Slide 1: Financial results for the year ended December 2007
ABSA GROUP LIMITED Financial results for the year ended December 2007 1 CONTENTS INTRODUCTION • Steve Booysen FINANCIAL REVIEW • Jacques Schindehütte ABSA CAPITAL • John Vitalo CORPORATE AND BUSINESS BANK • Robert Emslie FUTURE PERSPECTIVE • Steve Booysen 2 1
Slide 2: Financial Highlights
INTRODUCTION Steve Booysen 3 FINANCIAL HIGHLIGHTS • Headline earnings of R9.4 billion ( 19.6%) • Headline earnings per share of 1 402 cents ( 18.6%) • Attributable earnings of R9.6 billion ( 18.4%) • Dividends per share of 560 cents ( 18.4%) • Return on average equity of 27.2% • Cost-to-income ratio
Slide 3: Strategic Initiatives Delivering Results; Banking Businesses Driving Growth
STRATEGIC INITIATIVES DELIVERING RESULTS • Grow the franchise • Diversify the earnings base • Enhance risk management and collections • Improve efficiency • Leverage the Barclays relationship • Attract and retain the best people 5 BANKING BUSINESSES DRIVING GROWTH Year ended 31 December 2007 Earning
Slide 4: Compliance to Regulatory Requirements; Financial Review
COMPLIANCE TO REGULATORY REQUIREMENTS • National Credit Act successfully implemented • Basel II up and running • Compliance to international regulatory requirements • Alignment of the Financial Sector Charter to the Codes of Good Practice 7 FINANCIAL REVIEW Jacques Schindehütte 8 4
Slide 5: Group Income Statement; Growth in Advances
GROUP INCOME STATEMENT Year ended 31 December 2007 2006 Change Rm Rm % Net interest income 18 890 14 887 27 Impairment charge (2 433) (1 573) 55 Non-interest income 16 728 15 019 11 Operating expenditure* (19 209) (17 029) 13 Taxation (4 042) (3 151) 28 Attributable earnings 9 595 8 105 18 Headline
Slide 6: Funding of Balance Sheet Growth; Normalisation of Credit Impairments
FUNDING OF BALANCE SHEET GROWTH Year ended 31 December 2007 2006 Change 2007 mix 2006 mix Rbn Rbn % % % • Retail banking 97 81 20 15 16 - Low margin 35 22 59 5 4 - High margin 62 59 6 10 12 • Commercial 76 68 13 12 14 • Institutional 335 246 36 52 50 • Securitisation 10 4 186 2 1 • Capital 53 43 21
Slide 7: Net Fee and Commission Income; Equity Gains
NET FEE AND COMMISSION INCOME Comprising 69% of total non-interest income 2007 Change Mix Rm % % • Cheque accounts 2 575 7 20 • Credit cards 1 551 12 12 • Electronic banking 2 657 18 21 • Savings accounts 1 801 19 14 • Forex and other credit related fees 1 624 8 12 • Insurance commission received 87
Slide 8: Growing the Franchise; Capital Management
GROWING THE FRANCHISE 2007 % Increase in costs 14.6 • Integration programme 0.2 • Operational costs - Compliance 1.0 - Cash transportation costs 0.3 - Insurance 0.4 - Maintenance and IT costs 0.2 • Investment in growth - Marketing 0.6 - Infrastructure 0.8 - Talent and training 1.8 - Frontline staff
Slide 9: Absa Capital: The Results in Brief
ABSA CAPITAL John Vitalo 17 THE RESULTS IN BRIEF • Revenue of R3.8 billion Absa Capital’s revenue* ( 51%) R million Three-year compounded annual 3 809 • Attributable earnings of R1.7 billion growth rate (CAGR) of 39% ( 55%) • Contribution to Group earnings of 17% 2 521 ( 25%) 1 967 • Return on avera
Slide 10: Business Unit Revenue Contribution; Revenue Growth by Business Unit
BUSINESS UNIT REVENUE CONTRIBUTION • Revenue mix continues to diversify in Absa Capital – business unit earnings mix line with strategic objectives (%) • Change in mix driven by relatively stronger growth in Secondary Markets 14.4 17.6 17.0 • Objective is for Secondary Markets to 36.4 28.8 contribut
Slide 11: Core Performance Drivers; Secondary Markets
CORE PERFORMANCE DRIVERS • Benefits flowing through from business model implementation • Synergies with Barclays Capital • Investment in talent • Investment in organisational infrastructure • Strong growth in client franchise • Product innovation 21 SECONDARY MARKETS • Full-year revenue growth of 96
Slide 12: Primary Markets; Equity Investments and Investor Services
PRIMARY MARKETS • Full-year revenue growth of 29% - Excellent growth in fee income of 149% for 2007 • Growth achieved while significantly de-risking the business • Portfolio implementation to actively manage credit risk and capital • Client-centric approach with local and international offering • Le
Slide 13: Absa Capital Outlook; Corporate and Business Bank
OUTLOOK • Continue to build on the strong platform established over the past two years • Key operational focus areas for 2008 include: - Attracting and retaining the best talent in the market - Growing the client franchise - Driving synergies with Barclays Capital - Investing in world-class systems
Slide 14: ACBB Results in Brief; Core Performance Drivers
THE RESULTS IN BRIEF • Attributable earnings of R1.9 billion ACBB’s revenue ( 39%) R million • Contribution to Group earnings of 19% 6 152 • Return on average equity of 30% 5 168 • Non-interest income contribution of 37% 3 431 • Cost-to-income ratio of 52.7% Dec 2005 Dec 2006 Dec 2007 27 CORE PERFOR
Slide 15: Strategic Initiatives; Focus on Five Tiers of Strategy
STRATEGIC INITIATIVES • New market segment focus • New product focus • Building alternative revenue streams • Specialised focus teams, as well as supportive tools and training for new client acquisition • Dedicated training capacity 29 FOCUS ON FIVE TIERS OF STRATEGY • Expanding on the already estab
Slide 16: Future Perspective; Challenging Macroeconomic Outlook
FUTURE PERSPECTIVE Steve Booysen 31 CHALLENGING MACROECONOMIC OUTLOOK • Global economic growth under pressure • Domestic economic growth to moderate • Domestic investment-led growth to continue • But, we are facing some headwinds: - Ongoing inflationary pressure - Increasing household indebtedness -
Slide 17: Our Long-Term Strategies; Deliver Market Leadership
OUR LONG-TERM STRATEGIES ARE FORMULATED TO … • Deliver market leadership • Enhance our competitiveness • Diversify our earnings mix • Improve operational excellence • Reduce risk 33 DELIVER MARKET LEADERSHIP AND ENHANCE OUR COMPETITIVENESS • Protect and entrench leadership in retail banking - Retain
Slide 18: Diversify Our Earnings Mix; Improve Operational Excellence
DIVERSIFY OUR EARNINGS MIX • Expand emerging middle class market activities - Micro lending, credit cards and retailer finance market • Position Absa as a top-two player in investment, corporate and business banking by 2010 - Grow client franchise, expand market segment focus and accelerate new prod
Slide 19: Key Priorities for 2008; Addendum
... WHICH INFORMS OUR KEY PRIORITIES FOR 2008 • Growing our customer base • Attracting and retaining top talent • Capital management and funding • Risk management and collections • Operating efficiency and productivity 37 ADDENDUM 38 19
Slide 20: Net Interest Margin; Credit Impairment Trends
NET INTEREST MARGIN Percentage Jan 2007 Jan 2006 Net interest margin – opening position 3.30 3.27 Reclassifications (0.02) − Net interest margin – adjusted 3.28 3.27 • Impact of customer deposits (including risk strategies) 0.12 0.00 • Impact of customer advances 0.10 (0.02) • International and Afri
Slide 21: Non-Interest Income
NON-INTEREST INCOME R million % 52.5 53.8 53.8 50.8 50.2 47.9 47.0 43.7 45.0 40.5 16 728 38.8 37.0 15 019 34.1 13 780 12 168 10 753 9 127 7 694 6 421 5 331 4 623 3 879 3 150 2 406 30.9% 23.1% 19.2% 15.3% 20.4% 19.8% 18.6% 17.8% 13.2% 9.0% 11.4% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2005*
Slide 22: Bancassurance
BANCASSURANCE Year ended 31 December Life insurance 2007 2006 Change % • Gross premium income (Rm) 1 202 1 331 10 • Embedded value (Rm) 2 091 2 486 16 • Embedded value of new business (Rm) 213 263 19 • Embedded value earnings (Rm) 543 762 29 • Return on embedded value (%) 21.8 37.2 • Net income afte
Slide 23: Synergy Targets; Enhanced Efficiency
SYNERGY TARGETS Ahead of expectations Synergies Implementation costs R million R million 1 428 1 400 670 670 675 640 1 200 753 750 220 211 240 300 30 67 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 05 Dec 06 Dec 2007 Dec 08 Communicated targets (Rm) Actual synergies/implementation costs (Rm) 45 ENHANCED E
Slide 24: Positive Gearing; Value Created for Shareholders
POSITIVE GEARING Year ended 31 December 2007 2006 Top-line Operating Cost- Cost- income expenses to-income to-income growth growth ratio ratio % % % % • Retail banking 20 13 55 58 - Segment-focused* 21 16 66 70 - Home loans 20 6 35 40 - Credit cards 15 11 41 42 - Asset finance 11 8 44 45 • Corporate
Slide 25: Disclaimer
DISCLAIMER This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended and Section 27A of the US Securities Act of 1933, as amended with respect to certain of the plans, current goals and expectations of Absa Group