Absa Group Limited · JSE:ABG
Absa — Debt Investor Presentation (August 2018)
27 slides from Absa's debt investor presentation, August 2018
Slide 1: Absa Group Limited Fixed Income Investor Deal Roadshow
Absa Group Limited Fixed Income Investor Deal Roadshow
Slide 2: Table of Contents
Table of Contents 1. Group Performance Update 2. Capital Position and IFRS9 Impact 3. Funding and Liquidity Management 4. Fixed Income Overview 5. Appendix
Slide 3: Group Performance update
Group Performance update 1
Slide 4: Normalised performance in line with guidance
Normalised performance in line with guidance Change Normalisation 1H17 1H18 Rm (%) adjustments Net interest income 20 791 21 188 2 175 Non-interest income 15 294 15 854 4 413 Total income 36 085 37 042 3 588 Impairment losses 3 773 3 431 (9) - Operating expenses 20 038 20 834 4 (1 364) Other1 (716)
Slide 5: Separation journey on track
Separation journey on track Separation spend and remaining contribution (Rbn) o Sufficient financial and people resources o Execution is well underway 12.6 (4.9) o Robust governance and assurance in place o Proactive and effective risk management 1.0 8.7 PLC contribution Spent Revenue Remaining cont
Slide 6: IFRS9 impacted credit impairment
IFRS9 impacted credit impairment Change from IAS39 provision to IFRS9 expected Change from IAS39 NPL to IFRS9 stage 3 ratio (%) credit loss (Rbn) 27.8 5.53 4.2 Stage 1 5.31 21.9 IIS 3.0 4.9 Stage 2 IIS 0.37 3.75 PL 5.6 Stage 3 18.7 NPL 13.3 31 December 2017 1 January 2018 NPL30 NPL Stage Stage 3 3 1
Slide 7: IFRS9 leads to larger provision cover against performing loans
IFRS9 leads to larger provision cover against performing loans Coverage Ratio (%) 0.47 (0.27) 1.07 0.17 0.7 2 1 IAS 39 cover Emergence period change SICR Reclassification to Stage 3 IFRS 9 Stage 1 and Stage 2 cover Note: 1. Significant increase in credit risk (SICR) 2. Defined as the time lapse betw
Slide 8: Credit Loss Ratio remained at the bottom end of recent past experience
Credit Loss Ratio remained at the bottom end of recent past experience IAS39 Credit Loss Ratio (Bps) IFRS9 Credit Loss Ratio (Bps) (Bps) (Bps) 120 120 108 100 100 96 92 88 87 80 80 83 60 60 40 40 20 20 0 0 2014 2015 2016 2017 HY17 HY18 8 | Absa Group Limited Fixed Income Investor Roadshow | August 2
Slide 9: Group loan growth improving
Group loan growth improving Gross customer loans (Rbn) South Africa Rest of Africa 500 1H17 1H18 500 450 450 5% 400 400 350 350 300 300 250 14% 250 200 200 150 150 100 9% 100 12% 15% 50 50 0 0 Retail Business CIB RBB CIB South Africa Rest of Africa Source: Absa Group Limited 2018 Interim Results 9|
Slide 10: Capital Position and IFRS9 Impact
Capital Position and IFRS9 Impact 2
Slide 11: Well capitalised in excess of regulatory minimum requirements
Well capitalised in excess of regulatory minimum requirements4 SARB Capital Requirements1 (2019 Fully-Loaded) Absa Group June 2018 Capital Levels 18% 16.7% 16% 15.7% 13.9% 14% 13.3% 14.25% 12.8% 12% 12.2% 2.25% 11.75% 10% 10.0% 1.75% 8% 7.5% 7.0% 6% 4.5% 4% 4.0% 2% 0% 2 3 2 3 CET 1 Tier 1 CAR Levera
Slide 12: Consistent earnings progression delivers approximately 2% capital generation per annum
Consistent earnings progression delivers approximately 2% capital generation per annum 2.22% 2.16% 2.18% 2.16% 2.14% 2.09% 15.6 15.0 14.3 13.0 11.8 10.4 8.5 8.8 8.2 7.4 5.6 5.1 1 2012 2013* 2014 2015 2016 2017 Headline Earnings (R’bn) Ordinary Dividends paid (R'bn)¹ Earnings as a % of RWA Note: 1. E
Slide 13: Strong capital levels maintained post IFRS9 implementation
Strong capital levels maintained post IFRS9 implementation Absa Group Common Equity Tier 1 ratio (%) 2.0 (1.2) 12.2 12.1 (0.6) 2.2 (0.1) Board target range 10.0% - 11.5% 1H17 RWA movement IFRS9 Profit Dividend 1H18 13 | Absa Group Limited Fixed Income Investor Roadshow | August 2018 Source: Absa Gro
Slide 14: IFRS9 results in a marginal decrease in CET1
IFRS9 results in a marginal decrease in CET13 (190) (1 572) 5 868 95 (2 083) 4 106 2 118 1 2 IFRS 9 ECL Day 1 NCI impact Tax impact Retained income Other reserves Release of ECL Decrease in Impact impact impact shortfall common equity tier 1 supply Note:1. Non-controlling interest 2. Expected credit
Slide 15: Funding and Liquidity Management
Funding and Liquidity Management 3
Slide 16: Liquidity position in line with risk appetite
Liquidity position in line with risk appetite 30 30 o 30.5% of deposits due to customers covered by the Group’s Absa Group June June available sources of liquidity Key Risk Metrics 2018 2017 o NSFR effective 1 January 2018, at 106.0%, above the minimum requirement of 100% Sources of Liquidity (R'bn)
Slide 17: Fixed Income Overview
Overview Fixed Income | mA
Slide 18: Group ZAR debt maturity profile
Group ZAR debt maturity profile R’mn 10,000 8,000 6,000 4,000 2,000 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2023 Bank Senior Bank Tier 2 Group Tier 2 Group AT1 Source: Absa Group Limited, August 2018 Note: Graph excludes unlisted and structured notes Graphed to call date w
Slide 19: Senior: indicative term sheet
Senior: indicative term sheet INDICATIVE SENIOR UNSECURED ISSUANCE TERM SHEET Issuer Absa Bank Limited (“Absa”) Manager & Dealer Absa Corporate & Investment Bank Documentation ZAR 60bn DMTN Programme Issuance listing & settlement The Interest Rate Market of the JSE Moody’s National Long Term: Aa1.za
Slide 20: Potential AT1: HoldCo issuance main exposure remains Absa Bank Limited
Potential AT1: HoldCo issuance main exposure remains Absa Bank Limited Absa Bank Limited Group (OpCo) (Holdco) Amount (R’bn)1 % Contribution Amount (R’bn)1 Asset Contribution R1,029bn 83% R1,235bn Income Contribution R26bn 70% R37bn RWA Contribution R542bn 70% R771bn NAV Contribution R68bn 69% R99bn
Slide 21: Issuance at the Group entity is currently down-streamed to Absa Bank Limited
Issuance at the Group entity is currently down-streamed to Absa Bank Limited o Losses follow the hierarchy of claims, as they arise in the operating entities. No creditor is worse off (NCWO) than in liquidation, as ascribed by the FSB Key Attributes of Effective Resolution Regimes. o Due to minority
Slide 22: Capital market instrument pricing progression
Capital market instrument pricing progression Previous Pricing Points for 5year Senior, Tier II and AT1 Floating Rate Notes 1 Bps over Jibar 700 650 600 550 500 450 Idiosyncratic stress Cabinet Reshuffle 400 Draft Recovery & Resolution Regime ANC Elective 350 Introduction to Conference Basel III ABL
Slide 23: Appendix
Appendix 5
Slide 24: Debut USD400m Tier II Bond on 18 April 2018
Debut USD400m Tier II Bond on 18 April 2018 Execution Overview o Initial price thoughts were announced at 6.625% just after 7.30am UKT on Wednesday 18 th April for a USD300-400m size transaction following a two-day, two-team roadshow in London, Hong Kong and Singapore earlier in the week o As books
Slide 25: Quick Links
Quick Links • Liquidity Coverage Ratio (Jan 2013) - http://www.bis.org/publ/bcbs238.htm • Net Stable Funding Ratio (Oct 2014) - http://www.bis.org/bcbs/publ/d295.htm • TLAC - http://www.financialstabilityboard.org/wp-content/uploads/TLAC-Condoc-6-Nov-2014-FINAL.pdf Basel / FSB / EBA • MREL - https:/
Slide 26: Contacts
Contacts Absa Group Limited Syndicate Deon Raju – Absa Group Treasurer Matt Duggan – Head Tel no. 011- 895 7107 / [email protected] Tel no. 011- 895 7864 / [email protected] Rolf van den Heever – Head, Capital Market Execution & BSM Muhammad Motala Tel no. 011- 895 6381/ rolf.va
Slide 27: Disclaimer
Disclaimer This document has been compiled by Absa Corporate and Investment Bank (“Absa CIB”), a division of Absa Bank Limited, a registered bank in the Republic of South Africa (Registration number 1986/04794/06) and with its registered office at Absa Towers East, 170 Main Street, Johannesburg ("Ab
Absa Group — Debt Investor Presentation (August 2018) on 6ix