Slide 1: Absa Group FY20 results presentation
Absa Group FY20 results presentation 15 March 2021
Slide 2: Daniel Mminele, Chief Executive
Daniel Mminele Chief Executive
Slide 3: An extremely difficult macro backdrop
An extremely difficult macro backdrop Evolution of real GDP forecasts pre- and post-pandemic (%) Current forecasts Forecasts as of January 2020 2020 2021 2020 2021 Global 3.3 3.4 -3.5 5.5 SA 0.9 1.2 -7.0 3.1 ARO 5.7 5.7 -0.4 4.5 Source: IMF World Economic Outlook, Absa Research 3 |
Slide 4: An extremely difficult macro backdrop (cont.)
An extremely difficult macro backdrop (cont.) 2020 real GDP (%) 2020 policy rate change (basis points) 5 50 3 0 1 -50 -1 -100 -3 -150 -5 -200 -7 -250 -9 -11 -300 -13 -350 -15 -400 South Africa South Africa Uganda Uganda Zambia Zambia Seychelles Seychelles Ghana Ghana Kenya Kenya Botswana Botswana Ma
Slide 5: Key FY20 messages – we showed resilience
Key FY20 messages – we showed resilience • We responded well to the Covid-19 pandemic and the resulting economic downturn • Successfully completed our substantial separation from Barclays • Conducted an extensive strategy review • Produced a resilient performance - Maintained balance sheet strength
Slide 6: FY20 salient features
FY20 salient features Diluted normalised HEPS (c) RoE (%) 1% 16.8 1 910 1 923 15.8 (51%) 946 7.2 FY18 FY19 FY20 FY18 FY19 FY20 Pre-provision profit (Rbn) NAV per share (R) 7% 5% 4% 35.8 5% 33.6 131 126 32.0 120 FY18 FY19 FY20 FY18 FY19 FY20 6 |
Slide 7: Divisional performances
Divisional performances RBB SA CIB total Absa Regional Operations • “Smart growth” phase from “fixing” • Barclays separation complete • Barclays separation complete • Transactional franchises resilient • Broad-base revenue growth • Benefit of diversification • Benefitting from restructuring • Strong
Slide 8: Jason Quinn, Financial Director
Jason Quinn Financial Director
Slide 9: Credit charge the main driver of reduced earnings
Credit charge the main driver of reduced earnings Normalised headline earnings (Rbn) 5% (3%) (2%) 163% 1.06 2.48 12.75 0.78 16.26 Pre-provision profit up 7% (51%) 2.25 7.96 Revenue up 2% FY19 Net interest Non-interest Operating Credit Other* FY20 income income expenses impairments Note: * Includes o
Slide 10: Rate cuts and balance sheet mix changes dampened NIM
Rate cuts and balance sheet mix changes dampened NIM Change in net interest margin* (basis points) 7 (7) 1 (12) 4 16 (10) 450 (12) (8) (12) Loans Deposits 417 11 (18) FY19 Pricing Mix Pricing Mix Endowment Capital Hedge ** ARO *** Prime reset Other FY20 Note: * average interest bearing assets; ** in
Slide 11: Customer lending a small part of total asset growth
Customer lending a small part of total asset growth Growth in total assets (Rbn) 31% 1% 9% 37 1 526 41% 35% 25 55 1% 1 395 13 FY19 Net customer loans Trading portfolio Loans to banks Investment Other FY20 securities 11 |
Slide 12: Targeted customer loan growth
Targeted customer loan growth Gross customer loans (Rbn) RBB SA gross customer loans (Rbn) 600 4% 5% 255 500 FY19 FY20 243 FY19 FY20 400 2% 300 0% 128 128 9% 200 95 87 3% 100 8% (10%) 46 (1%) 44 24 24 0 RBB CIB RBB CIB Home Loans Vehicle Credit Personal Relationship finance cards loans Banking South
Slide 13: Secured SA retail production rebounded after 2Q20
Secured SA retail production rebounded after 2Q20 Retail and Business Banking South Africa – quarterly YoY growth in production (%) 50 Home Loans Vehicle Finance Personal Loans 30 Hard Covid-19 lockdown 10 -10 -30 -50 -70 -90 1Q20 2Q20 3Q20 4Q20 13 |
Slide 14: Customer loan and deposit trends varied from 2Q20
Customer loan and deposit trends varied from 2Q20 Gross customer loans (Rbn, QoQ growth) Customer deposits (Rbn, QoQ growth) 8% 1021 (4%) 0% (1%) 975 979 974 2% 2% 952 947 3% 935 920 8% 889 826 4Q19 1Q20 2Q20 3Q20 4Q20 4Q19 1Q20 2Q20 3Q20 4Q20 14 |
Slide 15: Robust deposit growth in South Africa
Robust deposit growth in South Africa Customer deposits (Rbn) 12% 416 FY19 FY20 373 36% 283 207 6% 150 159 (2%) 96 93 RBB SA CIB SA Absa Regional Operations Treasury and other South Africa up 21% 15 |
Slide 16: Lower fees and commission reduced non-interest income
Lower fees and commission reduced non-interest income Non-interest income (Rbn) Non-interest income by division (Rbn) 4% (3%) 4.8 23.4 (8%) 4.7 4.4 (9%) 21.4 FY19 FY20 5.2 5.0 6.6 26% 23.6 22.5 21.6 (9%) 4% 13% 6.0 6.3 3.8 4.3 FY18 FY19 FY20 RBB South Africa CIB South Africa Absa Regional Fees and c
Slide 17: Global Markets revenue rebounded off a low base
Global Markets revenue rebounded off a low base Global Markets revenue (Rbn) Markets SA revenue by type (Rm) SA ARO 33% 48% FY19 FY20 2.6 1 967 31% 5% 1 693 1.8 (8%) (18%) 1.7 (10%) 1.7 1 380 2.1 1 327 3.6 3.5 3.6 3.2 (144%) 2.5 216 (492) FY16 FY17 FY18 FY19 FY20 Corporate Institutional Client facil
Slide 18: Operating expenses well managed and responsive
Operating expenses well managed and responsive FY20 Change Mix Rm % % Cost-to-income ratio (%) Staff 25 140 (2) 55 58.0 Property 1 878 7 4 57.7 Technology 4 141 11 9 56.7 Depreciation 3 801 7 8 56.0 Professional fees 2 316 21 5 55.2 Marketing 1 114 (28) 2 Communication * 1 402 (7) 3 Cash transportat
Slide 19: Numerous moving parts within operating expenses
Numerous moving parts within operating expenses Incremental run costs post Barclays separation (Rbn) • Material reduction in performance incentives 30% • Edcon portfolio disposal base effect 1.8 • Reduced fraud costs 80% 1.4 • Lower restructuring costs • Higher incremental run costs post separation
Slide 20: Credit impairments rose materially across the board
Credit impairments rose materially across the board Credit impairments (Rbn) Credit loss ratio (%) FY19 FY20 229% 163% (0.6) RBB SA 1.18 2.64 2.8 20.6 432% 134% 1.6 Everyday Banking 5.50 8.42 8.4 Vehicle and Asset Finance 1.34 3.45 Home Loans 0.08 0.88 Relationship Banking 0.26 1.59 7.8 CIB SA 0.11
Slide 21: Provided extensive Covid-19 payment relief
Provided extensive Covid-19 payment relief … Gross carrying value of customer loans granted payment relief (Rbn) RBB SA: R152bn, 27% of book 84 40 26 25 27 10 7 Home Loans Vehicle and Asset Card Personal Loans Relationship CIB SA ARO Finance Banking Of book: 33% 27% 21% 28% 19% 13% 24% 21 |
Slide 22: Relief portfolio performing largely as planned
… relief portfolio performing largely as planned Payment relief book performance (Rbn) 90 1% 80 4% 94% 70 Up to date Arrears NPLs 60 50 40 3% 97% 0% 30 3% 3% 1% 9% 5% 8% 20 88% 94% 7% 89% 13% 10 79% 0 Home Loans Vehicle Finance Relationship Banking Everyday Banking CIB SA ARO Note: Loan splits may n
Slide 23: Relatively low exposure to Covid-19 impacted industries
Relatively low exposure to Covid-19 impacted industries Wholesale lending to key Covid-19 impacted industries (% of total loans) 8.4 4.5 3.1 1.5 1.1 0.5 0.4 0.3 0.2 Property Manufacturing Retail Construction Hospitality and Oil and gas Healthcare Automotive Aviation non-food entertainment 23 |
Slide 24: Substantial delinquency stage migration started in 1H20
Substantial delinquency stage migration started in 1H20 Group stage 2 loans to total (%) Group stage 3 loans to total (%) 6.28 11.07 5.65 10.02 5.31 5.10 4.79 4.67 8.95 8.66 7.91 7.67 1H18 FY18 1H19 FY19 1H20 FY20 1H18 FY18 1H19 FY19 1H20 FY20 24 |
Slide 25: Total loan coverage increased materially
Total loan coverage increased materially Stage 1 loan coverage (bp) Stage 2 loan coverage (bp) 92 707 639 55 55 609 FY18 FY19 FY20 FY18 FY19 FY20 Stage 3 loan coverage (%) Total loan coverage (bp) 45.1 454 43.7 42.5 351 327 FY18 FY19 FY20 FY18 FY19 FY20 25 |
Slide 26: CIB relatively resilient
CIB relatively resilient Normalised headline earnings (Rm) Return on regulatory capital (%) FY19 FY20 9 510 21.4 FY19 FY20 17.2 13.3 (55%) 11.1 4 270 (6%) 9.4 3 635 3 230 3 035 (56%) 6.4 1 589 RBB SA CIB SA Absa Regional RBB SA CIB SA Absa Regional Operations Operations 26 |
Slide 27: RBB SA earnings fell, particularly in lending products
RBB SA earnings fell, particularly in lending products Headline earnings (Rm) FY19 FY20 3 672 3 500 (31%) (44%) 2 522 1 967 1 588 (12%) 1 273 1 114 (71%) 299 453 (432%) (993) Home Loans Vehicle and Asset Everyday Banking Insurance Cluster Relationship Banking Finance Pre-provision profit growth: 17%
Slide 28: Transactional and Deposits performed well
Transactional and Deposits performed well Headline earnings (Rm) 3 500 FY19 FY20 11% 2 478 (44%) 2 242 1 967 894 (99%) 5 364 (242%) (516) Everyday Banking Card Personal Loans Transactional and Deposits Pre-provision profit growth: (3%) 3% 10% 28 |
Slide 29: CIB earnings fell despite strong pre-provision profits
CIB earnings fell despite strong pre-provision profits Headline earnings (Rm) 5 946 FY19 FY20 (17%) 4 945 CIB SA down 6% CIB ARO down 30% (2%) 2 251 2 197 1 951 (46%) (14%) 11% 979 1 062 838 765 848 Corporate Investment Bank Corporate Investment Bank Total CIB Pre-provision profit growth: 21% 40% 6%
Slide 30: Absa Regional Operations enhance revenue growth
Absa Regional Operations enhance revenue growth Absa Regional Operations revenue (Rbn) Absa Regional Operations revenue to group (%) 8% 14% 20.1 25 18.6 16.3 23 22 FY18 FY19 FY20 FY18 FY19 FY20 30 |
Slide 31: Substantial RBB swing reduced ARO earnings
Substantial RBB swing reduced ARO earnings Headline earnings (Rm) 3 635 FY19 FY20 2 716 (30%) (56%) 1 910 1 589 798 (120%) (161) Absa Regional Operations RBB ARO CIB ARO Pre-provision profit growth: 3% 6% 10% 31 |
Slide 32: Capital remains within board target range
Capital remains within board target range Absa Group IFRS common equity tier 1 ratio (%) 12.1 (0.7) 0.7 (0.6) (0.3) 11.2 FY19 RWA movement Profit Dividends Other FY20 32 |
Slide 33: 2021 outlook
2021 outlook • Low to mid-single digit growth in net interest income, based on improved customer loan growth • Non-interest revenue growth is expected to improve, but is likely to remain low • We expect low single digit growth in operating expenses, resulting in flat operating JAWS • Our credit loss
Slide 34: Daniel Mminele, Chief Executive
Daniel Mminele Chief Executive
Slide 35: Refreshed Group strategy
Refreshed Group strategy © Develop and nurture an §} Lead with pu deliver < entrepreneurial culture lue to a broat ge of sti fers @ Create an execution model that delivers fast-lane innovation © Build a modern ut oj technologyarchitecture ¢ 4 ctive di that powers digital 4 - distribution chant trans
Slide 36: 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