Absa Group Limited · JSE:ABG
Absa — Investor Presentation (December 2018)
57 slides from Absa's investor presentation, Dec 7, 2018
Slide 1: RBB Investor Presentation
RBB Investor Presentation 7 December 2018
Slide 2: Today’s Agenda
Today’s Agenda Agenda Item Time Introduction 10:00 RBB Overview 10:05 Relationship Banking 10:35 • Q&A 10:55 Home Loans 11:10 Vehicle Asset Financing 11:25 • Q&A 11:40 Tea Break 11:55 Everyday Banking 12:10 Channels 12:30 • Q&A 12:45 Closing Remarks 13:00 2 | RBB Investor Roadshow Presentation
Slide 3: RBB Portfolio
RBB Portfolio: Arrie Vehicle Asset Finance: Faisal Relationship Banking: Bongiwe Everyday Banking: Cowyk Home Loans: Geoff Channels: Tshiwela and Aupa 3 | RBB Investor Roadshow Presentation
Slide 4: RBB’s success is a critical lever for the Group
RBB’s success is a critical lever for the Group RBB is a key part of the Group (FY 17’ Revenue) RBB contribution to the group (FY 2017) 100% Headline Earnings WIMI, 8% VAF, 6% Home Loans, CIB SA, 15% 11% 80% 58% 54% 46% Rest of Africa Relationship (including WIMI), Banking, 28% 20% 60% Core Deposits
Slide 5: We have lagged the market …
We have lagged the market … Market share movement (%, 2012 -’17) Average number of products per Retail banking NPS (2017) customer (2018) 0 5 + 2,4 100 - 38 4,0 4 80 -2 71 3 2,7 60 56 52 -4 Industry 2,0 42 Average, 51 2 40 1,6 33 -6 1 20 -8 0 0 Youth Mass Middle Affluent Absa SA Leader SA Global A*
Slide 6: …and leading indicators have translated into below market growth
…and leading indicators have translated into below market growth Absa revenue growth by product (% FY13-17) Transactional and Deposits (0.42) (xx) = Relative Market Share in 2017 Note: Brackets indicate Relative Market Share calculated as the percentage share of market vs. the market leader (or vs.
Slide 7: Our existing franchise strengths create a strong platform…
Not withstanding, our existing franchise strengths create a strong platform… Our people Full banking offering Enhanced digital Healthy returns capabilities Extensive distribution Strong brand equity network 7 | RBB Investor Roadshow Presentation
Slide 8: …which we will leverage to reset the business
…which we will leverage to reset the business Structure for growth Hire for excellence Plan for success Measure for delivery Accountability through Get the right people closer to the customer and Detailed process followed to measures cascaded to closer to colleagues with control of the business defi
Slide 9: We have redesigned the RBB operating model…
We have redesigned the RBB operating model… Closer to Customers Closer to Colleagues Control of the Businesses Product Channel • Lend, transact, save and protect. Customer • Physical and Virtual channels. • End-to-end accountability for the • Relationship Banking (Coverage). business and operations.
Slide 10: …revised the RBB organisational construct…
…revised the RBB organisational construct… RBB CEO Distribution & Consumer Banking Business Bank Africa Ops Partnerships HR Marketing Finance Risk Compliance Legal Audit Coverage Segments/CVPs Risk, governance & Segments Regional MEs control Old Model Products Enablement Channels Collections • Card
Slide 11: …filled key positions with top talent…
…filled key positions with top talent… RBB CEO Arrie Rautenbach BBA; MBA; AMP 25+ year of banking exp Speciality: Retail Banking Strategy Risk Management Customer Value Management Physical Channels Home Loans Finance Transformation Office and Retail Compliance Christine Wu Tshiwela Mhlantla Geoff Le
Slide 12: …and followed an extensive process to build a bottom-up execution plan
…and followed an extensive process to build a bottom-up execution plan RBB execution plan supported by detailed strategies for all businesses With buy-in across RBB RBB ambition and growth RBB revenue growth RBB key objectives forecast measures People involved in bottom- 100+ up build 20+ Workshops
Slide 13: Each business unit has a targeted plan on how to differentiate
Each business unit has a targeted plan on how to differentiate Why is it a priority? How will we focus and differentiate? • Single client vision with advanced analytics to move • Historic product-focused approach limited the ability to drive towards a segment of one. Customer Value customer loyalty
Slide 14: We have defined robust metrics to track business performance…
We have defined robust metrics to track business performance… The key RBB measures… …are supported by leading …which are supported by indicators… business-specific measures Customer growth Home Loans (example) Revenue • Primary customers • New-To-Bank customers • Flow market share • Churn • Producti
Slide 15: …and drive outperformance in the market from 2020
…and drive outperformance in the market from 2020 Projected YoY growth for Absa and Market (%) Grow revenue above market Expected Market share growth Remove costs and invest to grow revenue Absa YoY Growth Market revenue* FY13-FY17 FY18 FY19 FY20 FY21 FY22 FY23 Lagging market Horizon 1 Horizon 2 Fix
Slide 16: RBB Portfolio
RBB Portfolio: Arrie Vehicle Asset Finance: Faisal Relationship Banking: Bongiwe Everyday Banking: Cowyk Home Loans: Geoff Channels: Tshiwela and Aupa 16 | RBB Investor Roadshow Presentation
Slide 17: The Growth segment generates >65% of our revenue
The Growth segment generates >65% of our revenue Business Bank – customer segmentation Premium – currently concentrated in Agri & Public sector Agri; Forestry & fishing Finance, real estate & Bus Services GDP contribution Rbn Advances Rbn Transport, ITC Trade Manufacturing Public Sector Construction
Slide 18: Our Private banking client base is misaligned to the market
Our Private banking client base is misaligned to the market Private Banking customers based Absa private banking client relationship tenure on income source 19% ~5% of Absa clients with a relationship <5 years 64% 81% Industry-wide client relationship tenure Industry-wide ~25% of clients 36% with a
Slide 19: We aim to become the relationship bank of choice
We aim to become the relationship bank of choice Grow presence in young and self employed 1 professionals. Deliver end-to-end Relationship Banking solution 2 for entrepreneurs in the Growth segment. 3 Diversify and grow the premium segment through key growth sectors and products with a focus on depo
Slide 20: Key capability themes underpin our delivery
Key capability themes underpin our delivery Front line Customer capability to experience service customers capability Enhanced credit capability 20 | RBB Investor Roadshow Presentation
Slide 21: Key measurements for tracking
Key measurements for tracking Leading metrics Lagging metrics Customers – Business bank (numbers) Revenue (Rbn) Customers – Private bank (numbers) Headline earnings (Rbn) Share of wallet– Business Bank PARCC (Rbn) Share of wallet – Private Bank Advances (Rbn) % Business bank customers with Private b
Slide 22: Q&A
Q&A 22 | RBB Investor Roadshow Presentation
Slide 23: RBB Portfolio
RBB Portfolio: Arrie Vehicle Asset Finance: Faisal Relationship Banking: Bongiwe Everyday Banking: Cowyk Home Loans: Geoff Channels: Tshiwela and Aupa 23 | RBB Investor Roadshow Presentation
Slide 24: The Home Loans market faces a challenging medium term outlook
The Home Loans market faces a challenging medium term outlook Flow market Flow market Absa Homeowner Sentiment Index volume (K) value (Rbn) % of respondents with overall positive sentiment Q4 2017 82% 10% Q3 2018 72% Source: Absa Analysis 24 | RBB Investor Roadshow Presentation
Slide 25: Absa has lost leadership position in the Home Loans market
Absa has lost leadership position in the Home Loans market Stock market share Flow market share Average age of customer base Market Absa 39 46 Absa average margin pressure Lower concession, higher funding (unable to pass to customers), Lower concession, lower margin, good increasing funding quality
Slide 26: We aspire to house the nation and shape the industry
We aspire to house the nation and shape the industry 1 Claim leadership position for first time home buyers. Bring our customers home when they 2 re-mortgage/switch and delight existing customers. 3 Provide portfolio approach for property investors. 4 Create an end-to-end direct channel experience.
Slide 27: Key capabilities underpin our growth delivery
Key capabilities underpin our growth delivery Customer experience Data analytics Risk Digital management capability and pricing 27 | RBB Investor Roadshow Presentation
Slide 28: Key measurements for tracking
Key measurements for tracking Leading metrics Lagging metrics Flow market share (%) Revenue (Rbn) Production (Rm) Headline earnings (Rbn) Average home loan concession (%) PARCC (Rbn) Delinquency roll rates (%) Advances (Rbn) Revenue margin (%) Customer NPS (%) Efficiency • Turnaround time • Applicat
Slide 29: RBB Portfolio
RBB Portfolio: Arrie Vehicle Asset Finance: Faisal Relationship Banking: Bongiwe Everyday Banking: Cowyk Home Loans: Geoff Channels: Tshiwela and Aupa 29 | RBB Investor Roadshow Presentation
Slide 30: Declining margins are reducing returns across the industry
Declining margins are reducing returns across the industry VAF volumes by channel for Jun-Aug 2018 SA Vehicle Asset Finance loan book* (Rbn) Return on equity by industry player for 2015 vs. 2018 (%) 1% 2% 4% P.Bank; 6% 7% 7% Internal; 13% 12% 369 7.6% 21% 30% Ford; 21% 17% 17% 30% 275 15% 15% Allian
Slide 31: Default rates have been increasing
Default rates have been increasing Credit loss ratio by player (%) Default rate by Empirica score band 1.9% (May'15 to Nov'16) 20% Ever 3+ at 12 months on book 1.6% 1.6% 1.6% 1.5% 1.4% 1.4% 16% 1.2% 1.2% 12% 8% 4% Absa B* A* 0% Low to 574 575 - 599 600 - 624 625 - 649 650 - 674 675 - 699 700 to High
Slide 32: Three critical success factors are needed to win with dealers
Three critical success factors are needed to win with dealers Strong relationships with dealers Compelling dealer value proposition • Enhance operating and dealer engagement model. • Refine segmentation to manage flow through approved dealers. • Drive relationship with original equipment manufacture
Slide 33: We aim to become the leading bank in VAF, leveraging dealer relationships
We aim to become the leading bank in VAF, leveraging dealer relationships 1 Become the bank of choice for vehicle dealers. Build best in class collections capability to reduce 2 loss rate and enable acquisitions. Maximise bancassurance revenue to improve 3 returns. Use customer analytics and digital
Slide 34: Key capabilities underpin our growth delivery
Key capabilities underpin our growth delivery Operating Model Data Analytics and Digital Risk management Partnerships 34 | RBB Investor Roadshow Presentation
Slide 35: Key measurements for tracking
Key measurements for tracking Leading metrics Lagging metrics Production (Rm) Revenue (Rbn) Units Headline earnings (Rbn) Net rate to prime on flow PARCC (Rbn) Approval rate Advances (Rbn) Take-up rate Installment sales market share per BA 900 (excluding JV’s) Delinquency roll rate (%) Customer NPS
Slide 36: Q&A
Q&A 36 | RBB Investor Roadshow Presentation
Slide 37: RBB Portfolio
RBB Portfolio: Arrie Vehicle Asset Finance: Faisal Relationship Banking: Bongiwe Everyday Banking: Cowyk Home Loans: Geoff Channels: Tshiwela and Aupa 37 | RBB Investor Roadshow Presentation
Slide 38: There is opportunity to improve primacy and reduce branch dependency
There is opportunity to improve primacy and reduce branch dependency Transact and Flexi Save are Absa’s most popular products, Product sales are still dependent on branches however these have below SA average customer primacy rates contributing >80% of new account sales 38 | RBB Investor Roadshow Pr
Slide 39: Currently an ageing customer base with an opportunity to increase penetration
Currently an ageing customer base with an opportunity to increase penetration Retail banking customer share by age (%, 2017/18) Average number of products per customer (2018) 100% 5 + 2,4 80 4,0 4 60 3 40 2,0 2 1,6 20 1 0 18-25 26-35 36-45 46-55 56-65 65+ 0 Absa SA Global Absa Note: Retail banking s
Slide 40: Customer experience significantly impacts retention
Customer experience significantly impacts retention Net switching between banks Suboptimal customer experience is a key driver for customer attrition/dormancy % switching between banks 48% • Inefficient internal key processes (including onboarding) 2% -3% • Inability to use data to create personalis
Slide 41: We aim to meet and exceed customer needs across their life cycle
We aim to meet and exceed customer needs across their life cycle Origination Sales Fulfilment Activation Usage Retention New Key Success Factors Existing • Customer Value Proposition Key Success Factors • Sales Process (including ease of joining/switching, cost to serve and new pipelines) • Customer
Slide 42: Everyday Banking will act as the lifetime rails
Everyday Banking will act as the lifetime rails Getting Started Consolidate Assets Build Wealth Wealth Transfer Lending ------------------------------------> Line of credit Savings and Investments Payments Everyday Banking Everyday Banking forms the foundation for day to day banking services through
Slide 43: We aim to become the everyday bank for life for our customers
We aim to become the everyday bank for life for our customers Targeted acquisition 1 Target core middle and affluent, anchored on “Everyday Banking” proposition through the “One account”. 2 Drive deposits through propositions and attractive rates. Creating customer lifetime value Leverage analytics
Slide 44: Key capabilities underpin our growth delivery
Key capabilities underpin our growth delivery Customer End-to-end digital experience enablement Risk Data analytics Management and customer management Onboarding and Payments Switching 44 | RBB Investor Roadshow Presentation
Slide 45: Key measurements for tracking
Key measurements for tracking Leading metrics Lagging metrics New to bank acquisitions (#) Revenue (Rbn) Market share on flow (#) Headline earnings (Rbn) Primacy (%) PARCC (Rbn) Risk adjusted margin (%) Advances (Rm) Cross sell ratio (#) Deposits (Rm) Digitally active customers (%) Market share – st
Slide 46: RBB Portfolio
RBB Portfolio: Arrie Vehicle Asset Finance: Faisal Relationship Banking: Bongiwe Everyday Banking: Cowyk Home Loans: Geoff Channels: Tshiwela and Aupa 46 | RBB Investor Roadshow Presentation
Slide 47: Digital remains a great opportunity
Digital remains a great opportunity SITEisfaction ® score* Digital Banking Satisfaction 2018 100 80 79 77 66 63 60 56 40 20 0 A B C D Note: *SITEisfaction® score = % of users who report high overall satisfaction - % of users who report high overall satisfaction 47 | RBB Investor Roadshow Presentatio
Slide 48: Extensive network with an opportunity to increase productivity
Extensive network with an opportunity to increase productivity Retail banking revenue per square meter (Rm) Competitor1 Branches ATMs 200 2015 CAGR +10% 2016 Absa 631 8,919 2017 150 A 575 4,360 CAGR +5% CAGR +12% 100 B 639 7,270 50 C 613 3,948 D 796 4,024 0 A B Note: (1) Based on annual reported fig
Slide 49: We aim to converge and seamlessly integrate across our channels
We aim to converge and seamlessly integrate across our channels Repurpose branches to become market Strategic redeployment of ATMs with relevant which optimise sales production market relevant functionality and transform our customer experience Deploy multi-skilled agents who can Embed design thinki
Slide 50: Key capabilities underpin our Omni-channel delivery
Key capabilities underpin our Omni-channel delivery Process optimisation Front line capability to service customers Innovation & design thinking Technology and systems 50 | RBB Investor Roadshow Presentation
Slide 51: Key measurements for tracking
Key measurements for tracking Leading metrics Lagging metrics Square meter optimisation (#) Base costs (Rbn) Number of ATMs (#) Cost savings (Rbn) Adoption of Digital Channels (%) NPS (%) Market sentiment (Culminate & SITEisfaction) Employee engagement (%) Service operating score (%) 51 | RBB Invest
Slide 52: Q&A
Q&A 52 | RBB Investor Roadshow Presentation
Slide 53: RBB Portfolio
RBB Portfolio: Arrie Vehicle Asset Finance: Faisal Relationship Banking: Bongiwe Everyday Banking: Cowyk Home Loans: Geoff Channels: Tshiwela and Aupa 53 | RBB Investor Roadshow Presentation
Slide 54: We have established ambitious targets…
We have established ambitious targets… H1 2018 2021 Market share Target Market Share Retail Advances 21% 23% Retail Deposits 21% 22% Production growth Target 3 yr CAGR Home Loans 14% 12% Personal Loans 29% 27% VAF Retail 19% 17% Credit card limits 6% 8% Deposits (book growth) 5% 12% Business Banking
Slide 55: ...to restore market leadership
...to restore market leadership Cultural journey: Drive the change from a back-office, authoritative 1 culture to a market-facing one defined by results, learning, enjoyment and caring. Get back to acquiring customers: Stem the decline in customer 2 numbers and focus on new customer acquisition. Foc
Slide 56: Thank you
) Thank you ( |
Slide 57: 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