Absa Group Limited · JSE:ABG
Absa — Barclays Africa Group — Debt Investor Presentation (August 2017)
45 slides from Absa's debt investor presentation, August 2017
Slide 1: International Fixed Income Investor Roadshow August 2017
Barclays Africa Group Limited (“BAGL”) International Fixed Income Investor Roadshow August 2017
Slide 2: 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
Slide 3: Roadshow Team
Roadshow Team Deon Raju Christopher Snyman Managing Principal Managing Principal Group Treasurer Finance • Almost two decades of banking experience within • Almost two decades of banking experience, 10 of which has been the group with BAGL • Serves as the Group Treasurer for Barclays Africa Group •
Slide 4: Table of Contents
Table of Contents 1. Overview of BAGL 2. Strategic Update 3. Domestic Operating Environment 4. Group Financial and Operating Performance 5. Capital Position and Themes 6. Funding and Liquidity Management 7. Risk Management 8. Credit Ratings 9. Appendix 4
Slide 5: Overview of BAGL
Overview of BAGL @ BARCLAYS
Slide 6: BAGL at a Glance
BAGL at a Glance We are a Basel III Regulated diversified financial services provider offering an integrated set of products and services across personal and business banking, corporate and investment banking, wealth and investment management and insurance We serve 11.6m customers Listed on the JSE
Slide 7: BAGL Group Structure
BAGL Group Structure Barclays Bank PLC (23.4%)(1) Other Public Shareholders (76.6%) Barclays Africa Group Limited Absa Bank Limited (100%) Absa Financial Services Limited (100%) Barclays Africa Limited (100%) Barclays Bank of Botswana Limited (67.8%) Barclays Bank of Ghana Limited (100%) Barclays Ba
Slide 8: Top Shareholders
Top Shareholders Major ordinary shareholders (%) 2338 (50,10) Ill Barciays Bank PLC (UK)' 7,12 (6.81) Il Public investment Corporation (SA) 4,62 (2,89) Ill Old Mutual Asset Managers (SA) 4,13 (1,48) I Allan Gray (SA) 2,95 (1.52) Ill Prudential Investment Managers (SA) 2,95 (1.54) [Nl Black Rock inco
Slide 9: A Well-Diversified Revenue Stream
A Well-Diversified Revenue Stream Revenue Growth Revenue Contribution Mix 8% 6% 6% 8% 7% 120.0% 8% 100.0% FY16 8% 22% FY15 80.0% 8% FY14 RBB SA 54.0% 56.0% 57.0% 58.0% 20% 18% FY13 60.0% 19% CIB SA 40.0% 13% 60% ROA Banking 46.0% 44.0% 43.0% 13% 60% 20.0% 42.0% WIMI 13% 59% 0.0% 14% 57% Dec-13 Dec-1
Slide 10: Benchmarking SA Banking: Market Share and Revenue
Benchmarking SA Banking(2): Market Share and Revenue SA Banking CIB SA Revenue Contribution CIB SA Revenue Growth Rates 20% 17% 17% 16% 23% 18% 13% 27% 27% 12% 12% 12% 12% 11% 9% 8% 8% 8% 8% 6% 29% 20% 30% 4% 26% 0% BAGL SBK NED FSR BAGL SBK NED FSR BAGL SBK NED FSR 2014 2015 2016 RBB SA Revenue Con
Slide 11: BAGL Accolades (2016–2017)
BAGL Accolades (2016–2017) RBB RBB RBB RBB • Lafferty Global Awards: Excellence • TGI Survey: Top Building and • Best ATM Channels • 1ST place in the social media in Retail Banking Content Insurance category for Absa’s ChatBanking South Africa • TGI Survey: Top Mortgage Bonds service on Twitter and
Slide 12: Strategic Update
Strategic Update @ BARCLAYS
Slide 13: Barclays PLC Sell-Down
Barclays PLC Sell-Down March 2016 • On 1st of March 2016 Barclays PLC announced its intention to sell down their 62.3% interest in BAGL • Barclays PLC announced that it was reducing its shareholding due to the recently introduced regulatory burdens specific and particular to Barclays PLC as a UK hea
Slide 14: Strategic Focus
Strategic Focus Three main priorities for the remainder of 2017 Focus on Retail and Business bank in South Africa 23% returns on RBB business Focus areas: • Key success with the launch of our Gold Value Bundle aimed at core middle-market segment, as well as Youth and Student Propositions, which are
Slide 15: Domestic Operating Environment
Domestic Operating Environment
Slide 16: South Africa Macroeconomic Fundamentals
South Africa Macroeconomic Fundamentals South African GDP Shows Muted But Stable Growth Key African Entities(1) Show Sustained Positive GDP Growth % q/q saar y/y% 9 15 7 10 5 3 5 1 0 (1) (3) (5) (5) (10) (7) 00 02 04 06 08 10 12 14 16 00 02 04 06 08 10 12 14 16 South Africa GDP Botswana Ghana Kenya
Slide 17: South Africa Macroeconomic Fundamentals (cont’d)
South Africa Macroeconomic Fundamentals (cont’d) Trade and Current Account Household Debt % of GDP % of Disposable Income 2 92 15 1 88 14 84 0 13 80 (1) 76 12 (2) 72 11 (3) 68 10 (4) 64 9 60 (5) 8 56 (6) 52 7 (7) 48 6 2012 2013 2014 2015 2016 2017 2000 2002 2004 2006 2008 2010 2012 2014 2016 Trade C
Slide 18: Group Financial and Operational Performance
Group Financial and Operational Performance
Slide 19: Lower Credit Charge Drove Solid Underlying Growth
Lower Credit Charge Drove Solid Underlying Growth 1H17 1H16 Rm 1H17 Rm Change % Adjustment Change % Normalised(2) Rm Net Interest Income 21,093 20,837 (1) 46 20,791 (1) Non-Interest Income 15,415 15,487 – 238 15,249 (1) Total Income 36,508 36,324 (1) 284 36,040 (1) Impairment Losses 5,197 3,773 (27)
Slide 20: Key Drivers of Financial Success (Normalised)
Key Drivers of Financial Success (Normalised(1)) 1H15 % 1H16 % 1H17 % Diluted Headline Earnings Per Share (EPS) Growth 11 7 7 Dividend per Share (DPS) Growth 13 2 3 Return on Equity (RoE) 16.4 16.1 16.8 Return on Assets (RoA) 1.33 1.29 1.40 Net interest Margin 4.7 5.01 4.93 Cost to Income Ratio 55.9
Slide 21: Modest Loan Growth, Particularly in Retail
Modest Loan Growth, Particularly in Retail Net Customer Loans (Rbn) Retail SA Net Customer Loans (Rbn) 400 (1%) 1% 228 225 350 300 250 6% 200 6% 150 96 90 100 7% (3%) (12%) 6% 50 38 37 3% 16 17 0 Retail Business CIB RBB CIB Home Loans Vehicle and Asset Card Personal Loans Finance 1H16 1H17 1H16 1H17
Slide 22: Credit Impairments Declined Noticeably
Credit Impairments Declined Noticeably 1H17 1H16 1H17 1H16 Non-Performing Loans (%) Credit Loss NPL Cover (%) 4.2 Ratio (bps) 4.1 SA Banking 91 128 42 42 4.0 RBB SA 128 143 42 42 3.8 3.8 3.7 Retail Banking 139 148 43 43 Cards 538 595 72 71 3.6 3.5 VAF 101 113 47 41 3.4 Mortgages(1) 41 44 21 22 3.2 P
Slide 23: While Portfolio Provisions Remain Conservative
While Portfolio Provisions Remain Conservative Portfolio Provisions to Performing Loans(1) (bps) Macroeconomic Unidentified Impairments (Rm) 80 1,600 11% 76 1,400 1,457 43% 75 72 1,311 1,200 70 1,000 57% 65 918 65 800 600 60 400 55 200 50 0 1H15 1H16 1H17 1H15 1H16 1H17 Source: as at 30 June 2017. 1
Slide 24: Strong Rest of Africa Growth Improves Its Returns
Strong Rest of Africa Growth Improves Its Returns Headline Earnings Growth(1) (%) Return on Equity (%) 35 20 33 30 18 25 16 20 19 14 15 12 10 5 10 5 3 0 8 South Africa Rest of Africa 1H14 1H15 1H16 1H17 1H16 1H17 South Africa Rest of Africa Source: as at 30 June 2017. 1. Normalised results are resul
Slide 25: BAGL Strongly Positioned in the Market
BAGL Strongly Positioned in the Market SA Banks offers attractive returns underpinned by high capital ratios Return on Equity BAGL SBG NED FSR 30 23.4% 24.0% 23.4% 22.9% 20 16.7% 17.0% 16.6% 15.5% 15.6% 15.3% 15.6% 15.8% 15.7% 15.3% 14.2% 13.0% 10 0 2013 2014 2015 2016 Leverage Ratio(1) BAGL SBG NED
Slide 26: Capital Position and Themes
Capital Position and Themes BARCLAYS
Slide 27: Capital Levels Remain Healthy
Capital Levels Remain Healthy Barclays Africa Group Common Equity Tier 1 Ratio (%) Risk Weighted Assets (R’bn) 41 16 103 1.6 13.7 12.1 12.1 (0.3) 1.0 (0.7) (0.0) 32 8 32 Board range: 10.0% - 11.5% (Regulatory min: 7.3%) 516 0 FY16 RWA Profit Dividend Other 1H17 Barclays 1H17 Movement Normalised Plc
Slide 28: BAGL Group Capital Composition – June 2017
BAGL Group Capital Composition – June 2017 Absa Bank 2019 Entity (As at Jun-17) BAGL(1) Residual Absa Bank Limited 2017 Targets BAGL Regulatory Limited Minimum Total Assets R1.138bn R948.52bn R189bn CET1 – Regulatory Headline Earnings(3) R7.618bn R4.805bn R2.813bn 7.3% 7.3% 7.5% (1) minimum Common E
Slide 29: SA Approach to Loss Absorption
SA Approach to Loss Absorption • South Africa as a member of the G20 subscribes to the FSB key attributes of effective resolution regimes which reinforces the hierarchy of claims and the concept of No Creditor Worse Off (NCWO) than under liquidation • The South African Reserve Bank (SARB) has releas
Slide 30: Funding and Liquidity Management
Funding and Liquidity Management
Slide 31: Funding Profile Across SA and RoA
Funding Profile Across SA and RoA Rm FY14 FY15 FY16 HY17 RBB SA 429,031 431,420 434,139 439,167 CIB SA 132,060 177,216 202,015 204,684 Loans and Advances to customers SA Banking 561,092 608,636 636,154 643,851 ROA Banking 69,103 88,744 77,877 78,938 BAGL 636,326 703,359 720,309 728,985 RBB SA 251,37
Slide 32: Liquidity Position
Liquidity Position BAGL Liquidity Coverage Ratio (LCR) BAGL Summary Liquid Assets and Reserves Position (Rbn) 130% 118.9% 190 120% 170 110% 33.2 39.7 95.2% 150 100% 90% 130 31.6 80% 69.9% 110 31.8 70% 90 144.7 143.0 60% 80% 70 105.3 50% 70% 60% 88.5 40% 50 30% 30 Dec 2015 Dec 2016 Jun 2017 Dec 2014
Slide 33: Funding
Funding BAGL Funding Composition June 17 Long Term Funding Ratio 6% 22% 18% 22% 21% 21% 20% 21.8% 21.4% 20% 21.0% 23% 19% 53% 19% 18% Dec-15 Dec-16 Jun-17 Deposits from Banks Demand Deposits BAGL Term Deposits Debt Securities in Issue Diversification: • The Group has a well-diversified deposit base
Slide 34: Risk Management
Risk Management @ BARCLAYS
Slide 35: Risk Management Framework
Risk Management Framework The Enterprise Risk Management Framework (ERMF) The Group has maintained its active approach towards managing both current and emerging risks through continued operating effectiveness of its ERMF. This approach is underpinned by: • A robust and aligned governance structure
Slide 36: Credit Risk: Analysis of Credit Exposures
Credit Risk: Analysis of Credit Exposures As of 31 December 2016 Current to 6 months to 1 year to More than Total 6 months 1 year 5 years 5 years Rm Rm Rm Rm Rm Banks 57,489 11,417 27,171 18,259 642 Corporate 320,043 150,566 26,894 129,699 12,884 Local governments and municipalities 9,127 4,967 4 2,
Slide 37: Market Risk: What We Hedge
Market Risk: What We Hedge Structural exposures are converted into a floating rate Assets Rate exposure Liabilities Rate exposure • Fixed (bonds) • Structural Equity Liquid Assets • Floating (treasury bills) • Fixed or floating Structural exposures are Capital Markets identified using a well Instrum
Slide 38: Market Risk: Interest Rate Risk in the Banking Book (IRRBB)
Market Risk: Interest Rate Risk in the Banking Book (IRRBB) Impact on earnings AEaR for 100 and 200 bps Changes in Market Interest Rates 31 December 2016 200 bps 100 bps 100 bps 200 bps Decrease Decrease Increase Increase Domestic Bank Book(1) (Rm) (1,835) (766) 840 1,681 Foreign Subsidiaries(1) Ban
Slide 39: Credit Rating
Credit Rating @ BARCLAYS
Slide 40: Credit Ratings: Foreign Currency
Credit Ratings: Foreign Currency BARCLAYS AFRICA GROUP Group: Ba1 (Neg) Group: Ba1 (Neg) Baa3 Bank: Baa3 (Neg) Bank: Baa3 (Neg) Bank: Baa3 (Neg) Bank: Baa3 (Neg) Group: BB- (Neg) BB+ NR NR Bank: BB+ (Neg) Bank: BB+ (Neg) Source: Latest Moody’s ratings action on South Africa taken on 9 June 2017 and
Slide 41: Appendix
Appendix @ BARCLAYS
Slide 42: History of Barclays Africa Group
History of Barclays Africa Group 2005 2013 1955 Barclays acquires a 56.4% stakeholding in Barclays African businesses are combined Absa, becoming Barclays’ largest Allied Group is formed after the mergers of with Absa to form Barclays Africa Group international acquisition to date. This was the Joha
Slide 43: Barclays Africa, A Strong African Franchise
Barclays Africa, A Strong African Franchise Legend Branches Customers ATM Employees Barclays Africa since 1927 Uganda Kenya Barclays Africa Representative Offices 39 71 98 216 132,154 898 519,230 2,262 Seychelles 8 20 Nigeria 16,947 232 Representative Office since 1981 Tanzania BBT Ghana since 1925
Slide 44: Phased-in Minimum Industry Requirements
Phased-in Minimum Industry Requirements Industry Phase-in of SARB South Africa Aligned to Basel III Minimum Capital Requirements 25.00% 5.00% Individual capital requirements or Pillar 2B Bank-specific individual capital requirement 2.25% 2.25% 2.25% Not disclosed externally 20.00% 2.50% Met wi
Slide 45: Further Strengthening of the SA Financial System
Further Strengthening of the SA Financial System Where we are... South Africa is adopting a Twin Peaks model of financial sector regulation – Prudential Authority with the SARB – Financial Sector Conduct Authority Regulation and legislative framework – South Africa aims to adopt G20 and FSB reco
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