Absa Group Limited · JSE:ABG
Absa — Investor Day (November 2019)
42 slides from Absa's investor day presentation, Nov 18, 2019
Slide 1: CIB investor update
CIB investor update 18 November 2019
Slide 2: Agenda
Agenda 1 Overview of CIB Africa 2 Our strategy 3 Investment Bank 4 Corporate Bank 5 Closing remarks 2 |
Slide 3: Leadership team
Leadership team Charles Russon CE Absa CIB Africa Years in Absa: 13 Years in financial services: 30 Speciality: Operations Finance CIB Temi Ofong Yasmin Masithela Mike Harvey Anand Naidoo Steve Seaka COO & Deputy CE: ARO Transactional Banking Investment Bank Client Coverage Public Sector & Gro
Slide 4: Foundation leveraged the best of Barclays and Absa
Foundation leveraged the best of Barclays and Absa Best of both worlds from A standalone African Corporate and Fully local, fully global Corporate and Investment Bank Absa and Barclays Investment Bank Corporate Banking CIB Pan-Africa Acquired Barclays’ African subsidiaries 2005 2006 2013 2016 2018 2
Slide 5: Taking stock of where we are
Taking stock of where we are 1. An asset-led business 2. Substantial South African platform to leverage in African Regional Operations 3. Separation has created an inward focus 4. Limited connectivity to our global clients since Barclays exited 5 |
Slide 6: An asset-led business
An asset-led business Loans and deposits (Rbn) Non-interest revenue (%) 1H19 RoRC (%) cagr: 12% 2% Loans 288 43 Deposits 36 Total 18.0 228 210 196 SA 13.3 ARO 32.7 2015 1H19 2015 1H19 Note: Customer loans exclude reverse repurchase agreements; customer deposits exclude repurchase agreements 6 |
Slide 7: Substantial South African platform to leverage into ARO
Substantial South African platform to leverage into ARO Headline earnings 1H19 (%) Product mix Geographic mix CIB IB 34% South Africa 4 year cagr 51% 34% 56% SA: 7% Rest of Absa Corporate 66% 49% ARO 44% ARO: 14% Absa Group 7 |
Slide 8: Separation created an internal focus …
Separation created an internal focus … 8 |
Slide 9: … with costs increasing post Barclays separation
. . . with costs increasing post Barclays separation Total CIB operating expenses (Rbn) 12% 8.7 Cost Drivers Cost saving initiatives • Technology platforms 2% • Decommissioning systems 7.5 7.7 7.8 • Rep offices • Business optimization • Replace expertise lost 2015 2016 2017 2018 9 |
Slide 10: Limited connectivity to our global clients
Limited connectivity to our global clients Global connectivity through Barclays Invested in: • Primary relationship management • Rep offices Global • Flows from global institutions corporates • Sector expertise 15% of revenue • Sector origination for Advisory • Global distribution 10 |
Slide 11: Our vision is to be a leading Pan Africa Corporate and Investment Bank
Our vision is to be a leading Pan Africa Corporate and Investment Bank Capabilities to deliver a full service proposition Deliver our growth objectives International • Grow CIB Africa franchise Banking - Target key growth sectors Financing - Build out Transactional banking - Expand product offering
Slide 12: Provide connectivity for local, regional and global clients
Provide connectivity for local, regional and global clients Middle UK & East Europe clients clients Deeply rooted in China & Africa Asia clients US clients Regional Pan Africa corporates platform Leverage partnerships 12 |
Slide 13: Leverage our strengths and invest in our capabilities
Leverage our strengths and invest in our capabilities Leverage strengths • Financing • Structuring • Fixed income trading • Collections (Physical & electronic cash handling) Impact • Risk management solutions • Grow our client franchise Invest to grow Pan-Africa • Improve non-interest revenue • Tran
Slide 14: Key metrics
Key metrics Absa Group 2021 targets CIB targets Revenue growth 1H19 2021 On average, faster than market with an improving trend over time and within Revenue diversity – Non-interest 36% >40% appropriate risk parameters. revenue: total income Cost-to-income ratio Cost-to-income ratio 51.1% <50% Consi
Slide 15: Investment Bank
Investment Bank Mike Harvey
Slide 16: The Investment Bank set up to leverage strengths to grow
The Investment Bank set up to leverage strengths to grow Vision: Become a leading Pan-African IB, leveraging strengths in financing, structuring and fixed income Clients Core product capabilities Primary Markets Activity 1 Investment Banking Division • Advisory • Capital Raising Investment • Global
Slide 17: Leadership team
Leadership team Mike Harvey Managing Executive Years in Absa: 13 Years in banking: 29 Speciality: Markets Treasury Investment Banking Saloshni Pillay Garth Klintworth George Asante David Renwick Klaus Kaempfer Sales and Structuring Global Markets Markets (ARO) Investment Banking Division Comme
Slide 18: Global Markets historically benefitted from leveraging the Barclays platform
Global Markets historically benefitted from leveraging the Barclays platform 1. Absa Capital created 2. Pan African business build out 3. Barclays exit Markets grew significantly, leveraging Absa’s Disrupted Markets value proposition strong balance sheet and Barclays’ global Strategic decision to ex
Slide 19: Separation impact on Global Markets
Separation impact on Global Markets Impacted areas Actions taken • Selectively onboarding active, high value Lost access to large pool of corporate and Client institutional clients institutional clients • Developing strategic interbank relationships • Intellectual property Global expertise and • Afr
Slide 20: Global Markets offers a full Pan-African value proposition
Global Markets offers a full Pan-African value proposition Vision: A leading full service, cross-asset, Pan-African Markets business Geographical footprint Product Systems • Africa presence - Markets Sales and • Complete markets product suite in • Single multi-product trading platform Trading capabi
Slide 21: Aim to turnaround SA while continuing ARO momentum
Aim to turnaround SA while continuing ARO momentum Markets revenue (Rbn) SA Markets revenue (Rm) 2.5 (11%) 49 1H18 1H19 343 2.2 37 Fixed income and credit 468 99 FX and commodities 417 Equities and prime services Other 818 1.7 649 (28%) 1H18 1H19 25% 1.2 1.0 0.8 Client facilitation risk Corporate In
Slide 22: Global Markets priorities
Global Markets priorities Priorities Timelines South Africa 1 • Rebalance SA client franchise mix 2H22 • Grow FX market share ARO • Thought leadership to develop and grow African markets (Africa Market Index) 2 • Grow local institutional and structured client solutions 2H20 • Continued focus on buil
Slide 23: Investment Banking Division is built on three key areas
Investment Banking Division is built on three key areas Vision: Trusted advisor, providing clients with leading capital raising and bespoke financing solutions Scale Leverage Capital raising Financing solutions Build out capital raising solutions including both Debt and Equity Capital Markets Expand
Slide 24: Investment Banking Division’s priorities
Investment Banking Division’s priorities Financing • SA: increased focus on mid market corporates, leverage finance, and cross border financing 1 • ARO : deepen in-country term debt capabilities, creating four financing hubs • Active balance sheet management Build Advisory & Capital Raising • Buildi
Slide 25: Recognition of Investment Banking Division
Recognition of Investment Banking Division Selected recent debt Selected recent advisory transactions transactions Recent awards • Best Investment Bank Pan-Africa, Botswana, Mozambique, South Africa, Tanzania, Zambia • Best Project Finance House Initial Public Offering • Best Sustainability Deal Fin
Slide 26: Commercial property finance has a Pan-African strategy
Commercial property finance has a Pan-African strategy CPF loans (Rbn, market share %) CPF loan mix (%) CPF loans 21 Market share 5 4 7 27 17 16% cagr 15 14 14 13 12 11 11 10 9 48 41 37 35 31 35 33 39 51 59 20 24 Retail Multiple portfolio* Industrial 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19
Slide 27: Focus on continuing to grow diversified, high quality book
Focus on continuing to grow diversified, high quality book CPF investment grade book (%) Watch list to total exposure (%) CPF credit loss ratio (bps) 13 6 50 48 44 8 8 42 40 4 6 3 -4 1 1 2015 2016 2017 2018 1H19 2015 2016 2017 2018 1H19 2015 2016 2017 2018 1H19 Grow reputable clients applying robust
Slide 28: Commercial property finance priorities
Commercial property finance priorities 1 Further diversify portfolio and grow in target sectors 2 Co-ordinated effort for Pan-African clients and enhance in-country capability 3 Broaden client relationships and focus on generating ancillary revenue 28 |
Slide 29: How you can measure us
How you can measure us 2021 metric 1 FX market share growth 15%-17% 2 SA non-interest revenue: total income >50% from 39% 3 Loan mandated lead arranger Top 3 in SA and SSA (Dealogic) 4 DCM ranking Top 3 (Dealogic) 29 |
Slide 30: Corporate Bank
Corporate Bank Yasmin Masithela
Slide 31: Corporate Bank set up to deliver every day banking
Corporate Bank set up to deliver every day banking Clients Core product capabilities Businesses • Global corporates • Regional corporates 1 Cash management • Physical and electronic cash • Large local corporates handling (collections) Trade finance and working • Payments • Mid-corporates capital Deb
Slide 32: Leadership team
Leadership team Yasmin Masithela Managing Executive Years in Absa: 8 Years in financial service: 19 Speciality: Commercial Law Compliance Strategy HeadRichard Southey SA of Cash Management Thabo Makoko James Scott Chris Paizis Cash Management SA Trade & WC, TXB ARO Digital and Channels Interna
Slide 33: Double digit revenue growth since 2013
Double digit revenue growth since 2013 Corporate Bank revenue (Rbn) Corporate Bank revenue split 2018 (%) SA 9.7 ARO 16 9.1 13% cagr 8.3 7.4 5.0 4.5 6.4 15 4.2 5.3 4.0 3.5 60 3.0 9 4.6 4.7 4.1 3.4 2.9 2.3 Cash management Working capital 2013 2014 2015 2016 2017 2018 Debt Trade finance Note: Excludes
Slide 34: Key areas identified to improve growth and reduce risk
Key areas identified to improve growth and reduce risk Challenges Actions so far Goal • Changed resource allocation and 16% of client relationships primary Grow primary banked clients scorecards banked by 1H21 from 14% • Build out Absa Access All clients migrated onto Absa Digital channel evolution
Slide 35: We have evolved client digital channel experience
We have evolved client digital channel experience Digital channel transformation Single sign on: Absa Access • 14 Channels across host, online across the 2012-14 continent • Project initiation to localize Barclays. Net and File Gateway Online/Web Host Mobile API 2014-17 • Barclays.Net and File gatew
Slide 36: Commercializing new capabilities in ARO …
Commercializing new capabilities in ARO … Focus Areas Capability to date Impact on client franchise • 20% deposit growth • Rolled out bulk mobile • 20% increase in new to bank Mobile propositions disbursement proposition clients • 2 new partnerships onboarded • Launched electronic customs tax • 11%
Slide 37: … and sales and service model
… and sales and service model Prioritise growth in priority sectors and segments Client Prioritise Primacy (main bank status) Growth focus Integrated proposition for efficiency Products High quality core deposits Growing our treasury advisory capabilities to drive Skills efficiencies in client opera
Slide 38: How you can measure us
How you can measure us 2021 metric 1 SA cheque deposit market share From 18% to 20% 2 SA domestic payments market share From 19% to 22% 3 Pan Africa revenue growth > 10% 38 |
Slide 39: Closing remarks
Closing remarks Charles Russon
Slide 40: Focused execution priorities
Focused execution priorities Separation: Complete separation book of work. Complete technical separation by end 1H20 Efficiencies: Decommission legacy technology channels and leverage SA platforms Growth: Primary banking and client acquisition to drive non-interest revenue and improve returns, withi
Slide 41: Key metrics
Key metrics Absa Group 2021 targets CIB targets Revenue growth 1H19 2021 On average, faster than market with an improving trend over time and within Revenue diversity – Non-interest 36% >40% appropriate risk parameters. revenue: total income Cost-to-income ratio Cost-to-income ratio 51.1% <50% Consi
Slide 42: 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