Absa Group Limited · JSE:ABG
Absa — Barclays Africa Group — Debt Investor Presentation (April 2018)
38 slides from Absa's debt investor presentation, April 2018
Slide 1: International Fixed Income Investor Presentation – April 2018
Barclays Africa Group Limited International Fixed Income Investor Presentation – April 2018
Slide 2: Agenda
Agenda 1 Introduction 2 Domestic Operating and Competitive Environment 3 Strategy and Barclays PLC Separation 4 Group Financial Performance 5 Capital and Liquidity Management 6 Risk Management 7 Holding Company versus Operating Company 8 Tier 2: Terms and Conditions 9 Appendix 2 BAGL | Confidential
Slide 3: Introduction
1 Introduction 3 BAGL | Confidential
Slide 4: Barclays Africa Group Limited “BAGL” at a glance
Barclays Africa Group Limited “BAGL” at a glance We are a regional African banking Group headquartered in South Africa offering diversified financial services through an integrated set of products and services across personal and business banking, corporate and investment banking, wealth, investment
Slide 5: A pan-African group with diverse shareholders
A pan-African group with diverse shareholders Barclays Bank PLC Other Public Major Ordinary Shareholders by Geographic Split (%) (14.9%) Shareholders (85.1%) Barclays Africa Group Limited FC Rating – LT (Moody’s : Ba1) 15 LC Rating – LT (Moody’s : Ba1) United Kingdom 28 Absa Bank Limited1 South Afri
Slide 6: Domestic Operating and Competitive Environment
2 Domestic Operating and Competitive Environment 6 BAGL | Confidential
Slide 7: One of the largest regional banks in Sub-Saharan Africa
One of the largest regional banks in Sub-Saharan Africa Total Assets (R'bn)1 Revenue (R'bn)1 2,028 103.2 88.4 1,292 72.9 1,165 983 51.7 BAGL P1 P2 P3 BAGL P1 P2 P3 Headline Earnings (R'bn) & RoE (%)1 Revenue Ranking in Key Jurisdictions Excluding SA2 Headline earnings RoE Position 4th 3rd 2nd 3rd 16
Slide 8: Strong market position in South Africa and across the key product segments
Strong market position in South Africa and across the key product segments 28% Market 24% Share % 21% 20% 17% Mortgages – Individuals Credit Cards Retail Deposits – Corporate Deposits* Corporate Loans and Individuals Advances* Market 2 1 2 3 3 Position BAGL South African Market Share based on SARB B
Slide 9: South Africa banking and financial sector – well regulated
South Africa banking and financial sector – well regulated and aligned to international standards South Africa Regulation is Aligned to International Standards o Basel III was implemented on 1 January 2013 o Resolution framework will align to FSB Key Attributes of Effective Resolution Regimes for Fi
Slide 10: South Africa – Macroeconomic environment
South Africa – Macroeconomic environment South African GDP growth has been solid in recent quarters2 SSA ex SA GDP set to improve steadily1, 2 y/y% Real GDP - BA9 ex SA % q/q, saar 5 6.0 4 5.7 3 2 5.4 1 0 5.1 -1 4.8 -2 -3 4.5 2014 2015 2016 2017 2018 2014 2015 2016 2017F 2018F Headline CPI will like
Slide 11: Macroeconomic environment
Macroeconomic environment Sharply improved trade and current account imbalances1 Households continue to deleverage1 % of GDP % of disposable income % of disposable income 2 81 10.00 1 79 0 9.70 -1 77 9.40 -2 75 -3 9.10 -4 73 Debt stock (lhs) -5 Trade balance 8.80 71 -6 Debt servicing costs (rhs) Cur
Slide 12: Strategy and Barclays PLC Separation
3 Strategy and Barclays PLC Separation 12 BAGL | Confidential
Slide 13: Separation journey from Barclays PLC is on track
Separation journey from Barclays PLC is on track post divesture announcement on 1 March 2016 Barclays PLC shareholding reduced to 14.9% 14.9 Today June 2020 23.4 21.9 PLC shareholding (%) Separation governed by agreements 62.3 50.1 £765m Barclays PLC contribution (IFRS vs. normalised numbers)
Slide 14: A new group strategy to focus on growth and returns
A new group strategy to focus on growth and returns Three Priorities To restore leadership in our core businesses To build pioneering new propositions To create a thriving organisation to enable our new organisation to operate competitively and sustainably Three Enabling Capabilities Targete
Slide 15: Group Financial Performance
4 Group Financial Performance 15 BAGL | Confidential
Slide 16: A diversified revenue stream both from a geographic and business mix perspective
A diversified revenue stream both from a geographic and business mix perspective South Africa Generates 78% of Total Revenues 59% of Revenues are Retail & Business Banking Related R’bn 73 78% of Revenue 59% of Revenue 73 55 16 16 55 11% 0 5 9 9 11 4 8 5% 57 46 43 33 (2) 2012 2017 2012 2017 South Afr
Slide 17: Strong returns across a well-diversified portfolio
Strong returns across a well-diversified portfolio … Divisional RoE (%) Headline Earnings Mix FY17 (%)2 7 21.7 20.9 20.8 20.1 7 18 16.6 14 15.1 40 4 20 14 75 Retail Banking SA Business Banking SA 1 CIB SA RBB Rest of Africa SA Banking * ROA Banking WIMI CIB Rest of Africa WIMI FY16 FY17 1. Return on
Slide 18: Operational efficiencies and cost control supported a stable cost-to-income ratio
In a tough economic backdrop, operational efficiencies & cost control supported a stable cost-to-income ratio 56.3% 56.8% 56.0% 56.8% 55.2% 10% 8% 7% 8% 6% 6% 6% 5% 4% 1% 2013 2014 2015 2016 2017 Income Growth Operating Expenses Growth Cost to Income Ratio 18 BAGL | Confidential
Slide 19: Consistent earnings progression; c.2% capital generated per year
Consistent earnings progression; c.2% capital generated per year 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 1. Excludes special dividend of
Slide 20: Capital and Liquidity Management
5 Capital and Liquidity Management 20 BAGL | Confidential
Slide 21: Strong capital position, well in excess of minimum regulatory requirements
Strong capital position, well in excess of minimum regulatory requirements & minimum internal board targets o Board target levels include SARB Capital Requirements2 BAGL December 2017 Regulatory minimum (2019 Fully-Loaded) Capital Levels 16.1% Regulatory buffers 16% D-SIB 14.9% 14.1% Counter
Slide 22: Funding of the SA banking system is supported by well regulated financial institutions
Funding of the SA banking system is supported by well regulated financial institutions Banking Industry Balance Sheet (R’bn) Retail Corporate & Government Institutional* Instituitional Short term ( < 1 month) Medium Term (1 < & < 6) Long term (> 6) 23.8% 47.3% 51.9% 44.6% 18.1% 27.1% 31.6% 34.6% 21.
Slide 23: Funding sources are stable
Funding sources are stable ROA’s Strong Deposit Franchise Reflected by Its South Africa Accounts for c.90% Credit Extended to Customers Conservative Loans to Deposit Ratio 2017 Closing Balance Sheet Position for Customer Advances and Deposits South Africa R’bn Rest of Africa Banking R’bn 1092 671 71
Slide 24: Liquidity position is healthy, within risk appetite and above minimum requirements
Liquidity position is healthy, within risk appetite and above minimum regulatory requirements o 31% of deposits due to customers covered by Key Risk Metrics 2017 2016 the Group’s available sources of liquidity Sources of Liquidity (R'bn) 213 192 o NSFR > 100% Sources of Liquidity as a % of Total o L
Slide 25: Risk Management
6 Risk Management 25 BAGL | Confidential
Slide 26: Credit risk is the largest risk type, with retail and corporate the largest asset class
Credit risk is the largest risk type, with retail and corporate the largest asset class Capital Demand as at 31 December 2017 Concentration by Basel Asset Class as at 31 December 2017 Total % Total % (R'bn) Contribution Description (R'bn) Contribution Credit Risk Excluding CCR1 528 72% Corporate 351
Slide 27: Balance sheet strength is supported by low bad debts – NPLs c.4% of gross loans
Balance sheet strength is supported by low bad debts – NPLs c.4% of gross loans and advances Non-performing Loans Totals c.4% of Total Gross Loans & Advances with Coverage Non-performing Loan Coverage at c.43% CLR bps 139 108 104 92 88 87 NPL 5.28 %1 4.71 4.19 3.94 3.75 3.47 43.0 43.2 44.2 43.1 41.8
Slide 28: Larger exposure to secured portfolios supports credit loss & NPL cover
Larger exposure to secured portfolios supports credit loss & NPL cover Non- NPL o Credit concentration risk managed at performing Credit Loss Coverage Loans (Rm) Ratio (bps) Ratio (%) a Group level with policies and SA Banking 25,887 80 41 frameworks consistently applied RBB SA 23,868 110 41 at all
Slide 29: Market risk in the banking book will have a limited impact on the group’s results
Market risk in the banking book will have a limited impact on the group’s results o All material interest rate risks hedged Accounting Earnings at Risk for a 100bps Decrease in Market Interest Rates as at 31 December 2017 in SA 100 bps Endowment risk Decrease Domestic Bank Book (Rm) (459) Struct
Slide 30: Holding Company versus Operating Company
7 Holding Company versus Operating Company 30 BAGL | Confidential
Slide 31: Main exposure is to ABSA while benefiting from the diversification of other entities
Main exposure is to ABSA while benefiting from the diversification of other entities Expected Resolution Loss Allocation Waterfall2 Barclays Africa Group Step 1 (HoldCo) OpCo Waterfall Total OpCo losses are allocated to OpCo investors in Absa Bank Limited Others1 accordance with the OpCo creditor
Slide 32: Tier 2 Notes: Terms and Conditions
8 Tier 2 Notes: Terms and Conditions 32 BAGL | Confidential
Slide 33: Summary terms and conditions
Summary terms and conditions Issuer Barclays Africa Group Limited Issuer Ratings (M/F) Ba1 (Stable outlook) / BB+ (Stable outlook) Expected Issue Ratings (M/F) [Ba2] / [BB] Currency/Size USD [ ]m Description Fixed Reset Rate Callable Subordinated Tier 2 Notes Format Reg S – Standalone do
Slide 34: Additional details on the Tier 2 point of non-viability clause
Additional details on the Tier 2 point of non-viability clause Specificities of the Tier 2 Trigger Event & Loss Absorption For the proposed Tier 2 Notes, write-off is at the discretion of the Registrar (as appointed by the SARB) Contractual Clause Required Triggered at the earlier of (a) a decis
Slide 35: Appendix
9 Appendix 35 BAGL | Confidential
Slide 36: PONV: Comparative analysis across selected jurisdictions
PONV: Comparative analysis across selected jurisdictions Basel III / FSB1 EU2 Switzerland Brazil Russia Korea Statutory Statutory, if appropriate Statutory power for Statutory power for Not applicable Not applicable Existing resolution legislation in place writedown or conversion writedo
Slide 37: PONV: Comparative analysis across selected jurisdictions (cont’d)
PONV: Comparative analysis across selected jurisdictions (cont’d) China Hong Kong Singapore India Turkish South Africa Statutory Not applicable Implemented in Legislative proposal Not applicable Not applicable Not applicable June 2016 published in April 2016 PONV Contractual Required
Slide 38: Disclaimer
Disclaimer The information and the opinions in this presentation have been prepared by Barclays Africa Group Limited (BAGL or the Issuer) solely for use at meetings regarding a proposed offering (the Offering) of securities of the Issuer (the Securities). This presentation and its contents are stric
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