Slide 1: Financial results for the year ended 31 December 2012
Financial results For the year ended 31 December 2012
Slide 2: Introduction
Introduction Maria Ramos @ BARCLAYS 2 a ABSA
Slide 3: 2012 in review
2012 in review A challenging year with significant change – Comprehensive business review – Strategic deals Maintained our focus Regaining momentum 3
Slide 4: Platform for sustainable growth
Platform for sustainable growth Customer focused Acquisitive customer growth (m) 2.2 6.0 3.8 Best Retail Bank in #1 Overall Bank Best Credit Card South Africa Management 2013 3rd consecutive year 2012 Edcon Barclays Africa Total Best Retail Bank in Best Bank for Best Retail Bank in Africa Customer S
Slide 5: Continued to create value
Continued to create value 10000 800 Ten-year CAGR: 9000 DPS 18% 684 700 684 8000 NAV per share 14% 595 560 600 7000 473 455 6000 445 500 5000 400 4000 295 300 3000 182 145 200 2000 116 100 9 319 2 996 6 998 7 838 2 589 3 862 8 690 2 354 7 038 1000 5 537 4 717 0 0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 F
Slide 6: Finance
Finance David Hodnett @ BARCLAYS 6 a ABSA
Slide 7: Earnings decline due to substantial impairments
Earnings decline due to substantial impairments FY12 FY11 Change Pre-provision profits (Rbn) Rm Rm % 12% 9% 3% Net interest income 24 111 24 429 (1) 21.0 Non-interest income 22 741 21 403 6 20.4 Total revenue 46 852 45 832 2 Credit losses (8 290) (5 081) 63 Operating expenses (25 874) (25 458) 2 18.
Slide 8: Underlying margin broadly stable
Underlying margin broadly stable Change in net interest margin to average interest bearing assets (basis points) 3 (2) 411 (1) (1) 0 (2) (5) 403 (16) 387 FY11 Loan pricing Loan mix Deposit Deposit Endowment Hedge Other * FY12 CIBW FY12 actual pricing mix underlying Note: * Includes reset risk, liqui
Slide 9: Reasonable non-interest revenue growth
Reasonable non-interest revenue growth FY12 Change Mix Non-interest income/total revenue (%) Rm % % 48.5 Retail Markets net fees 10 365 (1) 46 and commissions Business Markets net fees 3 028 11 13 and commissions Corporate net fees and 1 002 6 4 46.7 commissions Financial Services 4 009 0 18 Markets
Slide 10: Material rise in NPL cover and credit impairments
Material rise in NPL cover and credit impairments FY12 FY11 FY12 FY11 % % % % Credit loss ratio NPL coverage ratio Retail & Business Banking 1.98 1.16 36.4 27.2 Retail Markets 1.89 1.23 35.5 26.0 - Mortgages 2.08* 0.97* 28.5 17.1 - Instalment Credit Finance 0.64 1.88 48.9 48.2 - Credit Card 1.65 1.0
Slide 11: Significant Home Loans credit impairments…
Significant Home Loans credit impairments… Mortgages NPLs (Rbn) Mortgages NPL cover ratio (%) 1.7 28.5 3 months 1.2 1.2 4 months 0.9 Pre-legal 0.9 22.6 5 months 0.6 5.0 6 months + 19.1 2.1 18.4 2.7 17.3 17.1 Arrangements 2.5 0.9 Legal Deceased 1.3 12.6 2.9 11.6 Insolvent 2.5 1.5 Sold 1.4 6.7 Other 6
Slide 12: ...and Business Markets charge
...and Business Markets charge Credit impairments (Rm) Large single name CPF exposure 978 More rigorous approach to 910 managing distressed assets 651 Increased commercial voluntary liquidations Improved NPL cover 219 204 33 CPF Rest of Africa Other FY11 FY12 12
Slide 13: Lower inflows improve non-performing loans
Lower inflows improve non-performing loans Mortgages becoming NPL or written off Group NPLs as a percent of loans and (by year originated) advances (%) 8 16% 2005 2006 2007 7 14% 2008 2009 6 12% 2010 2011 2012 5 10% 4 8% 6% 3 4% 2 2% 1 0% 0 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Slide 14: Sustainable cost containment
Sustainable cost containment FY12 Change Mix Rm % % Cost to income and burden (%) 88 Staff costs 13 078 (4) 51 Accommodation, property and equipment- 4 725 20 18 56.2 related 84 Information technology 2 134 (5) 8 55.2 55.5 Communication 1 014 (4) 4 81 Marketing 1 024 (1) 4 Professional fees 862 (20)
Slide 15: Strengthened our balance sheet
Strengthened our balance sheet Source of funds (Rbn) Use of funds (Rbn) 3.9 (23.5) 4.4 36.5 (7.6) 5.5 23.3 Customer Equity Long-term Other funding Other assets Liquid assets Customer loans deposits funding and advances 15
Slide 16: Maintained strong capital ratios
Maintained strong capital ratios Group Core Tier 1 ratio (%) 1.8 (1.2) 0.9 (0.6) (0.2) 13.0 (0.7) 13.0 2011 Basel 2.5 AIRB Wholesale RWA growth Profit Dividend Other 2012 16
Slide 17: Limited Basel 3 capital impact
Limited Basel 3 capital impact Absa Group Core Tier 1 (%) 13.0 (0.7) 12.3 Board target (9.5-11.0) Basel II.5 Basel 3 17
Slide 18: Solid deposit growth
Solid deposit growth FY12 Change Mix Improving funding mix Rbn % % Deposits/total funding (%) 77 Cheque accounts 144 7 30 Savings and transmission and 77 4 16 72 investment products Fixed deposits 126 1 26 68 Call deposits 57 2 12 64 Other 73 43 15 Total 477 8 FY09 FY10 FY11 FY12 18
Slide 19: Lower property loans a drag
Lower property loans a drag Change in gross customer loans (Rbn) 16.1 0.2 542 3.2 11.4 0.3 517 (5.6) Edcon (3.7) 3.4 FY11 Mortgages CPF VAF Credit Cards Personal RBB other CIBW Other FY12 Loans 19
Slide 20: Substantial scope to improve returns
Substantial scope to improve returns RoE decomposition (%) RoRWA sensitive to credit losses ratio (%) FY07 FY08 FY09 FY10 FY11 FY12 3.0 Revenue to 10.2 11.1 11.0 10.6 10.8 10.9 2.5 average RWAs Cost to income 51.7 49.2 49.6 56.2 55.5 55.2 ratio 2.0 Credit losses to 6.7 13.6 21.3 14.0 11.1 17.7 reven
Slide 21: Diversified earnings by business…
Diversified earnings by business… Headline earnings FY12 headline earnings mix FY12 FY11 Change 4% Rm Rm % 15% Retail & Business Banking 4 346 6 106 (29) 39% Retail Markets 3 436 4 243 (19) Business Markets 910 1 863 (51) CIBW 2 810 2 230 26 32% Financial Services 1 338 1 375 (3) 10% Group centre 31
Slide 22: …and within business units
…and within business units FY12 change in headline earnings (Rm) 580 388 331 300 305 (37) (133) (185) (368) (585) (1 508) CIBW Retail VAF Card Retail Bank Group AFS Personal AllPay Business Business Home centre Loans Markets Markets Loans equities (excluding Retail Markets equities) 22
Slide 23: Retail Markets
Retail Markets @ BARCLAYS 23 a ABSA
Slide 24: Diversified portfolio
Diversified portfolio Headline earnings (Rm) Pressure on revenues 292% 18% 93% 96% 19% 47% Disciplined cost control 2 088 FY11 FY12 produced positive JAWS 1 757 Material Home Loans 947 720 791 credit impairments 587 646 516 403 201 15 Selective Personal Loans growth Strong Retail Bank, Card (992) an
Slide 25: Increased customer focus delivering results
Increased customer focus delivering results Absa Rewards customers (k) Primary bank leader 59% 1 045 659 Leader for individual deposits FY11 FY12 Focus on service, access and 2H12 YoY Sales (Rbn) value 12.8 27% Strong innovation delivery 9.4 10.1 9.1 10.4 30% 8.7 Strategic partnerships with 7.7 8.0
Slide 26: Business Markets
Business Markets @ BARCLAYS 26 a ABSA
Slide 27: Equities losses and impairments drove fall
Equities losses and impairments drove fall Business Markets attributable earnings (Rm) Weak performance from equity portfolio 1 810 711 CPF earnings significantly lower Rest of Africa losses 625 Solid growth in rest of SA business 124 514 84 FY11 Equities CPF Africa Rest BM FY12 Debt of SA 27
Slide 28: Reducing our equity portfolio
Reducing our equity portfolio Equity portfolio fair value movement (Rm) Equity portfolio value (Rm) 119 FY11 FY12 FY11 FY12 2 795 2 550 (13) (43) (91) (96) 1 320 (176) 976 (287) 651 457 472 153 (408) Investment Inventories Listed Unlisted Investment Inventories Listed Unlisted properties and other p
Slide 29: Focus on transactional income
Focus on transactional income Transactional income (Rm) Electronic utilisation by primary customers 11% 7% 9% 930 Market leading end-to-end cash 870 871 802 solutions 665 598 Sustained cheque fee income despite a reduction in volumes Electronic Cash Cheques banking FY11 FY12 29
Slide 30: Corporate, Investment Banking and Wealth
Corporate, Investment Banking and Wealth 30
Slide 31: Strong performance from integrated CIBW
Strong performance from integrated CIBW Headline earnings (Rm) Robust revenue growth 40% 1% 65% 26% Strong Investment Bank showing 32 2 810 539 9 in target markets Returns improved despite Basel changes 2 230 Corporate fully integrated FY11 Investment Corporate Wealth FY12 Bank RoRC: 18.0% 20.1% 31
Slide 32: Broad-based investment banking growth
Broad-based investment banking growth Net revenue (Rm) Markets grew without increasing market risk 19% 8% 25% >100% 3,843 – Client-driven focus 3,224 FY11 FY12 – Collaboration across business 1,259 1,365 – Africa opportunity 317 397 23 Investment banking gaining Markets Investment Private Equity and
Slide 33: Corporate a medium-term opportunity
Corporate a medium-term opportunity Key products and channels Corporate revenue (Rm) performing in line with expectations 2 535 2 563 1% Total Corporate client revenue 944 886 across the group up 14% 6% Material investment in platforms provides unique customer proposition 1 677 5% 1 591 FY11 FY12 No
Slide 34: Absa Financial Services
Absa Financial Services pes @ BARCLAYS 34 a ABSA
Slide 35: Claims and reserves reduce earnings
Claims and reserves reduce earnings Results impacted by: Operating results (Rm) – De-risking shareholder investments 5% 7% 75% 11% 0% 7% – Strengthening Life reserves 349 182 188 – 4Q Claims experience 1,686 97 4 1,565 – Improved cost efficiency Good 2H sales momentum Africa contribution rising New
Slide 36: Strong 2H new business
Strong 2H new business Embedded value of new business (Rm) Life insurance 216 211 Significant uplift in new policies sold 153 151 Rest of Africa contributing to growth Assumptions and experience variance 1H11 2H11 1H12 2H12 Assets under management (Rbn) Investments 52% 0% 40% 24% 6% AUM R192bn, up 1
Slide 37: Tough year for short term insurance industry
Tough year for short term insurance industry Loss ratio (%) SA underwriting margin 4.3% 119 FY11 FY12 (2011: 6.4%) 74 85 66 57 56 49 40 Significant 4Q claims impacted personal lines and HOC Personal Commercial Agriculture Mozambique Agri and Commercial Lines underwriting results deteriorate SA Perso
Slide 38: Closing remarks
Closing remarks Maria Ramos 38
Slide 39: Becoming Africa's Go-To bank
Becoming Africa’s Go-To bank Part of a leading global bank – Significant benefits Sustainable returns – Helping people achieve their ambitions – in the right way – Driven by our values 39
Slide 40: Transformational deal
Transformational deal Deal would increase our rest of Accelerate One Africa strategy Africa component materially (%) 17 Single legal entity 15 Leading listed Pan African bank Earnings enhancing Access to growth across Africa 3 (3) Revenue Earnings FY12 Pro forma FY12 40
Slide 41: Building business momentum
Building business momentum Stronger revenue growth Positive JAWS Significantly reduced credit loss ratio Improving returns 41
Slide 42: Disclaimer
Disclaimer Forward-looking statements Certain statements in this document are forward looking that relate to, among other things, the plans, objectives, goals, strategies, future operations and performance of Absa Group Limited (“Absa”). Words such as “anticipates”, “estimates”, “expects”, “projects