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Bayport Q3 2015 Investor Update Published
Bayport Management Limited provides credit, insurance, and transactional banking solutions to individuals and microbusinesses in emerging and frontier markets. It has a gross loan book of $863 million comprising loans to 557,000 borrowers across Africa and Latin America. It has established operations in 7 African countries and 2 Latin American countries since 2001. The company has demonstrated strong growth through organic expansion, greenfield launches, and acquisitions. It has a robust business model relying on payroll deductions and debit orders for repayments.
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- 1. Bayport Management Limited Uniqueaccess to the untapped potential of the frontier market borrower December 2015
- 2. Introduction To BayportManagement Ltd 2 Notes: (1) Unless otherwise noted, metrics in this presentation are as at 30 September 2015 (2) Currently licensed for deposit-taking in Ghana, Zambia and Mozambique (3) For definitions please see page 36 Bayport is a provider of credit, insurance and transactional banking solutions to individuals and micro businesses in emerging and frontier markets Currently engaged in lending to individuals in seven markets in Africa and two markets in Latin America Gross loan book of US$863 mln1 comprising loans outstanding to 557 K borrowers1 414.9 K lives insured1, with 9M 2015 Gross Written Premium of US$25.3 million Established in 2001, Bayport is managed by the two founders collectively possessing over 35 years of consumer finance experience… The founder joint CEOs beneficially own 17.8% of Bayport …capably aided by the group senior management team… 14 group executives from various cultures and backgrounds with the average tenure with the company of 5 years Strong alignment of interest with the shareholders through KPIs-based performance pay and 1% equity ownership …with the business driven locally by time-tested partners Local management and key partners own between 5% and 40% of the local subsidiaries in eight (out of nine) markets Demonstrated track record of profitable growth… Gross Loans 2010-2014 CAGR 71% Revenue (Operating Income) 2010-2014 CAGR 29% Average ROAE 2010-2014 of 28.3% …achieved through a balanced mix of organic growth, greenfield expansion and disciplined acquisitions Robust and unique business model… Extensive footprint with 406 branches in Africa and 64 branches in Latin America, with many branches suited for the delivery of a broader range of financial solutions Origination effort led by 5,115 agents, aided by outbound call centres Responsible lending of (typically) 48-60 month instalment loans with the centrally managed credit underwriting function and rigorously enforced monthly payment affordability thresholds Relying for repayments on the payroll deduction at source in eight (out of nine) markets and on debit order collection in South Africa Top-line synergies from insurance cross- and up-sell enhance profitability Demonstrated track record of entering new markets in a disciplined fashion, “exporting the business model” and scaling the business (since 2011: Colombia, Mozambique and Mexico) Successful launch of the MyMoney modern transactional banking solution expected to drive customer loyalty and retention while laying the foundation for off-payroll, relationship-based lending and deposit funding2 …provides the basis for further organic growth in the under-penetrated markets where Bayport is present, as well as attractive new markets… …with robust equity structure and established track record of access to debt markets ensuring sufficient funding for future growth Marquee institutional shareholders comprising the PIC (the largest asset manager in Africa), Helios, Kinnevik Borrowing relationships with the IFIs, including the IFC, OPIC, IDB and KfW (via the ALCB Fund) Four senior unsecured and subordinated bond issues in the European markets since 2010, with the aggregate issuance volume of US$439 million equivalent Securitisation programme in South Africa since 2011 Local-currency bond issues and credit facilities Source: Company information 1 Total shareholders’ equity; 2 9M 2015 Net interest income and 9M 2015 Net income annualised to calculate net interest margin and RoAA, RoAE, respectively; Note: Net interest margin = net interest income / average gross loans; cost-to-income = operating expenses / revenue Summary key financial metrics Directors and founders 18% PIC 21% Helios Investment Partners 18% Investment AB Kinnevik 24% Local management / partners/ other 19% Current shareholding structure US$ mln (unless otherwise specified) 2014 9M Sep-15 Net loans 864.6 752.2 Borrowings 833.9 712 Shareholders equity¹ 225.9 219.1 Net interest income 189.5 124.9 Operating income (Revenue) 255.4 162.3 Net income 52.1 27 Net interest margin (%)² 20.3% 17.7% Cost-to-income ratio (%) 54.5% 61.5% Equity to total assets (%) 19.8% 21.2% RoAA (%)2 5.0% 3.3% RoAE (%)² 22.6% 16.2%
- 3. Bayport has aunique pan sub-Saharan African footprint and a growing Latin American presence 3 Bayport's geographic footprint Segment reporting Colombia Mexico South Africa Ghana Mozambique Botswana Zambia Tanzania Uganda Source: Company information 1Net interest income annualised to calculate the net interest margin 2Net interest margin = net interest income / average gross loans Key comments MyMoney transactional banking & off-payroll lending pilot scaling up in Ghana MyMoney to be rolled out in Mozambique in 2016 Deposit-taking pilot starting in Zambia in December 2015 Robust loan book growth in Zambia, Ghana, Colombia & Tanzania Mozambique and Mexico offer high growth potential Business reengineering and rejuvenation and cost containment in South Africa Southern Africa, 63.2% West Africa, 11.0% East Africa, 12.9% Latin America, 12.9% Net Loans Southern Africa West Africa East Africa Latin America Southern Africa, 67% West Africa, 11% East Africa, 14% Latin America, 8% Revenue, 9M 2015 Southern Africa West Africa East Africa Latin America As of 9M to Sep ‘15 (US$ mln) Southern Africa West Africa East Africa Latin America Net interest income 76.5 20.5 15.9 11.3 Operating Income (Revenue) 105.7 22.3 17.3 13.4 Gross Loans 589.6 97.1 83.8 94.6 Net loans 449.4 91.3 78.4 91.4 Total assets 563.8 102.9 85.4 129.2 Shareholder's Equity 128.9 24.7 20.6 6.0 Shareholder loans 117.7 49.9 51.1 73.3 Borrowings 291.2 17.0 11.3 41.6 Total Liabilities 434.9 78.3 64.8 123.2 Net interest margin (%)12 11.8% 21.9% 18.3% 11.8% Equity to total assets (%) 22.9% 23.9% 24.1% 4.7% For definitions please see page 36 As At 30 September 2015
- 4. Geographic Overview 4 2001 557k customers 8080 total employees, of which 5,115 sales force 470 branches US$1,758 average loan amount 41 months average loan term 2003/2006 Focus: Mining sector and civil service 133K customers 1,755 employees, of which 1,206 sales force 56 branches Net loan book US$91m Average Loan Term – 40 YTD Average Loan Size at Disbursement – US$810 YTD Average Monthly Number of Loans Disbursed – 4,581 YTD Average Monthly Cash Disbursements – US$3.4m 2011 Focus: Civil service 22K customers 787 employees, of which 540 sales force 29 branches Net loan book US$72m Average Loan Term – 56 YTD Average Loan Size at Disbursement – US$4,467 YTD Average Monthly Number of Loans Disbursed – 1,174 YTD Average Monthly Cash Disbursements - US$3.9m 2014 Focus: Civil service 17K customers 367 employees, of which 211 sales force 35 branches Net loan book US$19m Average Loan Term – 34 YTD Average Loan Size at Disbursement – US$1,376 YTD Average Monthly Number of Loans Disbursed – 1,253 YTD Average Monthly Cash Disbursements - US$1.3m 2012 Focus: Civil service 16K customers 567 employees, of which 418 sales force 12 branches Net loan book US$33m Average Loan Term – 56 YTD Average Loan Size at Disbursement – US$1,995 YTD Average Monthly Number of Loans Disbursed – 1,403 YTD Average Monthly Cash Disbursements - US$2.6m 2014 Focus: Public and private sector 170K customers 2,298 employees, of which 1,268 sales force 94 branches Net loan book US$250m Average Loan Term - 31 YTD Average Loan Size at Disbursement - US$1,946 YTD Average Monthly Number of Loans Disbursed – 3,866 YTD Average Monthly Cash Disbursements - US$6.2m 2006 Focus: Civil service 57K customers 1 061 employees, of which 792 sales force 125 branches Net loan book US$54m Average Loan Term –51 YTD Average Loan Size at Disbursement – US$766 YTD Average Monthly Number of Loans Disbursed – 4,498 YTD Average Monthly Cash Disbursements - US$2.0m 2004 Focus: Civil service 38K customers 500 employees, of which 272 sales force 41 branches Net loan book US$24m Average Loan Term – 55 YTD Average Loan Size at Disbursement – US$926 YTD Average Monthly Number of Loans Disbursed – 678 Average Monthly Disbursements – US$337k 2002 Focus: Mining sector and civil service 94K customers 367 employees, of which 240 sales force 64 branches Net loan book US$128m Average Loan Term – 34 YTD Average Loan Size at Disbursement – $2,217 YTD Average Monthly Number of Loans Disbursed – 6,228 YTD Average Monthly Cash Disbursements – US$9.0m (1) Employees include agents (2) Unless otherwise noted, metrics in this presentationare as of 30 September 2015 (3) For definitions please see page 36 (4) The dates and percentageson this page refer to equity interest owned by Bayport Management Ltd and year of the market entry 2010 11K customers 246 employees, of which 168 sales force 14 branches Net loan book US$38m Average Loan Term - 54 YTD Average Loan Size at Disbursement - US$4,115 YTD Average Monthly Number of Loans Disbursed – 1,168 YTD Average Monthly Cash Disbursements - US$1.8m 90%/74% 83% 99.96% 60% 85% 89% 95% 100% 95% Bayport Management Ltd
- 5. History And Development 5 2001 BMLincorporated in BVI Seed funding from Brait SE 2002 2003 2004 2005 2006 2007 2008 Bayport South Africa establishes BaySec Securitisation programme 2010 Moneyquest (Pty) Ltd starts trading as Bayport Botswana following BML purchase of majority of shares Investment AB Kinnevik becomes largest shareholder with 31.39% ownership BML issues debut bond in Sweden for SEK 700m 2011 Bayport enters Latin American market with majority acquisition of FiMSA S.A., now Bayport Colombia. BaySec securitization programme is listed on the Johannesburg Stock Exchange. 2012 KfW lends BML subordinated debt finance Bayport Mozambique incorporated Investment AB Kinnevik increases ownership to 46.1% BML sets up a Mezzanine note programme in Sweden BML issues second bond in Sweden of SEK 700m 2013 Long term incentive plan (LTIP) for key management established BML listed “by way of introduction” on Stock Exchange of Mauritius Helios Investment Partners invests USD 100m to acquire 23% of BML thus enabling the 100% acquisition of Bayport South Africa BML issues third bond of SEK 600m in Sweden Acquisition of Bayport South Africa 2014 BML taps third bond with an additional nominal of SEK 200m in Sweden BML issues SEK 650m subordinated debt in Sweden Majority shares in Financiera Fortaleza acquired in Mexico BML changes year end from March to December MyMoney & micro lending launched in Ghana 2015 PIC invests $149m for 20.81% of BML Landmark US$250 mln 7 yr credit facility approved by OPIC Record US$50 mln, 5yr credit facility led by the Inter- American Development Bank obtained by Bayport Colombia SMART Campaign certification obtained by Bayport Botswana BML issues bond of SEK 1.1bn in Sweden First lending operation in Zambia established to service mineworkers on the Copper Belt Bayport enters West Africa by opening in Ghana Bayport Uganda incorporated Bayport South Africa starts trading (outside of the BML group) BML migrates from BVI to Mauritius Bayport Tanzania incorporated and CFC (Ghana) acquired Management buyout of Brait SE South AfricaZambia Ghana TanzaniaUganda Botswana MozambiqueColombia Mexico 20132002 2003 20062004 2010 20122011 2014 Market entry
- 6. Bayport has aunique focus on the attractive segment of lending to individuals in frontier & emerging markets 6 Presence focused on highly attractive and rapidly growing markets Unique combination of a regional network yet with a local presence High growth, high margin operations Strong risk management policies Visionary & experienced management team 1 2 3 4 5
- 7. Presence focused onhighly attractive and rapidly growing markets 7 Real GDP growth (%) 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% SouthAfrica Mexico Colombia Uganda Botswana Zambia Tanzania Mozambique Ghana CEE EMAsia World 2011-2015 2016-2020F The regional growth rates represent the real GDP growth (%) for all countries in the category weighted by 2015 real GDP (US$ mln); CEE consists of Bulgaria, Czech Republic, Hungary, Poland, Romania and Turkey; EM Asia consists of Indonesia, Malaysia, Philippines, Thailand and Vietnam Bayport’s markets have shown strong growth which is expected to be sustained over the medium term 1 Source: IMF, World Bank
- 8. Sustained growth inSSA has led to a sharp rise in the bankable population 8 Source: IMF, World Economic Outlook database, Financial Access Survey database, World Bank, FinScope, UNCTAD, McKinsey Global Institute 1 GDP per capita based on purchasing-power-parity (“PPP”); 2 Household income brackets (based on PPP): consuming middle class (US$10,000-$20,000), emerging consumers (US$5,000-10,000), disposable income households (>US$5,000); 3 As measured by FinScope and includes formal and informal banking services; 4 Based on adult (age 18+) population (4%) (2%) 0% 2% 4% 6% 8% 10% '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14E '15E '16E GDPpercapita1growth(%chg) Sub-Saharan Africa Advanced economies 18 27 41 29 41 56 0% 10% 20% 30% 40% 50% 60% 0 20 40 60 80 100 120 140 2000 2008 2020F %oftotalhouseholds Households(mm) 163 196 244 Consuming middle class² (LHS) Emerging consumers² (LHS) Disposable income households² (RHS) # Total households (mm) 36% 43% 52% 289 311 377 556 43 61 61 115 4 5 6 7 2004 2007 2010 2013 Deposit accounts (per 1,000 adults) Loan accounts (per 1,000 adults) Bank branches (per 100,000 adults) 86% 73% 67% 54% 75% 72% 85% 73% South Africa Namibia Botswana Malawi Kenya Rwanda Uganda Tanzania 62% 48% 54% 45% 67% 47% 70% 44% % of banked population4 (2014) (2011) (2009) (2014) (2013) (2012) (2013) (2013) (2004) (2007) (2004) (2008) (2010) (2009) (2009) (2009) Countries in which Bayport operates Consistent growth in SSA’s GDP per capita over the last decade… Commercial bank accounts & branches in SSA have risen in the past decade …has led to a fast growing middle-class and higher disposable incomes in SSA Financial inclusion3 in several key SSA economies had also increased 1
- 9. Significant sector growthpotential exists in SSA, given low banking penetration, rapid growth of mobile money and the informal banking and unsecured lending sectors ready for transformational change 9 Nigeria South Africa Angola Kenya GhanaTanzania DRC Cameroon Zambia Uganda Gabon Senegal Botswana Republic of Congo Chad Zimbabwe Mozambique 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% -10% 0% 10% 20% 30% 40% 50% 60% Depositswithcommercialbanksin2013(%ofGDP) Formally banked adult population¹ (%) Source: IMF, Financial Access Survey database, World Bank, Global Financial Development Indicators, Demirgüç-Kunt and Klapper (2012), African Development Bank 1 As measured by the World Bank and is the percentage of population older than 15 years with an account at a formal financial institution (e.g. bank, credit union, microfinance institution, post office, etc) 0% Bubble size = Population in 2013 2,535 1,846 1,546 1,119 850 681 556 692 501 284 542 178 190 115 Advanced economies CEE CIS Latin America & Caribbean Developing Asia MENA SSA Deposit accounts (per 1,000 adults) Loan accounts (per 1,000 adults) Countries in which Bayport operates Banking penetration of major SSA economies, 2013 Commercial bank accounts by region (2013) 1
- 10. Regional network, localpresence Local partners and management are true champions of the brand and business Local wisdom is critical to our success Local partnership is rare Reflects our confidence to lead rather than to follow The countries’ people are in the business Work with the regional executives Entrepreneurial interests are very aligned Group holding company Manages the various regulatory, funding, treasury and governance functions across the group Driver of the Bayport business philosophy and ethos as encapsulated in the “Bayport Way” Keeper of the medium- and long-term strategies Defines the framework and sets the general agenda Guides and sets up for success Operational and function support for the in-country operations Initiated and implements group wide policies, technology, operational best practice and other initiatives Four areas of excellence 1. Optimisation Group Finance Group Credit Group Modeling and Business Intelligence Group Internal Audit Group Risk Management 3. Corporatisation Strategy development Product development Geographic development Debt and Capital Markets Investor relations Mergers & Acquisitions 2. Innovation Information Technology infrastructure, design, deployment and support Information Technology governance and security Information Technology operations and service management Business Platform development and support Business Change and Project Management 4. Harmonisation Brand, Marketing and Communications Human Capital and Performance Management Learning and Development Group Collaborations Integrated Reporting Financial Wellness Operations best practice Lending and Collecting 10 Bayport Management Limited Local Partnerships Bayport International Group Support (BIGS) 2 For definitions please see page 36
- 11. 9M 2015 New loansissued 9M ‘15, US$ mln 56.1 16.4 81.1 23.3 18.3 3.0 30.4 35.0 12.0 275.5 Average loan amount advanced Q3 ‘15 (US$) 1,698 3,882 2,138 1,892 502 863 760 4,362 1,347 Average loan term at disbursement Q3 ‘15, months 29 54 37 57 53 55 39 62 34 # of loans 000’s 211.4 11.5 101.5 18.2 62.6 38.6 132.9 22.8 16.7 616.2 # of active clients, 000’s 170 11 94 16 57 38 133 22 17 557 Loan yield, % 28.0%* 38.7% 38.9% 38.4% 39.7% 43.3% 50.0% 31.7% 46.7% 29.5% Gross loans, US$ mln 380.9 40.8 130.2 33.2 57.0 28.1 98.2 74.7 20.3 864 Net loans, US$ mln 250.3 38.3 128.1 32.7 54.4 24.1 91.3 72.1 19.3 710 LLR to gross loans1 , % 38.2% 5.9% 1.6% 1.5% 4.8% 13.3% 6.9% 3.5% 5.0% 17.6% NPL Coverage Ratio2 , % 149.7% 88.4% 69.8% 165.2% 70.0% 82.5% 76.9% 51.9% 84.3% 130.9% NPL ratio3 , % 25.5% 6.6% 2.2% 0.9% 6.8% 16.1% 9.0% 6.7% 5.9% 13.5% Collection rates4 , % 77.8% 93.3% 96.7% 90.8% 94.4% 80.4% 93.1% 87% 91.9% Seasoning5 29.0 10.5 11.0 6.4 15.7 20.7 17.5 14.8 5.9 High growth, high margin operations: Cross section of operations 11 South Africa Zambia GhanaTanzania UgandaBotswana Mozambique Colombia Mexico 3 1. Average loan loss provisions/Gross loans for quarter 2. Average loan loss provision/Non-performing loans for quarter 3. Average non-performing loans/Gross loans for quarter 4. Actual collections for the quarter/Due to be collected for the quarter 5. Seasoning refers to the weighted average months on book * South African loan book does not include the written-off loans For definitions please refer to page 36 Total
- 12. High growth, highmargin operations 12 3 Gross Loan Book Margin Evolution1 Revenue vs. Cost Evolution (US$ mln)2 # Of Loans Outstanding 1. Effective Loan yield = Revenue for the period/Average Gross Advances 2. Revenue and costs for 2014 and 2015 normalized at average 2013 FX rates For definitions please see page 36 Note: gross loans converted at YE 2013 exchange rates in order to eliminate the currency depreciation effect across all countries of Bayport’s operations 429 1,119 1,316 0 200 400 600 800 1,000 1,200 1,400 2013 2014 9M 2015 US$ mln For illustrative purposes only For illustrative purposes only 31.5% 27.3% 23.1% 12.5% 13.9% 13.5% 28.0% 20.3% 17.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 2013 2014 9M 2015 Effective Loan Yield Cost of funds Net Interest Margin
- 13. Strong Risk ManagementPolicies - Payroll Loan Book Recency as a % of Gross Payroll Loan Book Arrears and Recency (Stacked) Balance in Arrears as a % of Gross Payroll Loan Book 13 Recency Quarterly Vintage Analysis DPD 90 + Quarterly Vintage Analysis Notes: 1Unless otherwise noted all metrics in this presentation are as at 30 September 2015 2Balance in arrears includes loan principal plus any accrued interest & fees 3Value in arrears includes loan principal only and is an approximate value based on a one month first cycle collection delay 4For all vintages denominator value is equal to original principal debt (“OPD”) and numerator value is equal to loan principal plus recognised but not received interest & fees 5Recency classification means last payment exceeding three months ago Estimated Total Value in Arrears as % of Gross Loan Book: 7.02% 4 For definitions please see page 36
- 14. Strong Risk ManagementPolicies Cont’d – Payroll Loan Book Consolidated Payroll Business Performance based on Arrears & Recency YE ‘14 & Sep ‘15 (Stacked) 14 Note: Unless otherwise noted, metrics in this presentation are as at 30 September 2015 excluding Mexico 4 Considerable improvement YTD in the DPD 60-89 and DPD 90+ buckets Stable quality YTD in the DPD 0-29 and DPD 30-59 buckets For definitions please see page 36
- 15. Strong Risk ManagementPolicies Cont’d – Payroll Loan Book NPL Recovery Analysis by Disbursements- % of Total Loans (Volume) NPL Recovery Analysis by Disbursements- % of Total Loans (Volume Stacked) Remaining NPL Loans by Disbursements - Split by Administrative reasons & Credit Risk (Stacked) 15 4 NPLs arising due to the payroll-related administrative reasons tend to be cured over time Strong recovery profile of the NPLs driven by the efficient collection practices For definitions please see page 36 Note: Unless otherwise noted, metrics in this presentation are as at 30 September 2015 excluding Mexico
- 16. Highly skilled managementteam 16 5 Source: Company data Industry experience Experience at Bayport David Rogers Chief Innovation Officer Bryan Arlow CEO of South Africa Stuart Stone– Joint Chief Executive Officer Co-founder of Bayport in 2001 Founded Credit Direct (JV with African Bank Limited) 15+ 14 Grant Kurland – Joint Chief Executive Officer Co-founder of Bayport in 2001 Worked with Stuart at Credit Direct and African Bank Limited (Head of Sales) 15+ 14 John White Chief Harmonisation Officer Christo Koch Group Finance Executive 215 Ted Kristensson Group Executive: Latin America & Corporate Affairs 37 Paul Rodgers Head: Strategy & Research 320 Stephen Williamson Group Executive: Finance & Risk 8 7 Key Management Team Years in Industry Years at Bayport 619 David Rajak Head: Capital Markets Ettienne Myburgh Head: Insurance 219 Etienne Coetzer Head: East Africa 1415 Paul Silverman Group Executive: Southern & West Africa 618 Sandro Rtveladze Group Head: Retail Banking 6 315 2221119 1 Pablo Montesano Group Executive: Mexico 118
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- 18. South Africa Shareholders 18 Zambia GhanaTanzaniaUgandaBotswana Mozambique Colombia Mexico 83% 95% 95% 89% 85% 90% 99.96% 60% 100% CFC Ghana 74% PIC 21% of BML Local Management/ Partners/Other 19% of BML Directors & Founders 18% of BML Helios Investment Partners 18% of BML Investment AB Kinnevik 24% of BML Equity interest owned by Bayport Management Ltd
- 19. 9M 2015 Highlights1 19 OperatingIncome (Revenue) US$162.3 mln, down 16% y-o-y (up 4.8% y-o-y net of FX impact) Net Income US$27.0 mln, down 34% y-o-y (down 21.3% y-o-y net of FX impact) Annualised ROAA2 3.1%, annualised ROAE2 15.1% Robust performance despite continuing FX headwinds; the Bayport FX Index3 down 12.8% for 9M 2015 Resilient Performance 9M 2015 loan disbursements (issued cash) US$275.5 mln, down 7.4% y-o-y (up 10.9% y-o-y net of FX impact) Gross Loans down 12.9% YTD (up 14.6% YTD at YE’14 FX rates) 46,086 new borrowers acquired YTD, compared to 268,958 new borrowers acquired in 9M 2014 4,766 active4 MyMoney users as at 30 September 2015, up from 557 as at YE 2014 Growth Key metrics impacted by FX headwinds Annualised NIM 17.7%, down 280 bps y-o-y Blended Cost Of Funds5 13.5%, down 40 bps y-o-y Cost/Income Ratio 61.5%, up from 51.2% in 9M 2014 Operating Leverage -17%, as compared to 13.8% in 9M 2014 Core Profitability & Operational Efficiency Cash & Equivalents US$107.8 mln as at 30 September 2015, or 10.3% of Total Assets, up 64% YTD Undrawn credit facilities US$43.5 mln as at 30 September 2015 Landmark US$250 mln 7 year credit facility approved by OPIC Record US$50 mln 5 year credit facility led by the Inter-American Development Bank obtained by Bayport Colombia The Public Investment Corporation (www.pic.gov.za), the largest asset manager in Africa acquired (in June 2015) a 21% equity interest in Bayport Management Limited for the gross consideration of US$149 mln Liquidity & Capitalisation Mexico is scaling up well; payroll codes for 1 million individuals obtained NovaLend, the new proprietary IT platform, ready for soft launch in Botswana and Colombia SMART Campaign certification obtained by Bayport Botswana Other Developments 1All figures in US$ unless otherwise noted. 2Annualised. 3The Bayport FX Index is an index that tracks the relative currency movements of the countries that Bayport is exposed to, weighted by the size of gross loan book in each country 4An active user is an individual who has signed up for an account and deposited funds into his/her account 5 Blended cost of funds equals interest expense for the period divided by average interest-bearing liabilities for the period For definitions please see page 36
- 20. 9M 2015 FinancialOverview 20 Total Operating Income (Revenue) US$162 million - 15.9% y-o-y + 4.8% y-o-y at the average 9M ‘14 FX rates 9M 2014: US$193 million Net Operating Income US$132 million +5.9% y-o-y +34.1% y-o-y at the average 9M 2014 FX rates 9M 2014: US$124 million Profit Before Provisions US$69 million -42.5% y-o-y -30.6% y-o-q at average 9M 2014 FX rates 9M 2014: US$118 million Net Income US$27 million -34.2% y-o-y -21.3% y-o-y at the average 9M ‘14 FX rates 9M 2014: US$41 million Return On Average Equity 15.6% 9M 2014: 24.69% Return On Average Assets 3.3% 9M 2014: 6.1% Cost to Income Ratio 61.5% 9M 2014: 51.2% Leverage (Times) 3.72x YE ‘14: 4.05x Cost Of Risk 4.3% 9M 2014: 9.9% Gross Loans US$863 million -13% YTD YE 2014: US$991 million +16% YTD at YE 2014 FX rates Net Loans US$752 million -13% YTD YE 2014: US$817 million +18% YTD at YE 2014 FX rates Liquid Assets* US$107.8 million +64% YTD YE 2014: US$65.8 million +74% YTD at YE 2014 FX rates Branches 470 +7.3% YTD YE 2014: 438 Number Of Agents 5,115 +21.5% YTD YE 2014: 4,209 Number Of MyMoney Users 4,766** +756% YTD; YE 2014: 557 Number Of Borrowers 557,135 +9.0% YTD; YE ‘14: 511,049 Number Of Loans 616,343 YE ’14: 581,579, +6.0% YTD Number Of Loans Excluding South Africa: 404,898 YE ‘14: 334,461, +16.1% YTD Number Of Loans Disbursed: 209,189 9M 2014: 213,238, -1.9% y-o-y Number Of Loans Disbursed Excluding South Africa: 174,394 9M 2014: 150,826, +15.6% y-o-y * Liquid assets include cash balances with banks ** c. 20 K as of Nov ‘15For definitions please see page 36
- 21. Diversified Portfolio 21 Revenue SplitBy Country (US$ ‘000s) Revenue Split By Country YE 2014 9M 2015 New Loans Issued Gross Loan Portfolio Split By Product YE 2014 9M 2015 Payroll Loans, 52% Unsecured Consumer Loans (South Africa), 47% 344,275 loans outstanding 237,304 loans outstanding South Africa, 53.7% Zambia, 13.0% Botswana, 3.1% Mozambique, 0.5% Tanzania, 7.4% Uganda, 4.4% Ghana, 11.8% Colombia, 5.9% Mexico, 0.2% South Africa, 39.1% Zambia, 19.8% Botswana, 4.5% Mozambique, 3.3% Tanzania, 6.8% Uganda, 4.1% Ghana, 14.0% Colombia, 5.7% Mexico, 2.7% For definitions please see page 36 55 54 56 69 97 95 106 100 92 86 98 45 38 39 46 75 69 71 63 66 64 79 0 10 20 30 40 50 60 70 80 90 -10 10 30 50 70 90 110 130 150 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 '000sUS$ mln Loans issued by value (LHS) Loans issued by number (RHS)
- 22. Operating Efficiency HasStabilised 22 Structure Of Operating Expenses Cost/Income Ratio Funding Costs, Operating & Provision Expenses Cost to income ratio deterioration a consequence of young businesses not yet at scale and the FX impact * Q4’14 Cost to Income Ratio normalised for one-off US$4.2 million provision of bonuses 37.2 33.9 10.3 13.5 51.2 52.4 9M '14 9M '15 Personnel costs Sales & marketing Other expenses 98.7 99.8 US$ million 12.6 12.1 12.4 16.8 12.7 9.0 12.2 3.5 3.2 3.6 5.9 4.0 4.3 5.2 16.9 16.8 17.5 17.8 17.4 17.4 17.6 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3'15 33 32 34 41 34 31 35 For definitions please see page 36 76 81 41 21 99 100 9M '14 9M'15 US$ million 24 26 26 28 27 27 26 20 21 27 27 13 9 9 33 32 34 41 34 31 35 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3'15 Funding costs Provision Expense Operating Expenses
- 23. Lower Cost OfRisk And Conservative Asset Quality Management 23 NPLs As % Of Gross Loans (excluding South Africa) Gross Loan Book Split By Aging (SA) Cost Of Risk (excluding South Africa) Cost Of Risk (South Africa) For definitions please see page 36
- 24. Portfolio Statistics 223,643 loansissued in 9M 2015 Total loan disbursements (cash issued) in 9M 2015 – US$275.5 million (-7.4% y-o-y) 616,343 loans outstanding as at 30 September 2015 Gross loans reached US$863 million Net loan book reached US$752.2 million as at 30 September 2015 Average loan size at disbursement varies from US$744 in Ghana to US$4,467 in Colombia 51% of the 9M ’15 loan disbursements consist of loans below US$1,000 Average tenor at disbursement varies by country from 31 to 56 months 24 Net Loan Book By Country, Q3 ‘15Summary Number of Loans Outstanding per Country Portfolio Split By Average Loan Amount at Disbursement %/US$, Q3 ‘15 For definitions please see page 36
- 25. Product Overview 25 Payroll LoanUnsecured Consumer Loan South AfricaZambia GhanaTanzania UgandaBotswana Mozambique Colombia Mexico Term Up to 84 months Up to 60 months Topical Use Education, Housing, Small Business Education, Housing, Loan Consolidation Fee Initiation fees Credit life insurance Initiation fees Credit life insurance Monthly service fees Size Average loan size at disbursement of US$ 1,724 during 9M to September 2015 Average loan size at disbursement of US$ 1,946 during 9 months to September 2015 Repayment Payments deducted at source (payroll) before the borrower receives the net salary Payments deducted directly from borrowers bank account Markets Zambia, Ghana, Tanzania, Uganda, Botswana, Mozambique, Colombia, Mexico South Africa Share in total portfolio 56% of gross loan portfolio as of Q3 ‘15 44% of gross loan portfolio as of Q3 ‘15 For definitions please see page 36
- 26. Financial Overview –9M 2015 Income Statement 26 For Illustrative Purposes Only Summary Unaudited 9M 2015 Income Statement (9M ‘15 Numbers Converted At 9M ‘14 Average Exchange Rates) Summary Unaudited 9M 2015 Income Statement Constant currency variance reflects the results on a constant currency basis excluding the impact of the strengthening US$ dollar against the relevant African, Latin American and European (SEK) currencies year over year (i.e. reflects the operational performance variance). Excluding the currency impact, the variance from 9M 2014 to 9M 2015 net profit would only have been negative US$8.7 million. US$ 9M 2014 9M 2015 Growth y-o-y Interest income 217,868,085 205,471,317 -5.7% Interest expense (76,245,998) (80,607,272) 5.7% Net interest income 141,622,087 124,864,045 -11.8% Net non-interest income 51,402,842 39,560,502 -23.0% Operating income 193,024,932 162,277,717 -15.9% Operating expenses (98,749,736) (99,841,674) 1.1% Foreign exchange G/L 36,574,067 5,463,904 -85.1% Pre-provision income 118,173,115 67,900,070 -42.5% Net impairment of loans and advances (68,032,045) (29,908,499) -56.0% Movements in carrying value of written off book 18,261,327 (5,456,226) -129.9% Net impairment of goodwill (12,676,148) - -100.0% Profit/(Loss) before taxation 50,141,070 37,991,571 -24.2% Taxation (9,084,711) (10,988,474) 21.0% Profit/(Loss) for the year 41,056,359 27,003,097 -34.2% Profit/(Loss) for the period attributable to: Owners of the company 40,607,408 28,210,666 -30.5% Non-controlling interest 448,951 (1,207,569) -369.0% US$ 9M 2014 9M 2015 Growth y-o-y Interest income 217 868 085 245 456 971 12.7% Interest expense (76 245 998) (89 049 710) 16.8% Net interest income 141 622 087 156 407 261 10.4% Net non-interest income 51 402 842 45 800 853 -10.9% Operating income 193 024 932 202 208 114 4.8% Operating expenses (98 818 472) (120 726 537) 21.8% Foreign exchange G/L 36 574 067 1 189 463 -96.7% Pre-provision income 118 173 115 81 961 966 -30.6% Net impairment of loans and advances (68 032 045) (34 647 835) -49.1% Movements in carrying value of written off book 18 261 327 6 181 561 -66.1% Net impairment of goodwill (12 676 148) -100.0% Profit/(Loss) before taxation 50 141 070 47 314 131 -5.6% Taxation (9 084 711) (14 998 992) 65.1% Profit/(Loss) for the year 41 056 359 32 315 139 -21.3% Profit/(Loss) for the period attributable to: Owners of the company 40 607 408 28 407 809 -30.0% Non-controlling interest 448 951 3 907 331 770.3% For definitions please see page 36
- 27. Financial Overview –September 2015 Balance Sheet 27 For Illustrative Purposes Only Summary Unaudited Sep ‘15 Balance Sheet (Sep ‘15 Numbers Converted At YE 2014 Exchange Rates) Summary Unaudited Sep ‘15 Balance Sheet Constant currency variance reflects the results on a constant currency basis excluding the impact of the strengthening US$ dollar against the relevant African, Latin American and European (SEK) currencies year over year (i.e. reflects the operational performance variance). US$ Sep-15 Dec-14 Sep-14 YTD growth y-o-y growth Cash and cash equivalents 107 781 587 65 839 650 69 240 754 64% 56% Gross advances to customers 863 207 800 991 258 536 1 099 756 088 -13% -22% Provisions 152 901 999 174 290 043 178 645 406 -12% -14% Net advances to customers 710 305 801 816 968 493 921 110 682 -13% -23% Carrying Value of written off book 41 910 179 47 660 558 18 515 530 -12% 126% Trade and other receivables 40 090 196 41 183 983 37 033 287 -3% 8% Inventories 28 656 1 090 632 1 472 096 -97% -98% Current tax receivable 4 427 562 2 564 831 6 114 195 73% -28% Property, plant and equipment 9 688 710 12 079 908 11 274 055 -20% -14% Intangible assets 883 125 1 012 657 1 109 825 -13% -20% Goodwill 90 688 886 110 854 773 49 325 163 -18% 84% Deferred tax asset 29 175 119 43 809 979 15 426 720 -33% 89% Total Assets 1 034 979 821 1 143 065 464 1 130 622 307 -9% -8% Stated Capital 300 143 764 151 665 683 151 665 683 98% 98% Reserves 15 594 125 35 465 043 38 755 782 -56% -60% Retained earnings 153 566 214 138 477 972 137 182 132 11% 12% FCTR -257 549 158 -113 826 007 -90 789 264 126% 184% Equity attributable to equity holders 211 754 945 211 782 691 236 814 333 0% -11% Non-controlling interests 7 352 645 14 200 476 13 824 933 -48% -47% Total Equity 219 107 590 225 983 167 250 639 266 -3% -13% Finance lease obligation 734 368 976 859 980 079 -25% -25% Bank overdraft 9 741 887 9 156 989 12 774 799 6% -24% Trade and other payables 61 859 175 50 383 090 50 773 879 23% 22% Long term borrowings 711 984 734 833 953 320 805 419 616 -15% -12% Term loans 598 696 896 754 899 068 741 740 302 -21% -19% Subordinated debt 113 287 838 79 054 252 63 679 314 43% 78% Customer deposits 297 603 12 127 2354% Deferred tax liabilities 37 037 38 134 27 203 -3% 36% Current tax liabilities 1 579 101 2 725 297 8 138 102 -42% -81% Other financial liabilities 29 638 326 19 836 481 1 869 363 49% 1485% Total Liabilities 815 872 231 917 082 297 879 983 041 -11% -7% Total Equity and Liabilities 1 034 979 821 1 143 065 464 1 130 622 307 -9% -8% US$ Sep-15 Dec-14 Sep-14 YTD growth y-o-y growth Cash and cash equivalents 114 390 140 65 839 650 69 240 754 74% 65% Gross advances to customers 1 145 787 827 991 258 536 1 099 756 088 16% 4% Provisions 185 163 955 174 290 043 178 645 406 6% 4% Net advances to customers 960 623 872 816 968 493 921 110 682 18% 4% Carrying Value of written off book 49 275 424 47 660 558 18 515 530 3% 166% Trade and other receivables 45 669 639 41 183 983 37 033 287 11% 23% Inventories 34 243 1 090 632 1 472 096 -97% -98% Current tax receivable 2 564 831 6 114 195 -100% -100% Property, plant and equipment 13 418 154 12 079 908 11 274 055 11% 19% Intangible assets 620 680 1 012 657 1 109 825 -39% -44% Goodwill 107 333 158 110 854 773 49 325 163 -3% 118% Deferred tax asset 35 784 781 43 809 979 15 426 720 -18% 132% Total Assets 1 327 150 089 1 143 065 464 1 130 622 307 16% 17% Stated Capital 300 143 773 151 665 683 151 665 683 98% 98% Reserves 6 024 884 35 465 043 38 755 782 -83% -84% Retained earnings 161 818 795 138 477 972 137 182 132 17% 18% FCTR -112 063 075 -113 826 007 -90 789 264 -2% 23% Equity attributable to equity holders 355 924 376 211 782 691 236 814 333 68% 50% Non-controlling interests 16 055 225 14 200 476 13 824 933 13% 16% Total Equity 371 979 602 225 983 167 250 639 266 65% 48% Finance lease obligation 1 103 090 976 859 980 079 13% 13% Bank overdraft 28 521 749 9 156 989 12 774 799 211% 123% Trade and other payables 75 455 322 50 383 090 50 773 879 50% 49% Long term borrowings 828 223 035 833 953 320 805 419 616 -1% 3% Term loans 684 387 759 754 899 068 741 740 302 -9% -8% Subordinated debt 143 835 275 79 054 252 63 679 314 82% 126% Customer deposits 350 841 12 127 2793% Deferred tax liabilities 946 517 38 134 27 203 2382% 3379% Current tax liabilities 2 296 593 2 725 297 8 138 102 -16% -72% Other financial liabilities 18 273 340 19 836 481 1 869 363 -8% 878% Total Liabilities 955 170 487 917 082 297 879 983 041 4% 9% Total Equity and Liabilities 1 327 150 089 1 143 065 464 1 130 622 307 16% 17% For definitions please see page 36
- 28. Financial Overview –Key Ratios 28For definitions please see page 36 Loan Book Performance Sep-14 Sep-15 No of new loans issued 213,238 223,643 New loans issued (US$ mln) 297.9 275.5 Loan book growth in local currency (%) South Africa 4.8% -2.2% Botswana 16.4% 14.5% Mozambique 236.6% 230.6% Zambia 30.7% 37.5% Tanzania 11.8% 23.3% Uganda 30.1% 7.8% Ghana 35.0% 26.6% Colombia 34.1% 15.1% Mexico 96.3% New loans issued/gross loans (e-o-p) 0.27 0.32 Average loan size (US$) Payroll 1785 1724 Non-payroll 1845 1946 Average loan term (months) Payroll 39.1 43.3 Non-payroll 37.3 31.5 Non performing loan ratio (%) Payroll 5.1% 6.0% Non-payroll 37.3% 25.5% LLR to gross loans (%) Payroll 2.9% 4.4% Non-payroll 28.7% 38.2% Non performing loan coverage (%) Payroll 57.1% 74.0% Non-payroll 76.9% 149.7% Net loans/total assets (%) 83.1% 72.7% Total equity/total assets (%) 22.2% 21.2% Operating Metrics 9M 2014 9M 2015 No of branches 412 470 Branch growth, y-o-y (%) 93.00% 14.1% No of agents 4,641 5,115 Agent growth, y-o-oy (%) 93.40% 10.2% No of customers 549,209 557,135 Customer growth, y-o-y (%) 82.4% 1.4% Policies in force at year end 401125 400746 Policies in force at year end growth, y-o-y (%) -0.1% Profitability, Efficiency & Asset Quality 9M 2014 9M 2015 Interest income/average gross loans 31.6% 29.2% Non-payroll loans 22.7% 20.2% Cost of average interest bearing liabilities 13.9% 13.5% Net interest margin (%) 20.5% 17.7% Net interest income/operating Income (%) 73.4% 76.9% Net non-interest income/operating income (%) 26.6% 23.1% Pre-provision margin (%) 54.2% 33.0% Personnel expense/operating costs 37.7% 34.0% Personel expense/revenue 19.3% 20.9% Cost of risk (%) 9.9% 4.3% Bad debts written-off/net loans and advances (%) 11.3% 4.9% Cost-to-income ratio 51.2% 61.5% Return on average equity (%) 23.8% 16.2% Return on average tangible equity (%) 28.9% 27.7% Return on average assets (%) 6.1% 3.3% Total revenue/average assets (efficiency ratio) (%) 25.3% 19.3% Operating costs/average assets (%) 13.0% 11.8%
- 29. Stable & DiversifiedLiability Base 29 Liabilities Asset & Liability Mismatch Excluding South Africa Asset & Liability Mismatch, South Africa 50% of the SEK exposure hedged and the company policy is to keep For definitions please see page 36
- 30. Existing breakdown ofcapital structure for BML 30 Shareholders’ Equity/Assets Total Debt/Profit Before Provisions, x Interest Coverage* *Calculated as Profit Before Taxation divided by Interest Expense 1.5x 1.9x 1.4x 1.2x 0.5x 2011 2012 2013 2014 9M 2015, annualised 26% 24% 21% 20% 21% 2011 2012 2013 2014 Sep-15 For definitions please see page 36 31-Dec-14 Increase/Decrease Of Principal Increase/(Decrease) due to FX 30-Sep-15 US$ US$ US$ US$ BAYP 001 o2 SE0003617216 BML SEK 90 059 955 (1) (6 629 285) 83 430 670 13% 2 months BAYP 0003 o2 SE0004649713 BML SEK 89 802 641 (1) (6 610 343) 83 192 298 13% 18 months BAYP 003 SE0005393477 BML SEK 64 250 851 (1 063 719) (4 651 185) 58 535 947 13% 18 months BAYP 003 SE0005393477 BML SEK 28 013 462 (938 564) (1 992 975) 25 081 924 13% 18 months BAYP 004S SE0006451712 BML SEK 83 627 100 0 (6 155 765) 77 471 336 14% 47 months BAYP 003 SE0005393477 BML SEK - 16 585 000 (1 220 817) 15 364 184 13% 18 months BAYP 003 SE0005393477 BML SEK - 1 196 102 (88 045) 1 108 057 13% 18 months Zambia bond Zambia ZMW 31 322 924 (0) (14 620 068) 16 702 856 Total Bonds 387 076 933 15 778 818 (41 968 481) 360 887 270 BFS SA Loan notes 278 853 554 (36 071 839) (39 609 267) 203 172 448 31-Dec-14 (Decrease Due To Repayment Of Principal) Increase/(Decrease) due to FX 30-Sep-15 US$ US$ US$ US$ BFS SA Term loan 40 018 872 (1 364 619) (6 306 351) 32 347 902 BML Kfw term loan 13 233 590 - - 13 233 590 Zambia Term loan 19 449 643 329 908 (8 351 832) 11 427 719 Ghana Term loan 12 966 573 3 202 580 (2 453 606) 13 715 547 CFC Term loan 4 778 481 (1 149 789) (550 640) 3 078 052 Tanzania Term loan 14 315 870 (7 836 049) (1 241 458) 5 238 363 Uganda Term loan 4 547 807 3 434 176 (1 964 013) 6 017 970 Botswana Term loan 19 156 203 1 982 836 (2 071 720) 19 067 319 Mozambique Term loan 1 383 138 (260 779) (236 198) 886 161 Colombia Term loan 30 563 634 14 720 937 (10 622 237) 34 662 334 Mexico Term loan 7 609 022 1 862 023 (1 220 986) 8 250 059 Total borrowings 168 022 833 14 921 225 (35 019 041) 147 925 016 Grand Total (Bonds, Loan Notes & Borrowings) 833 953 321 (5 371 797) (116 596 790) 711 984 734 Interest Rate Remaining Tenor Borrower Type of borrowing Currency Instrument ISIN Issuer Currency nmf nmf
- 31. Stable & DiversifiedLiability Base 31 Local Currency Funding By Country Debt Maturity Profile * Shareholder’s Loans make up 69% of Bayport Zambia’s funding Swedish Bond Mid Yields To Maturity Source: Bloomberg as of November 2015 100% 100% 49% 16% 17% 36% 23% 55% 36% 51% 84% 83% 64% 77% 45% 64% 0% 20% 40% 60% 80% 100% South Africa Zambia* Botswana Mozambique Tanzania Uganda Ghana Colombia Mexico % Of Local Currency Funding % Of Foreign Currency Funding Change in the share of local currency funding YTD 2015 +65% -5%-14% +11%+2% -16% +9% -43%+0% For definitions please see page 36 0 2 4 6 8 10 12 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 % BAYPRT 13/19 0 2 4 6 8 10 12 14 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 % BAYPRT 13/15 0 2 4 6 8 10 12 14 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 % BAYPRT 13/17 0 2 4 6 8 10 12 14 16 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 % BAYPRT 14/19
- 32. Our Strategy: CorePayroll Deduction Markets Our strategy is designed to leverage our strengths and take advantage of the opportunities we believe we can avail ourselves of As such, our strategy is based on the contextual facts and assumptions: We have achieved a leading position as a non-bank payroll deduction based lender in our key markets, namely Zambia, Ghana and Colombia Additionally, we are a prominent non-bank payroll deduction based lender in Botswana, Uganda, Tanzania and Mozambique In all our core markets, we benefit from our ability to originate and deliver not only in large cities, but in remote rural areas as well There is material further growth potential for our core payroll deduction based lending business in many of our key markets, namely in Zambia, Ghana, Colombia, Uganda, Tanzania, Mozambique, Colombia and Mexico* As we grow our business, we expect the efficiency of our operations in these markets to improve further, as manifested in the declining Cost/Income Ratio and, consequently, in the improving operating profitability We have, therefore, devised a number of strategies to maximise the organic growth of our payroll deduction based lending business in these core markets We aim to improve the retention of our existing high-value clients and to extend the client lifetime value by devising and implementing incentive-based retention programmes and proactive loan term extension and refinancing programmes We are investing in technology and people to be able to offer our clients differentiated pricing based on behavioural data and other factors We aim to preserve the existing and to develop new relationships with employers (including in the private sector) in order to obtain new deduction codes, and believe that our unique local partnership model positions us well to succeed We are investing in marketing to enhance our brand recognition and awareness and reach out to new clients within our core payroll target market We will continue to expand our branch footprint and agent network and refine, where needed, our model of agent engagement We are investing in technology and people to further refine our credit underwriting and collection processes in order to maintain the quality of our payroll loan book throughout the expected period of high organic growth 32 *(Where the addressable market (based on our current deduction codes) is estimated at ~1 mln individuals (compared with approximately 500,000 outstanding as of 30 September 2015)) 1/3 For definitions please see page 36
- 33. Our Strategy: ScalingThe Business Faster Through Expansion & Diversification We have developed a strong track record of successfully entering new markets through either greenfield investment or small-scale foothold acquisitions and rapidly integrating and scaling the business Botswana: greenfield investment in 2010; Gross Loans 2010-2014 CAGR 64% & Revenue (Operating Income) 2010-2014 CAGR 64%1 Colombia: foothold acquisition in 2011; ; Gross Loans 2012-2014 CAGR 80% & Revenue (Operating Income) 2012-2014 CAGR 94% 1 Mozambique: greenfield investment in 2012; Gross Loans 2013-2014 CAGR 643% & Revenue (Operating Income) 2013-2014 CAGR 639% 1 Mexico: greenfield investment in December 2014; Gross Loans up 96% YTD; deduction codes addressing ~1 mln individuals obtained We continue to scan the market for suitable entry opportunities in Africa and Latin America and plan to achieve additional growth in our core payroll deduction based lending business by entering new markets in a highly selective and disciplined manner We screen opportunities based on a rigorous set of criteria, including the affordability/size of investment, scale and scope reachable in the medium term, and our ability to execute by leveraging our expertise in building and managing a mixed branch & agent based distribution network and credit underwriting, with the investment and effort weighed carefully against the expected market opportunity and socioeconomic and regulatory environment We believe we will benefit from the further geographic expansion by enhancing the diversification of our revenue and /improving the efficiency of our business We believe that diversifying the range of financial solutions we offer to our clients builds shareholder value in several ways: Extend the lifetime value of the average client by enhancing client loyalty for our core payroll deduction based lending business and by achieving a higher product-to-client ratio Increase the efficiency of our business model by migrating over time a material portion of the new and (in particular) repeat loan disbursements Create opportunities for disciplined off-payroll lending to our clients based on the transactional and behavioural data collected Diversify our funding sources by attracting current account balances and term deposits We have invested in technology and people and believe the pilot launch of MyMoney in Ghana has been a success We intend to roll out by the transactional banking and/or deposit-taking pilot projects in Zambia (YE ‘15) and Mozambique (2016) 33 Note: (1) All CAGRs based on local currency figures 2/3 For definitions please see page 36
- 34. Our Strategy: SouthAfrica & Insurance In South Africa, we aim to preserve and improve the quality of our debit order loan book while maintaining cost control discipline through the right-sizing of our business, in order to position the business to benefit from the eventual cyclical improvement in the consumer credit conditions We have enhanced the group-level oversight and made changes to the management of our South African business We have tightened considerably our credit underwriting criteria and monitor them carefully to take further action if and when warranted We will seek to increase the share of client acquisition and disbursements via the outbound call centre and electronic channels to optimise the cost of sales and delivery We continue to invest in technology and people to further improve our collections processes We monitor the regulatory environment and engage in pre-emptive and preventive redesign of our product bundles in order to protect the net interest margin while remaining compliant at all times We have built, since 2013, considerable expertise in insurance, by building through cross-sell a sizeable credit life insurance business in South Africa and selected other markets Our early experience in the distribution of other insurance products leads us to believe we can scale our insurance business in certain core markets, including East Africa and Southern Africa We believe that our continued focus on building the insurance business will result in the following benefits: Further diversify our revenue streams Leverage our branch and agent distribution network, including by reducing the sales agent churn through annuity-like commissions Further enhance our reputation as a responsible lender as the insurance products we aim to sell reduce the need to “borrow for wrong reasons” (i.e. in response to risk events that could/should be covered by insurance rather than by emergency borrowing) 34 Note: (1) Currently licensed for deposit-taking in Ghana, Zambia and Mozambique 3/3 For definitions please see page 36
- 35. Translating Our StrategyInto Measurable Management Targets 35 1An active user has signed up for an account and deposited funds into their account Note: indicative management targets are for illustrative purposes only and do not represent forecast or guidance endorsed by the company For definitions please see page 36 Strategic Objective Measure YE 2014 9M 2015 Indicative Management Target Maximise organic growth of the payroll deduction based lending business in core markets Gross payroll loan book US$ 514 million US$ 484 million YE 2018: ~US$ 1,143 million Net payroll loan book US$ 492 million US$ 460 million YE 2018: ~US$ 1,072 million Effective yield 27.3% 23.1% 2018: 31.8% Additional growth by entering new payroll deduction markets # core markets 8 9 9-10 Diversify the range of financial solutions offered # of active1 users 557 4,766 YE 2018: ~285,000 (MyMoney) Client account balances & deposits Negligible US$ 297,005 YE 2018: ~US$52 million Off-payroll gross loan book Negligible US$ 105,285 YE 2018: ~US$44 million South Africa Gross loans US$ 466 million US$ 383 million YE 2018: ~US$397 million Net loans US$ 313 million US$ 250 million YE 2018: ~US$225 million ROAA 1.10% 1.30% YE 2018: ~6% Insurance Annual Gross Written Premium US$ 49 million US$ 25.2 million 2018: ~US$ 61 million Combined Ratio 35.4% 34.2% 2018: 35% - 39% Operational Objectives Net Interest Margin 26.7% 17.7% 2018: 27% Cost/Income Ratio 54.5% 61.5% 2018: 39% Cost of Risk 13.4% 4.3% 2018: 4% Performance Objectives RoAE 23.9% 16.2% 2018: ~39% RoAA 5.7% 3.3% 2018: ~9.5%
- 36. Definitions 36 Return On AverageTotal Assets (ROAA) equals Net Income of the period divided by average Total Assets for the same period; Return On Average Equity (ROAE) equals Net Income of the period divided by average Shareholders’ Equity for the same period; Cost of Funds equals Interest Expense for the period divided by average Interest-bearing Liabilities for the period; Net Interest Margin equals Net Interest Income for the period divided by average Gross Loans for the period; Net Income Margin equals Net Income divided by Total Operating Income; Interest Coverage is calculated as Profit Before Taxation divided by Interest Expense; Cost of Risk equals Impairment Expense for the period divided by average Gross Loans for the period; Gross loan book includes loan principal, accrued interest and written-down loans that are accounted for at the balance sheet at a discounted value; Gross Loan Yield equals interest income for the period divided by average Gross Loans for the period; Effective loan yield equals net interest income plus non-interest income for the period divided by average gross loans for the period; Total operating income includes Net Interest Income plus Non-interest Income; Net operating income means net interest income plus non-interest income less impairment for loan losses; Pre-provision Margin equals Profit Before Taxation for the period plus Impairment of Loans and Advances for the period divided by Interest Income for the period; Operating Leverage equals y-o-y percentage change in Total Operating Income less y-o-y percentage change in Total Recurring Operating Costs; Cost/Income ratio equals Total Recurring Operating Costs plus Discretionary Bonus Pool of the period divided by Total Operating Income; Loan Loss Reserve includes Loan Loss Reserve principal and any accrued and recognized interest; Balance in arrears includes loan principal plus any accrued interest & fees; Value in arrears includes loan principal only and is an approximate value based on a one month first cycle collection delay; For all vintages denominator value is equal to original principal debt (“OPD”) and numerator value is equal to loan principal plus recognised but not received interest & fees; NPLs means those loans that are either Non Performing as per the or are classified as Doubtful or Bad (where separation from payroll has occurred); Doubtful mean loans where future recovery is unlikely; Bad mean loans that are considered irrecoverable and automatically carry a 100% provision; Recency classification: last payment exceeds three months ago; Provision Coverage Ratio equals Provision held divided by Gross Loan Book; NPL Ratio equals Non-Performing Loans for the period divided by Gross Loan Balance; NPL Coverage Ratio equals provision held divided by Non-Performing Loans; Collection Rates equals Actual Collections for the period divided by the amount that was Due to be Collected for the period; DPD means days past due; Tier I Capital ratio calculated in accordance with Basel III Capital Accord Standards. The Tier I capital adequacy ratio equals the Tier I capital divided by the risk weighted assets; Total capital adequacy ratio calculated in accordance with Basel III Capital Accord Standards. The total capital adequacy ratio equals total capital (Tier I +Tier II - deductions) divided by the risk weighted assets.
- 37. Disclaimer 37 IMPORTANT INFORMATION This presentation(the “Presentation”) has been prepared by Bayport Management Ltd (the “Company”). This Presentation has been prepared and issued by and is the sole responsibility of the Company and is being furnished to each recipient solely for its own information and in connection with the preliminary discussions in relation to the Company. No copy of the Presentation will be left behind after the meeting. For the purposes of this notice, “Presentation” means this document, its contents or any part of it, any oral presentation, any question or answer session and any written or oral material discussed or distributed during the Presentation meeting. By attending any meeting where this presentation is made public, or by reading this document, you agree to be bound by the following terms and conditions. THIS PRESENTATION DOES NOT, AND IS NOT INTENDED TO, CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO SELL, ISSUE, PURCHASE OR SUBSCRIBE FOR (OR ANY SOLICITATION OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR) ANY SECURITIES OF THE COMPANY (“SECURITIES”) IN ANY JURISDICTION. This presentation does not constitute or form a part of any offer or solicitation to purchase or subscribe for Securities in the United States of America. The Securities discussed in this presentation have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”) or qualified for sale under the law of any state or other jurisdiction of the United States of America and may not be offered or sold in the United States of America except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Company is not and does not intend to become an “investment company” within the meaning of the U.S. Investment Company Act of 1940, as amended (the “U.S. Investment Company Act”), nor is it engaged or propose to engage in the business of investing, reinvesting, owning, holding or trading in securities. Accordingly, the Company is not and will not be registered under the U.S. Investment Company Act and investors will not be entitled to benefits or that Act. Neither the United States Securities and Exchange Commission nor any securities regulatory body of any state or other jurisdiction of the United States of America, nor any other country or political subdivision thereof, has approved or disapproved of this presentation or any Securities discussed herein or passed on the accuracy or adequacy of the contents of this presentation. Any representation to the contrary is a criminal offense in the United States of America. The Presentation has been prepared on the basis of information held by the Company and also from publicly available information. This information, which does not purport to be comprehensive, has not been independently verified by or on behalf of the Company . The Presentation does not constitute an audit or due diligence review and should not be construed as such. Except where otherwise indicated in the Presentation, the information provided therein is based on matters as they exist at the date of preparation of the Presentation and not as of any future date and will be subject to updating, revision, verification and amendment without notice and such information may change materially. Nothing contained in this Presentation is or should be relied upon as a promise or representation as to the future. This document has not been approved by any regulatory or supervisory authority. No representation or warranty, express or implied, is given by or on behalf of the Company or any of the Company’s directors, officers or employees or any other person as to the fairness, currency, accuracy or completeness of the information or opinions contained in this document and no liability is accepted whatsoever for any loss howsoever arising from any use of this presentation or its contents. The presentation includes certain forward-looking statements which are based on the Company’s belief or current expectations, intentions and projections with respect to its future performance, anticipated events or trends and other matters. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “plans”, “may”, “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places and include, but are not limited to, statements regarding the Company’s intentions, beliefs or current expectations concerning, amongst other things, results of operations, financial condition, liquidity, prospects, growth and strategies. Although the Company believes the statements are based on reasonable assumptions, such statements may or may not be correct and should not be construed in any way as a guarantee of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include risks specific to the industry, unanticipated economic and market conditions as well as other relevant developments and risks described in the Company’s periodic, current and other reports. No information included in this presentation is intended to be a profit forecast or a financial projection or prediction. No representations or warranties, express or implied, are given as to the achievement or reasonableness of, and no reliance should be placed on, statements pertaining to financial performance, including (but not limited to) any estimates, forecasts or targets contained herein. The achievability of the Company’s proposed strategy set out in this presentation cannot be guaranteed. Except as may be required by applicable law or regulation, the Company assumes no obligation to publicly release the result of any update or revisions to these forward-looking statements to reflect new information, future events or circumstances after the date hereof, or otherwise. These statements are not guarantees of future performance and are subject to known and unknown risks and uncertainties.