Zanaco | Bank performance in 2013 a presentation to institutional investors

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Zanaco | Bank performance in 2013 a presentation to institutional investors

  1. 1. Bank Performance in 2013: A Presentation to Institutional Investors Zambia National Commercial Bank Plc Bruce Dick Managing Director Zambia National Commercial Bank Plc. April 2nd, 2014
  2. 2. 2 Contents Zanaco Overview Zanaco Strategic Orientation, Financial Performance, Dividends & Share Price Operating Environment Closing Zanaco On A Page Zambian Political Economic Overview Banking Sector Performance Strategy On A Page Financial Performance Dividends Share Price & ROI Development
  3. 3. 3 How Well Do You Know Your Bank?  Previously,state-owned;subsequentlysold49%,Management RightstoRabobank2007  IPOin2008:Rabobank46%;Government25%;ZNFU3%,Public26%  StrongRetailBankfranchise,relativelynewCorporate,someTreasury capabilities  LargestBankinZambia;Top1-3positions(19banks)  #1:Clients,Distribution,Cards, TotalAssets,Deposits  #2:Capitalization,Profits; #3:Lending  Fullproductrangeinpayments,collections,cashmanagement, trade,lending,&accountservices  Firsttomarket;ATM’s,MobileBanking(Xapit),SMSbanking  Distribution:64Branches&Agencies(62in2012),160ZanacoAgents(SMEAgents)  Largestcustomerbase:>750,000;LargestCardbase:>947,000  170ATMsand699POSterminals  1,324employees&167DirectSalesAgents; >3,500shareholders  2013PAT:ZMW186mn,Equity:ZMW867mn,Assets:ZMW7.0bn Zanaco on a Page (Past→Present) Source: Internal MIS & IFRS Fin as at 31 Dec
  4. 4. 4 Political-Economic Overview Stable political environment Strong historic macro-economic trends:  GDP real growth rate 6% (estimate) 2014 GRZ target >7%  2013 end of year Inflation was 7.5%; 2014 GRZ target is <6.5%  Kwacha under pressure (depreciating trend)  2013 fiscal deficit high; interest rate trending up  Agriculture is still key to economic diversification; focus area for Zanaco Commission of Inquiry: Update No further developments on Commission of Inquiry status Monthly Cautionary Statements being published as per LuSE requirements Recent developments Kwacha under massive pressure; 13% depreciation in 3 months MPR up 175 bp (10.25%12.00%) Statutory reserve ratio increased (9%14%): tightening credit environment to manage inflation expectations Suspension of SI 33 & 55 in order to reduce pressure on Kwacha Generally favorable environment but pressure in the short term Source: BOZ
  5. 5. 5Source: Bank of Zambia Strong Industry growth driven by general economic performance and increasing banking penetration Industry NPL ratio continue to improve Banking Sector Performance Growing market with CAGR of assets, loans, & deposits in the mid 20% 2012 (Kwacha million) (USD million) Total assets 34,276 6,581 Net Loans & Advances 16,617 3,190 Deposits 25,162 4,831 Non- Performing Loan 1,246 258 NPL ratio 8.1% 8.1% Provisions 126 24.2 2013 (Kwacha million) (USD million) Total assets 41,953 7,656 Net Loans & Advances 17,884 3,264 Deposits 30,907 5,640 Non-Performing Loan 1,320 241 NPL ratio 7.0% 7.0% Provisions 206 37.6
  6. 6. 6 Banking Sector Soundness Sound banking sector with high upside potential Source: BOZ 2006 2007 2008 2009 2010 2011 2012 2013 Capital adequacy Regulatory capital to risk-weighted assets 20.4% 18.9% 18.6% 22.3% 22.1% 19.2% 19.4% 26.8% Regulatory Tier 1 capital to risk-weighted assets 18.0% 16.2% 15.7% 18.9% 19.1% 16.8% 19.4% 24.5% Asset composition and quality Large loan exposure to regulatory capital 140.8% 133.7% 126.3% 114.0% 134.4% 180.9% 145.0% 97.6% NPLs to gross loans excluding accrued interest 11.3% 8.8% 7.2% 12.6% 14.8% 10.4% 8.1% 7.0% Performance Return On Assets (ROA) 5.2% 4.7% 3.6% 2.1% 2.5% 3.7% 3.9% 3.4% Return On Equity (ROE) 30.6% 35.1% 20.8% 9.4% 12.1% 25.5% 23.4% 18.2% Liquidity Liquid assets to total assets 34.2% 31.3% 34.0% 38.5% 43.7% 40.3% 36.0% 38.9% Liquid assets to total deposits & short term liabilities 37.5% 38.1% 40.9% 47.0% 52.3% 48.6% 44.4% 49.3%
  7. 7. 7 Our Strategic Ambitions by 2015 Source: Internal MIS Customers Retail 1,000,000customers FoodandAgriculture #1inloans and#1incustomers Government #1inshareofwallet SME’s 25%marketsharecustomers,transactions,deposits (>750,000Dec’13)✔ (#2and#1Dec’13)✔ ✔ ✔ (#1Dec‘13) (18-22%Dec‘13) Service MostImprovedBank,basedonCustomerfeedback (Lagging) Innovation MostInnovativeBank,basedonCustomerfeedback;NewProductDevelopment (Toreview) Financials ReturnonEquity 25% (23.5%Dec’13) Cost/IncomeRatio 55% (65%Dec’13) CSR FinancialLiteracy 50,000personstrained (>35,000reached) Health WaterProjects (>6,000reached) ✔ ✔ ✔ ✗ ✗ Strategic targets vs. achievements on a page
  8. 8. 8 M Source: Internal MIS Distribution Zanaco Branches & Agencies; 64 Zanaco ATM’s; 170 Zanaco Xpress (SME Agents); (160) Distribution is key to our business model; thus we are present in 89 of the 102 Zambian districts
  9. 9. 9 Financial Performance 2012 vs. 2013 Good financial performance with opportunities to improve efficiency Revenue16%up Impairmenthigherthannormaldueto decisiontofullyprovidefortwolarge loans;nosectorconcentration,recoveries oncourse Deposits28%up Loans&advances13%up Equity22%up Cost/Incomeratiodownbutstillhigher thandesired ROEontrackwithourmediumterm targetof25% Financial Highlights (ZMW Million) Actual ‘12 Actual ‘13 Change Revenues 720 838 16% Operating expenses 476 542 14% PBT 238 264 11% Impairment 6 32 461% Tax charge/ (credit) 82 78 -5% PAT 156 186 19% Deposits 4,315 5,522 28% Assets 5,812 6,972 20% L & A (net) 2,639 2,988 13% Equity 713 868 22% Operational C/ I 66% 65% -2% Dividend/share in ZMW 0.005 0.005 3% EPS in ZMW 0.018 0.022 20% ROA 2.9% 2.9% -1% ROE 24.1% 23.5% -2% Source: IFRS Financials as at 31 Dec
  10. 10. 10 Key Performance Ratios Source: IFRS Financials as at 31 Dec 2012 2013  AssetQuality:  Non-PerformingLoans/ Loans: 2.63% 4.4%  Efficiency:  Cost/IncomeRatio: 67.0% 65.0%  Loans/DepositRatio 61.0% 53.0%  Profitability:  ReturnonAverageTotalAssets: 3.0% 2.9%  ReturnonAverageEquity: 24.1% 23.5%  CapitalAdequacy:  Capital=min10%ofRiskWeightedAssets 19.0% 20.0% Strong funding & capital, but assets need to sweat more
  11. 11. 11 Financial Performance  Balancesheetis82%fundedbydeposits (95%indomesticcurrency)  Strongsavingsbalances&“sticky” transactiondeposits  Lowcostoffunds  Abovethemarket&sustainablenet interestmargins(NIMs)  Shareholdersfundskeyforfurthergrowth Stable & sticky funding Source: IFRS Financials as at 31 Dec
  12. 12. 12 Financial Performance (cont’d)  Liquidbalancesheet  PrimaryassetfocusinFood&Agriculture&Personalbanking Liquid balance sheet directed to support growth in key areas Source: IFRS Financials as at 31 Dec
  13. 13. 13 Financial Performance: 7 Years CAGR Thus demonstrating strong 7 years growth & performance record Source: IFRS Financials as at 31 Dec Financial Highlights (ZMW’ million) Actual ‘06 Actual ’07 Actual ‘08 Actual ‘09 Actual ‘10 Actual ‘11 Actual ‘12 Actual ‘13 CAGR Revenues 242 299 399 497 568 626 720 838 19% Operating expenses 183 234 281 305 361 421 476 542 17% PBT 59 45 86 126 173 185 238 264 24% Impairment 19 19 32 66 34 20 6 32 8% Tax charge/ (credit) 11 -5 34 47 60 64 82 78 32% PAT 29 51 52 82 113 121 156 186 30% Deposits 1,494 1,799 2,325 2,292 2,591 3,412 4,315 5,522 21% Assets 1,706 2,124 2,915 3,042 3,520 4,717 5,812 6,972 22% L & A (net) 487 800 1,001 1,163 1,726 1,891 2,639 2,988 30% Equity 159 202 322 398 477 583 713 868 27% Operational C/ I 76% 78% 70% 61% 64% 67% 66% 65% -2% Dividend/share in ZMW 0.010 0.010 0.016 0.021 0.028 0.028 0.005 0.005 N/A Normalised divided/share ZMW 0.010 0.010 0.016 0.021 0.028 0.028 0.036 0.038 20% EPS in ZMW 0.030 0.052 0.052 0.071 0.098 0.104 0.018 0.022 N/A Normalised EPS in ZMW 0.030 0.052 0.052 0.071 0.098 0.104 0.135 0.162 27% ROA 2.0% 2.7% 2.1% 2.8% 3.4% 2.9% 3.0% 2.9% 6% ROE 18.0% 28.3% 19.8% 22.8% 25.8% 22.8% 24.1% 23.5% 4%
  14. 14. 14 Future Proofing Profitability-Major Systems Initiatives Rationale  SinceprivatizationZanaco’sbusinesshasgrownsignificantly  Aspartofimproving capacity&businessefficiency,weembarkedonupgradingourcorebankingsystemwithaviewto; Improvingsystemcapacity Buildingdatavalidationcapabilities inordertopreventcommonerrorsinbankrecords Improvingcustomerexperienceat everycustomertouchpoint Improvingcustomerinterfacingprocesses Improvingoverallbankefficiency Status  We have since invested over US $13million in the project, covering System Upgrade, tier 3 Data Centre, andprocess changes/improvements; Oneof thehighestsingleIT investmentinZambia  WehavebuiltthebestDataCentre inAfrica;targetedtomeetyourbank’sfuturegrowthambitions  Whatis happeningnow? We migratedtothenewcorebankingplatforminJanuary2014 Wearefacingpostimplementationchallenges,whichwerecognizehasadverselyaffectedallourcustomers inmany waysastheyuseourbankingservices
  15. 15. 15 Hashadnegativeimpactonavailability ofour bankingservices andfunctions  Whatarewedoingaboutit? Wehavedeployeddedicatedresourceswithspecifictargetstoresolvetheissueswithin thenext4weeks We have on site our system support team, Oracle, to assist us resolve the post implementationchallenges GoingForward  Whatarewepromisingourstakeholders&customers? Improvedavailabilityofourbankingsystemsandfunctions Improvedanduserfriendlyfunctionalities Improvedwayofservingourcustomers Improved systems&servicereliability Future Proofing Profitability-Major Systems Initiatives (cont’d)
  16. 16. 16 Dividends & Dividend Decisions Source: Financials as at 31 Dec Impact of bonus share issue 2013 proposed bonus relatively flat. Your bank requires capital to meet growth aspirations, & maintain suitable level of capital in order to meet regulatory requirements….. * Dividend per share for 2012 & 2013 (ZMW 0.005) is equal to ZMW 0.038 at pre-bonus share issue (normalised). Bonus share issue rate was 13 new shares for every 2 held `
  17. 17. 17 Share Price & ROI Development Source: SBZ Coverage Report ……Thus we want to build a strong basis for sustainable future capital growth and share price performance
  18. 18. 18 Thank you for your attention Closing
  19. 19. Disclaimer Zambia National Commercial Bank PLC, (hereafter “Zanaco”) has taken all reasonable care to ensure that to the best of its knowledge this presentation is true and correct in all material respects, does not contain any untrue statement of a material fact, is not misleading and does not omit to state any material fact, the result of which would make the statements, opinions and intentions herein, in the context in which they are made, misleading in any material respect. This presentation and any other information supplied is not intended to provide the basis of any evaluation, and should not be considered as a recommendation by Zanaco. Any recipient of this presentation, or of any other information supplied in connection with this presentation should make its own independent investigation of the financial condition and affairs, and its own appraisal, of Zanaco, including the merits and risks involved. This presentation does not constitute an offer to sell or the solicitation of an offer to buy any Zambia National Commercial Bank PLC, ordinary shares in any jurisdiction to any person. Zanaco does not represent that this presentation may lawfully be distributed, or that any Zambia National Commercial Bank PLC, ordinary shares may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available there under, or assumes any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by Zanaco that would permit a public offering of any Zambia National Commercial Bank PLC ordinary shares or distribution of this document in any jurisdiction where action for that purpose is required. Accordingly, this presentation may not be re-distributed or re-published in any jurisdiction, except with the express approval of Zanaco. Forward-looking statements This presentation may include “forward-looking statements” which include all statements other than statements of historical facts, including, without limitation, those regarding Zambia National Commercial Bank PLC’s financial position, profit and revenue forecasts, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to Zambia National Commercial Bank PLC’s products and services) and any statement preceded by, followed by or that includes the word “projects”, “estimates”, “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could” or “seeks” or any similar expression or the negative thereof. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other important factors beyond Zambia National Commercial Bank PLC’s control that could cause the actual results, performance and/or achievements of Zambia National Commercial Bank PLC, to be materially different from future results, performance and/or achievements expressed or implied by such forward-looking statements. Forecasts or projections made in this presentation are based on assumptions that may or may not materialize. While such forecasts or projections have been prepared with due care and objectivity, no representation, warranty or undertaking, express or implied is made and no responsibility is accepted for the reasonableness of any forecast or projection. 19

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