Slide 1: Interim financial results for the six months ended 30 June 2012
IInterim t i financial results for the six months ended 30 June 2012
Slide 2: Review
Review Maria Ramos @ BARCLAYS «ce ABSA
Slide 3: First half performance well below expectations
First half performance well below expectations Change 1H12 1H11 % Headline earnings (Rm) 4 332 4 595 (6) Pre-provision profit (Rm) 10 452 10 112 3 Diluted headline earnings per share (cents) 602 3 602,3 638 5 638,5 (6) Dividends per ordinary share (cents) 315 292 8 Net interest margin on interest-be
Slide 4: Delivering on our strategy
Delivering on our strategy … Create a leaner group Continue to strengthen our balance sheet Build a platform for sustainable growth Execute One Africa strategy … to make customers’ lives much easier 4
Slide 5: Financial overview
Financial overview D id H David Hodnett d tt
Slide 6: Earnings decline on higher impairments
Earnings decline on higher impairments 1H12 1H11 Change Rm Rm % Headline earnings (Rm) Net interest income 11 909 11 622 2 1% 19% 6% Non-interest income 11 174 10 680 5 4 595 Total revenue 23 083 22 302 4 4 332 Credit losses (4 020) (2 902) (39) Operating expenses (12 666) (12 218) (4) 3 862 Other (
Slide 7: Stable net interest margin
Stable net interest margin Change in margins (average interest-bearing assets) YoY bps 4.0 % % 16 L Loans and d advances d to t customers t 1 15 Change in customer rates 2 3.5 14 Change in composition (1) 13 Deposits due to customers (3) 3.0 12 C t Customer pricing i i (2) 2.5 Change in composition
Slide 8: Modest retail non-interest revenue growth
Modest retail non-interest revenue growth 1H12 Change Mix Volume of revenue generating retail Rm % % transactions (%) Retail Markets net fees and 5 143 2 47 commissions 1H12 / 1H11 Business Markets net fees 1 485 12 13 and commissions Corporate net fees and 64 / 61 36 / 39 476 5 4 commissions Financ
Slide 9: Significant rise in impairments
Significant rise in impairments 1H12 1H11 1H12 1H11 % % % % Credit loss ratio NPL coverage ratio Retail & Business Banking (RBB) 1,92 1,38 31,9 28,5 Retail Markets 2,03 1,46 30,9 28,1 - Mortgages 2,20 1,18 22,6 18,8 - Vehicle and Asset Finance 1 04 1,04 2 08 2,08 54,8 43 4 43,4 - Card 1,66 1,49 63,9
Slide 10: Substantial provision in Home Loans legal book
Substantial provision in Home Loans legal book Home Loans NPL cover ratio (%) Were comfortable with our 2011 cover 22 6 22.6 Higher write-offs triggered a review 19.1 18 4 18.4 17.3 17.1 Actions taken to address risk – Model changes g – Operational 12.6 – Structural 11.6 2006 2007 2008 2009 2010 201
Slide 11: Lower inflows improve non-performing loans
Lower inflows improve non-performing loans New NPLs Group NPLs as a percentage of (monthly number) loans and advances (%) 8000 8 7000 7 6000 6 5000 5 4000 4 3000 3 2000 2 1000 1 0 0 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 1H12 2006 2007 2008 2009 2010 2011 2012 Home Loa
Slide 12: Sustainable cost containment
Sustainable cost containment 1H12 Change Mix Cost-to-income ratio Rm % % and JAWS (%) Staff costs 6 522 (2) 51 53.6 54.8 54.9 Accommodation, property 2 282 30 18 and equipment-related Information technology 1 154 3 9 4.5 Co Communication u cat o a and d 899 4 7 marketing (0.2) Professional and audit
Slide 13: Strengthened our balance sheet
Strengthened our balance sheet Source of funds (Rbn) Use of funds (Rbn) 27.3 (9.1) (29.4) 6.0 52.2 (47.1) Customer deposits Equity Other funding Liquid assets Total loans Other assets 13
Slide 14: Strong capital ratios
Strong capital ratios Group Core Tier 1 ratio 99 bps (66 bps) (5 bps) 13.2% 19 bps (15 b bps)) 13.0% (10 bps) FY11 Credit risk Equity risk Market risk Other Profit Dividend 1H12 14
Slide 15: Solid deposit growth
Solid deposit growth 1H12 Change Mix Funding mix (Rbn) Rm % % Cheque accounts 140 12 31 458 Savings and transmission 406 74 9 16 and investment products Fixed deposits 123 2 27 Call deposits 48 (14) 10 Other 73 97 16 148 125 Total 458 13 17 26 Deposits due to Deposits Debt securities customers from
Slide 16: Improving loan momentum
Improving loan momentum Loans and advances to 1H12 Change Mix customers Rbn % % Home Loans share of new business (%) R il M Retail Markets k 328 (1) 63 22 Credit cards 22 6 4 Installment finance 40 4 8 17 Mortgages 239 (3) 46 Other 27 13 5 Business Markets 96 (2) 19 CIBW 95 10 18 Other 1 3 0 Total 5
Slide 17: Diversified earnings
Diversified earnings Headline earnings RoRC 1H12 1H11 Change Mix 1H12 1H11 Rm Rm % % % % Retail & Business Banking 1 933 2 618 (26) 45 14,5 19,3 Retail Markets 1 368 1 789 (24) 32 17,3 22,3 Business Markets 565 829 (32) 13 10,4 15,0 CIBW 1 352 1 190 14 31 21,7 20,7 Financial Services 678 644 5 16 29
Slide 18: Divergent Retail Markets performance
Divergent Retail Markets performance Headline earnings (Rm) Solid Card performance 11% 14% 70% 17% >100% 904 Strong Retail Bank growth 811 526 461 Continued VAF turnaround 308 303 253 181 Lower Personal Loans 33 earnings Home Loans loss due to credit impairments ((623)) Card Retail Bank & Vehicle &
Slide 19: Equity portfolio reduced Business Markets' earnings
Equity portfolio reduced Business Markets’ earnings Profit before tax (Rm) Transaction strategy successful 50% 3% 1 278 1 326 1 367 637 Large equity portfolio write-down Business Markets Business Markets SA excluding equity portfolio Underlying growth in South Africa 1H11 1H12 Transactional revenue
Slide 20: Steady Financial Services performance
Steady Financial Services performance Net operating income (Rm) Maintained attractive returns 2% 3% 1% 36% >100% Investment income improved 430 421 Strong growth in premium income, flat non-premium income Higher weather-related 201 207 claims 135 136 Operating expenses well 59 contained 38 (5) 20 Re
Slide 21: Solid broad-based CIBW growth
Solid broad-based CIBW growth Net revenue (Rm) Strong performances in foreign exchange, exchange Africa 8% 5% 7% 15% >100% 100% trading, equities and prime services 1 841 1 712 Stable performance from Corporate 1 321 1 255 Investment Banking growth driven by increased margin business 670 715 Strong
Slide 22: Strategy and prospects
Strategy and prospects M i R Maria Ramos
Slide 23: RBB regaining momentum
RBB regaining momentum Advances production (Rm) Customer focus – improved processes and optimised branches 5000 4000 Innovation – new products, products simplified pricing and digital migration 3000 Advances production growth – return to 2000 growth across the franchise 1000 0 Q1 Q2 Q3 Q4 Q1 Q2 2011
Slide 24: Financial Services returns attractive
Financial Services returns attractive New business – policies and investments (thousands) Operating O ti models d l – entrenching t hi ththe 80 bancassurance and revised adviser 70 model 60 Efficient business – continue to 50 leverage broader group 40 30 Africa expansion – growth on the back of the
Slide 25: CIBW client focus reflected in improving returns
CIBW client focus reflected in improving returns Daily markets revenue distribution (Rm) Business days 30% IIntegrated t t d corporate t and d investment i t t 20% banking – seamless solutions for clients 10% 0% <-35 >50 -5 to <0 -35 to <-30 -30 to <-25 -25 to <-20 -20 to <-15 -15 to <-10 -10 to <-5
Slide 26: What to expect
What to expect Customer, customer, customer Driving One Africa opportunity Growing in target areas Efficiency an ongoing priority Further strengthen g our balance sheet Continue to invest in talent 26
Slide 27: Disclaimer
Disclaimer Forward-looking statements Certain statements in this document are forward looking g that relate to, amongg other things, the plans, objectives, goals, strategies, future operations and performance of Absa Group Limited (“Absa”). Words such as “anticipates”, “estimates”, “expects”, “proje