%) Rm % % 65 Staff costs 17 593 11 53 63 Property-related costs 5 033 2 15 61 Information technology 2 078 (6) 6 59 57 Professional fees* 1 837 61 5 55 Communication 1 393 9 4 53 Marketing costs 1 355 19 4 51 Cash transportation
Slide 19: Currency and strategic investments increased costs
Currency and strategic investments increased costs Operating expenses growth (Rbn) Professional fees (Rm) 3% 10% 155 0.8 33.4 7% 2.4 754 65 572 30.2 669 300 FY12 Constant Rand FY13 FY12 FY13 currency depreciation Strategic initiatives Business as usual Other * Note: * Includes legal, credit bureau a
Slide 20: Capital ratio above target
Capital ratio above target Barclays Africa Group Common Equity Tier 1 ratio (%) 2.12 (1.07) 0.81 (1.33) 13.0 (0.59) (1.00) 0.10 (0.11) 11.9 Board target 9.5%-11.0% FY12* Basel III RWA RWA Africa deal Profit Special Dividend Other FY13 optimisation growth dividend Note: * Absa Group ratio 20
Slide 21: Strong dividend growth
Strong dividend growth Dividends per share for period (cents) Ordinary dividend cover (x) 708 * 2.5 2.5 2.0 1.8 1.7 820 684 684 445 455 FY09 FY10 FY11 FY12 FY13 FY09 FY10 FY11 FY12 FY13 Note: * Special dividend 21
Slide 22: Underlying returns improved
Underlying returns improved 17.0% RoE RoA (RHS) 1.35% 16.5% 1.30% 16.0% 1.25% 15.5% 1.20% 15.0% 1.15% 14.5% 1.10% 14.0% 1.05% 13.5% 1.00% 13.0% 0.95% FY09 FY10 FY11 FY12 FY13 22
Slide 23: Strong divisional earnings growth
Strong divisional earnings growth Headline earnings growth (YoY, Rm) 35% (4%) 8% (>100%) 348 (883) 64% (129) 105 668 14% 36% 11 843 1 315 10 419 14% FY12 Retail Business RBB Rest of CIBW Financial Head office FY13 Banking SA Banking SA Africa Services and Other Growth in pre-provision profit (YoY):
Slide 24: Retail Banking SA turnaround continues
Retail Banking SA turnaround continues Strong earnings growth Headline earnings (Rm) Credit impairments reduced FY12 sharply as mortgage legal FY13 1 888 1 980 book improved Strong asset flow growth 1 296 1127 with selective strategies 876 847 Fee growth still weak on 587 573 385 lower trans
Slide 25: Strong Business Banking SA growth off a low base
Strong Business Banking SA growth off a low base Lower defaults and improved book Headline earnings (Rm) construct 24% Stabilised equity portfolio 1 875 64% 1 710 Solid deposit growth 1 508 FY12 CPF book declined, despite higher FY13 1 042 payouts Increased electronic banking transactions
Slide 26: Bancassurance maintains high returns
Bancassurance maintains high returns Investments’ margin improved Net operating income (Rm) 56% (62%) Successful African expansion >100% (133) 80 14 Life EV of new business up 18% 26% 114 10% Employee Benefits turnaround 1 724 10% 80 Claims impacted short-term insurance 1 569 Integrated
Slide 27: Benefit from diversifying CIBW
Benefit from diversifying CIBW Strong Investment Banking Net revenue (Rm)* revenue growth 1% (29%) 14% Good traction in Corporate (5%) (>100%) 584 36 8% Banking (122) (22) (70) 11 177 Markets similar to high 2012 37% base 419 Exited non-core businesses 10 352 Investment Banking Corporate Pri
Slide 28: Barclays Africa Limited acquisition earnings accretive
Barclays Africa Limited acquisition earnings accretive Headline earnings R1.9bn, up 14% Rest of Africa earnings mix (%) Enhanced group CET1 ratio 2 Substantial currency impact 25 Scope to improve 16% RoE Strong retail franchise Opportunities in Corporate, Business Banking, Markets and Ba
Slide 29: Our commitments
Our commitments Top 3 by revenue in our 5 biggest markets - South Africa, Kenya, Ghana, Botswana and Zambia RoE 18% to 20% Cost to income ratio in the low 50s Rest of Africa 20% to 25% of total revenue 29
Slide 30: Appendix
Appendix @ BARCLAYS
Slide 31: Well diversified revenue…
Well diversified revenue… Net revenue by type (FY13) Revenue by business (FY13) 7% 19% 48% 46% 52% 14% 14% Non-interest income Retail Banking SA Business Banking SA Net-interest income after impairments RBB Rest of Africa CIBW Financial Services 31
Slide 32: … and earnings
… and earnings Headline earnings by business * Pre-tax profit by geography (FY13) (FY13) 11% 19% 4% 40% 20% 11% 81% 14% Retail Banking SA Business Banking SA RBB Rest of Africa CIBW SA South Africa Rest of Africa CIBW Rest of Africa Financial Services Note: * Excludes head office, inter-segment elim
Slide 33: Credit quality normalises
Credit quality normalises Group credit loss ratio (%) 2.5 2.0 1.5 1.0 0.5 0.0 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Note: Dark blue line shows ratio excluding UniFer; grey is Barclays Africa Group 33
Slide 34: Focus on quality new business
Focus on quality new business Vehicle finance risk mix Risk mix of new personal loans 50% 9% 9% 11% 8% 45% 24% 34% 30% 24% 40% 35% 43% 39% 30% 42% 38% Low risk 25% Medium risk 20% Higher risk 15% 26% 25% 10% 19% 19% 5% 0% FY10 FY11 FY12 FY13 7/12 8/12 9/12 1/13 2/13 3/13 4/13 5/13 6/13 7/13 8/13 9/1
Slide 35: Deposit growth funds lending to customers
Deposit growth funds lending to customers Source of funds (Rbn)* Use of funds (Rbn)* 17.8 (23.1) 0.8 (2.3) 44.9 1.0 39.1 Customer Equity Borrowed funds Other Other Liquid assets Customer loans deposits funding ** assets ** and advances Note: * YoY change; ** largely loans and advances to banks/depos
Slide 36: Deposits are over three-quarters of funding
Deposits are over three-quarters of funding FY13 Change Mix Deposits/total funding (%) Rbn % % 78.6 77.9 Cheque accounts 141 1 24 Savings and transmission 87 16 15 and investment products 72.3 Fixed deposits 133 6 23 68.3 Call deposits 53 (7) 9 63.8 Other 174 18 29 FY09 FY10 FY11 FY12 FY13 Total 588
Slide 37: 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