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BancABC Annual Financial Results 2009

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ABC Holdings Limited is the parent company of a number of sub-Saharan Africa banks operating under the BancABC brand that offer a diverse range of financial services including personal, business and …

ABC Holdings Limited is the parent company of a number of sub-Saharan Africa banks operating under the BancABC brand that offer a diverse range of financial services including personal, business and corporate banking as well as asset management, stockbroking and treasury services. Guided by its core values of professionalism, people, innovation, passion and integrity, BancABC is pursuing its vision be the preferred banking partner in Africa by offering world class financial solutions

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  • 1. BancABC Annual Financial Results 2009 11 March 2010
  • 2. OVERVIEW
  • 3. Financial Highlights
    • Total income increased 10% to BWP 392 million
    • Solid income growth across all operations except BancABC Zambia
    • Significant investment in Retail Banking and Zimbabwe dollarisation increased operating expenses 54% to BWP 366 million
    • Impairment charges increased 15% to BWP 51 million
    • Basic EPS down 33% to 40.4 thebe
    • RoE of 14% (2008:23%) and NAV of BWP 399 million (2008: BWP 438 million)
    • Balance sheet grew 11% to BWP 4.4 billion
    • Customer deposits grew 19% to BWP 3.4 billion
  • 4. Operational Highlights
    • Microfinance operation successfully integrated into BancABC Zambia and customer base expanded
    • Retail Banking commenced business with first branches opened in Harare and Dar es Salaam
    • Credit function strengthened
    • New products successfully introduced in Tanzania and Mozambique boosted non-interest income
    • Business rapidly expanded at BancABC Zimbabwe post economic stabilisation
  • 5. Economic Overview - 2009
    • Economic deterioration experienced in late 2008, cont’d into 2009
    • Regional GDP growth slowed to 1.5% in 2009, from 5.4% in 2008
    • Zimbabwe economy grew for first time in 10 years post formation of GNU and dollarisation
    • Botswana and Zambia hardest hit by declining commodity prices
    • Policy interest rates declined across all territories
      • Associated margin pressure for banks
    • Credit growth declined significantly across all territories except Mozambique
  • 6. Economic Overview – GDP Growth
  • 7. Economic Overview – Inflation trend
  • 8. Economic Overview – Loan & Deposit levels
  • 9. Economic Overview – Credit Growth
  • 10. Economic Overview – 2010 Outlook
    • The worst of the recession appears to be over but economic recovery remains fragile
    • Growth in employment levels lagging private sector economy growth
    • Central Banks remain focused on restoring credit growth to the productive sectors of the economy
    • Rising commodity prices supports recovery in Group’s markets
    • Improved growth prospects are envisaged in 2010 in all of Group’s markets
  • 11. FINANCIAL REVIEW
  • 12. Income Statement - Overview 60.2 40.4 Earnings per share (thebe) 87,931 58,431 Profit for the year -33,642 15,768 Tax 121,573 42,663 Profit before tax 2,300 16,164 Share of results of associates 119,273 26,499 Net income from operations -236,941 -365,694 Operating expenditure 356,156 392,193 Total income 216,126 265,017 Non interest income 140,030 127 176 Net interest income after impairments -44,365 -51,218 Impairment of loans and advances 184,395 178,394 Net interest income before impairments 2008 2009 BWP’000s
  • 13. Income Statement – Interest Income
    • Margins on interest income generally declining due to change in asset mix
    • Margins widened in 2008 due to aggressive loan growth
    • Decreased demand for credit in 2009, resulted in excess cash being invested in low yielding money market and t-bills
    • Lower policy rates resulting in a squeeze in banking margins
  • 14. Income Statement – Impairments and NPL’s
    • Overall NPL’s and credit loss ratio is declining
    • 2009 increase attributable to economic circumstances
    • Quality of loan book is improving
  • 15. Income Statement – Non-interest Income
    • NI income increasing overall and as a % of total income
      • 2009 NI % increased to 68% (08: 61%)
    • Trading activities, esp in forex are primary source of growth
    • Introduction of Retail Banking expected to increase net interest income going forward
  • 16. Income Statement – Segmental analysis % change 2008 2009 BWP 000’s (3%) 184,395 178,394 TOTAL (249%) 4,147 (6,180) Head office 2% 180,248 184,574 Banking operations - 63 14,339 Zimbabwe (16%) 73,561 61,632 Zambia incl Microfin 14% 30,941 35,178 Tanzania 13% 34,295 38,594 Mozambique (16%) 41,389 34,831 Botswana Net Interest Income
  • 17. Income Statement – Segmental analysis % change 2008 2009 USD 000’s (7%) 26,989 25,176 TOTAL (244%) 607 (873) Head office (1%) 26,382 26,049 Banking operations - 9 2,023 Zimbabwe (19%) 10,766 8,698 Zambia incl Microfin 10% 4,529 4,965 Tanzania 9% 5,020 5,447 Mozambique (19%) 6,058 4,916 Botswana Net Interest Income
  • 18. Income Statement – Segmental analysis % change 2008 2009 BWP 000’s 23% 216,126 265,017 TOTAL (14%) 75,564 65,236 Head office 42% 140,562 199,781 Banking operations 54% 38,112 58,575 Zimbabwe (18%) 12,078 9,889 Zambia incl Microfin 29% 20,971 27,138 Tanzania 120% 27,856 61,407 Mozambique 3% 41,545 42,772 Botswana Non-interest income
  • 19. Income Statement – Segmental analysis % change 2008 2009 USD 000’s 18% 31,634 37,402 TOTAL (17%) 11,061 9,207 Head office 37% 20,573 28,195 Banking operations 48% 5,578 8,267 Zimbabwe (21%) 1,768 1,396 Zambia incl Microfin 25% 3,069 3,830 Tanzania 113% 4,077 8,666 Mozambique (1%) 6,081 6,036 Botswana Non-interest income
  • 20. Income Statement – Segmental analysis % change 2008 2009 BWP 000’s (32%) 85, 818 58,117 TOTAL (30%) 27,770 19,488 Head office (33%) 58,048 38,629 Banking operations (24%) 25,338 19,362 Zimbabwe (365%) (7,223) (33,567) Zambia incl Microfin (49%) 10,096 5,155 Tanzania 82% 16,644 30,266 Mozambique 32% 13,193 17,413 Botswana Attributable Profit
  • 21. Income Statement – Segmental analysis % change 2008 2009 USD 000’s (35%) 12,560 8,202 TOTAL (32%) 4,064 2,750 Head office (36%) 8,496 5,452 Banking operations (26%) 3,709 2,733 Zimbabwe (348%) (1,057) (4,737) Zambia incl Microfin (51%) 1,478 728 Tanzania 75% 2,435 4,271 Mozambique 27% 1,931 2,457 Botswana Attributable Profit
  • 22. Income Statement – Cost to Income Ratio
    • Target C:I ratio of 50% over the medium to long term
    • Once off costs associated with construction project pushed ratio from 77% to 82%
    • Dollarisation of Zimbabwean economy brought in BWP 62 mill of costs vs. nil for 2008
    • Significant investment in Retail Banking; people, systems and processes the bulk of which were expensed
    • Retail head count now at 89 (08: 35)
  • 23. Income Statement – Staff costs
    • Total head count in 2009 of 592 vs. 484 in 2008
    • Growth in ABCH portion largely attributable to Retail Banking
  • 24. Balance Sheet - Overview 3,967,938 456,508 437,654 3,511,430 599,814 2,822,352 3,967,938 216,942 2,249,903 26,100 659,587 513,050 2008 11% (9%) (9%) 14% (9%) 19% 11% 29% (11%) (31%) 34% 72% % change 4,417,745 TOTAL EQUITY AND LIABILITIES 415,779 Total equity 399,069 Equity attributable to ordinary shareholders 4,001,966 Total liabilities 543,822 Borrowed funds 3,355,118 Deposits 4,417,745 TOTAL ASSETS 278,975 Property and equipment 1,995,325 Loans and advances 17,905 Financial assets designated at fair value 880,740 Financial assets held for trading 881,884 Cash and short term funds 2009 BWP '000s
  • 25. Balance Sheet – Capital Adequacy
    • Botswana recapitalised to the extent of BWP 35 mill in H209
    • All entities adequately capitalised
    • Zambia to be reacapitalised in 2010
    Capital Adequacy Ratio 20% 10% 23% 17% 23% 2009 19% 22% 16% 32% 16% 2008 10% Zimbabwe 10% Zambia 12% Tanzania 8% Mozambique 15% Botswana Min Country
  • 26. Balance Sheet – Loans and Advances
    • Active decision taken to curtail lending due to poor economic circumstances
    • Liquidity constraints precluded further lending in Tanzania and Zambia in H109
    • Excluding Zambia, impairments across Group reduced from BWP 34 mill in 2008 to BWP 27 mill in 2009
    • Actively support good clients in difficult economic environment
    Loans and advances per country to follow
  • 27. Balance Sheet - Deposits
    • Customer deposits increased over the year by 19% to BWP 3.4 bill
      • Zimbabwe increased BWP 158 mill due to economic stability
      • Mozambique increased BWP 200 mill as client base grew
      • Tanzania increased BWP 132 mill with deposit mobilisation
    • Excess cash invested in t-bills and money market instruments
    • Resulting squeeze on margins with consolidated spreads reducing from 5.9% in 2008 to 5.1% in 2009
  • 28. OPERATIONAL REVIEW
  • 29. Botswana
    • Economic activity sharply declined in 2009 as diamond revenues remained subdued
    • Management decision to curtail lending in light of poor economic circumstances
    • Impairments well managed down to BWP 9 mill (08: BWP 22 mill)
    • Increased customer deposits and capital injection from ABCH positions Balance Sheet well for 2010
    • Forex trading volumes and associated non-interest income increased
    • Expenditure tightly controlled with only 10% increase
    • Overall PAT improvement of 32% to BWP 17 million
  • 30. Mozambique
    • Slow down in commitments to long term projects across the economy reduced demand for credit from corporates
    • Interest income increased in line with increased customer deposits, despite lack of growth in loan portfolio, as cash was invested in t-bills and money market
    • Significant growth in non-interest income, predominantly from forex trading
    • Operating expenditure increased 32%, bulk of which was on Retail Banking
    • PAT up 82% to BWP 30 million
  • 31. Tanzania
    • Lending restricted early on in the year as liquidity constraints kicked in
    • This plus increased impairments of BWP 13 mill (08: nil) contributed to decline in net interest income after impairments to BWP 22 mill (08: BWP 31 mill)
    • Increased customer deposits by year end of 24% to BWP 677 mill
    • Non-interest income increased 29% with introduction of bond trading providing new income stream
    • Operating expenditure increased 17% to BWP 40 mill
    • PAT decline of 49% to BWP 5 mill
  • 32. Zambia - BancABC
    • BancABC experienced significant loss in 2009
      • Reduced market activity
      • Large impairments mostly from mining customers
    • Economy hard hit by declining copper price in 2008 and recovery of spot price slow to impact the real economy
    • Loan book declined 45%, interest income down 19% to BWP 11 mill
    • Accordingly Balance Sheet shrunk 37% to BWP 286 mill, customer deposits were down 10% to BWP 176 mill
    • Impairments were BWP 24 mill vs. BWP 10 mill in 2008
    • New management team making progress in addressing credit controls and reputational issues
    • Recapitalisation planned for 2010
  • 33. Zambia - Microfin
    • Microfin, BancABC Zambia’s microloans business, made good progress with loan book increasing to BWP 104 mill (08: BWP 90 mill)
    • Impairments drastically reduced from BWP 9 mill to BWP 3 mill
    • Average yield on IEA however declined to 35% from 47%
    • Decision taken to integrate BancABC and Microfin operations to reduce costs and cross sell retail products
    • Merger successfully concluded and brand integration planned for 2010
  • 34. Zambia – write offs
    • BancABC Zambia was advisor to the financing of construction project
    • Construction ran over budget resulting in significant loss for investors
    • To protect BancABC reputation, board took the decision to reimburse investors
    • Total reimbursements of BWP 36 million paid out over 2008/ 09
    • Building taken over by the Group
  • 35. Zimbabwe
    • Significant economic improvement on the back of formation of GNU and dollarisation
    • Positive economic trend for first time in 10 years
    • Lack of liquidity in the banking sector still problematic
      • Limited capacity of lender of last resort
      • Inactive interbank market
      • Limited FDI
    • Net interest income of BWP 14 mill vs. nil in 2008
    • Expenses of BWP 62 mill vs. nil in 2008
  • 36. Retail Banking - Update
    • IT systems largely in place and testing has commenced across territories
    • First branches opened in Harare and Dar es Salaam
      • Branches to open in Mozambique in March
      • Botswana to follow in Q2 and Zambia Q3
      • Total of 10 branches to be opened by half year
    • Visa accreditation acquired in Botswana, Mozambique and Tanzania
    • Partnerships remain key driver of growth
  • 37. INVESTMENT CASE
  • 38. Investment Case
    • NAV per share of 273 thebe vs. share price of 130 thebe
    • Historic PE multiple of 3.2.
    • Only regionally diversified bank listed in Botswana/ Zimbabwe – reduced country risk
    • Traditionally valuing assets in Zimbabwe was a challenge, this has changed following dollarisation
  • 39. STRATEGY & OUTLOOK
  • 40. Strategy – Vision and Mission
    • BancABC is realising this vision by building profitable, lifelong customer relationships through the provision of a wide range of innovative financial products and services; to the benefit of all our stakeholders
    BancABC’s vision is to offer world class financial solutions that make it Africa ’s preferred banking partner
    • Balanced Scorecard introduced as the Group’s performance management strategy implementation tool
    • Setting and reviewing the performance targets to become a more transparent process
  • 41. Strategy – Key Objectives 2010 Grow & Diversify Customer Base Increase Non-Interest Income Boost Net Interest Income Control Operating costs Reduce cost of Funding Manage investment in Growth
    • Merge Microfin and Zambian operations and cross sell
    • Convert wholesale banking customers to retail bank
    • Expand Retail Banking business
    • Cross sell products to borrowing customers
    • Improved credit management
    • Managed growth of the loan portfolio
    • Costs driven by incremental revenue they can generate
    • Improve turnaround times
    • Expansion of Retail Banking footprint
    • Invest in human capital
    • Retain a substantial amount of Group‘s earnings
  • 42. Outlook
    • Continue to grow wholesale business
    • Bed down merger in Zambia, recapitalise this operation
    • Use Microfin branch network to leverage Retail Banking growth in Zambia
    • Retail Banking coming on stream – cash flow positive and profitable in next 18-24 months
    • Revisit capital raising initiatives in H210
    • Draw down on AfDB loan of US$30 million in Q210
    • Balance sheet positions bank well to grow all operations as regional economy improves
    • Year started well, sustained profit growth expected for remainder of 2010
  • 43. THANK YOU www.bancabc.com