Abch analyst presentation 31 dec 2010 v5-final-14_march_2011

BancABC Full Year Financial Results 2010

14 March 2011


AGENDA

• Highlights

• Economic overview

• Financial review

• Operational overview

• Strategy and outlook


HIGHLIGHTS

Douglas Munatsi

Financial Highlights

All banking operations

profitable for the first time in the

history of the Group

Total income increased 39 % to BWP547 million

Operating profit increased by 320% to BWP111 million

Cost to income ratio down to 77% from 82% in the prior

year Operating expenses

up by 19%

Impairment charges on loans and

advances reduced by 69% to BWP16

million

Basic earnings per share improved by 15% to 46.3 thebe from 40.4 thebe in

2009

4 BancABC Full Year Financial Results 2010

Financial Highlights (cont’d)

Balance sheet grew by 36% from BWP4.4 billion in 2009 to BWP6.0

billion

Loans and advances

increased by 54% from BWP2.0

billion to BWP3.1 billion

Customer deposits grew by 46% from BWP3.4 billion in 2009 to BWP4.9

billion

Net asset value per share up from

BWP2.73 to BWP2.93

Return on average equity was 16%

compared to 14% in 2009


Operational Highlights

Total retail branches increased

to 17 as of now

Zimbabwe retail division already

profitable 12 months after

commencement

Successful turnaround of the Zambia operation

which is now profitable

BancABC Zambia and BancABC Zimbabwe re-

capitalised during the year



ECONOMIC OVERVIEW

Douglas Munatsi

Economic Overview

Global economic recovery has been uneven in different

regions

Inflation on the rise due to high oil prices

In developed countries:• Economic growth has been somewhat subdued

• Unemployment remains high

• Renewed fears in the Euro zone due to high debt levelsIn emerging

countries:• Capital inflows have been strong

• Currencies have appreciated

• Early signs of overheating

In sub-Saharan Africa (SSA)• Economic growth has been strong

• High commodity prices a boon to regional countries



Economic Overview

3

-0.6

5

4.4

0.6 1

.8

1.5

5.6

2.8

5 5.5

0

-2.6

2.8

3

9.6

9.2

10.3

9.6

3.7

-1.7

2.8 3

.4

-4

0

4

8

12

08 09 10 11 08 09 10 11 08 09 10 11 08 09 10 11 08 09 10 11 08 09 10 11

World Euro Area SSA USA China SA

Economic Growth in Selected Regions/CountriesRegions

BancABC Full Year Financial Results 2010BancABC Full Year Financial Results 2010

Economic Growth Outlook & Size of Markets (USD m)

10

Botswana14,367

Tanzania23,739

Malawi5,487Kenya

36,922

Zambia18,298

Mozambique9,940

Zimbabwe8,073

Lesotho1,875

Swaziland3,238

Namibia11,767

0

1

2

3

4

5

6

7

8

9

10

11

30 40 50 60 70 80 90 100 110 120 130 140 150 160 170

GD

P G

row

th 2

011 (

%)

Ease of Doing Business- 2011 Rank

GDP Size (US$ m)= Bubble Size

BancABC Full Year Financial Results 201011 BancABC Full Year Financial Results 2010

2.6

6.8 6.4 6.3

2.1

4.7

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

08 09 10 11 08 09 10 11 08 09 10 11 08 09 10 11 08 09 10 11 08 09 10 11

GDP Growth

Avg Growth

Bots Moz Tanz Zamb Zimb SSA

Economic Growth in ABC Markets

Average economic growth for Mozambique, Tanzania, Zambia above sub-Saharan Africa growth of 4.7%

Economic growth in Botswana suffered from effects of Global crisis

Zimbabwe has potential for double digit growth



7,700 4,500 8,093 4,737 3,669

6,152 3,150 5,665 3,316 2,568

3,304 2,560 3,813 1,702 1,669

Loans US$ m

Deposits US$ m

Zimbabwe*Botswana ZambiaTanzaniaMozambique

Assets US$ m

ABC Markets Banking Sector Landscape As of Oct-10

12 * As of Dec-10

Botswana Mozambique Tanzania Zambia ZimbabweGDP US$ m** $13,714 $9,287 $22,777 $15,687 $6,716 Deposit to GDP

45% 34% 27% 21% 38%

* * GDP for 2010

Banking Sector Deposits and Loans

13

The markets continue to be attractive and have generally been growing in the recent past

All markets are highly competitive

Opportunities exist to enter new

market segments in all the countries

The Tanzania and Botswana markets largest of all group presence countries

Zimbabwe has rapidly grown in the 2009-2010

period


J-09

F-0

9

M-0

9

A-0

9

M-0

9

J-09

J-09

A-0

9

S-0

9

O-0

9

N-0

9

D-0

9

J-10

F-1

0

M-1

0

A-1

0

M-1

0

J-10

J-10

A-1

0

S-1

0

O-1

0

N-1

0

D-1

0

-10

-5

0

5

10

15

20

Moz Zim

Zamb

Tanz

Bots

Annual Inflation Trends

Inflation has been broadly stable in all

markets except Mozambique

In Mozambique, inflation accelerated from 4.2% in Dec-09 to 16.6% in Dec-10

due to rapid depreciation of Metical against USD & ZAR


Interest Rate Profiles

15

Jan-0

6

May-0

6

Sep-0

6

Jan-0

7

May-0

7

Sep-0

7

Jan-0

8

May-0

8

Sep-0

8

Jan-0

9

May-0

9

Sep-0

9

Jan-1

0

May-1

0

Sep-1

0

Jan-1

1

4

6

8

10

12

14

16

18 Botswana

Prime Lending

Deposit Rate Spread

Source: Respective Central Banks

Jan

-06

Jun

-06

Nov-0

6

Ap

r-0

7

Sep

-07

Feb

-08

Jul-0

8

Dec-

08

May-0

9

Oct

-09

Mar-

10

Au

g-1

0

8

13

18

8

13

18

%

Prime Lending

Deposit Rate

Mozambique

Spread

Jun-0

6

Dec-

06

Jun-0

7

Dec-

07

Jun-0

8

Dec-

08

Jun-0

9

Dec-

09

Jun-1

0

Dec-

10

0

4

8

12

16

20 %

SpreadLending Rate

Deposit Rate

Tanzania

Jun

-06

Oct

-06

Feb

-07

Jun

-07

Oct

-07

Feb

-08

Jun

-08

Oct

-08

Feb

-09

Jun

-09

Oct

-09

Feb

-10

Jun

-10

Oct

-10

4

8

12

16

20

24 %

SpreadLending Rate

Deposit Rate

Zambia


Exchange Rate Movement vs. USD

On annual basis the following currencies depreciated vs USD:

•MZN; 19.6%•TZS; 10.8%•K ; 3.4%

ZAR appreciated vs USD by 10.6%

BWP appreciated vs USD by 3.5%-12 -8 -4 0 4 8 12 16 20

BWP

ZAR

MZN

TZS

K

-3.5

-10.6

19.6

10.8

3.4

%

YoY: Dec-09 to Dec-10

Ex Rate vsUSD: Appreciation(-) & Depreciation(+)

Appreciationvs USD Depreciationvs USD



BWP vs Exchange Rates

Over Dec-09 to Dec-10 the BWP appreciated against MZN, TZS, K,

GBP, EUR, USD

The BWP depreciated against ZAR & YEN by

8.0% & 9.6%

Ex Rate Movement of BWP against Foreign Currency

Depreciation Appreciation

-10 -5 0 5 10 15 20

ZAR

MZN

TZS

K

EUR

GBP

YEN

USD

-8

19.3

12.9

6.6

10.2

7.2

-9.6

3.5

%

YoY: Dec-09 to Dec-10


FINANCIAL REVIEW

Beki Moyo

18


Income Statement

19

BWP’000s 2010 % ∆ 2009

Net interest income 297,845 67%

178,394

Impairment of loans & advances (15,826) -69% (51,218)

Net interest income after impairments 282,019 122%

127,176

Non interest income 264,288 -0.3% 265,017

Total income 546,307 39%392,19

3

Operating expenditure (435,093) 19%

(365,694)

Net income from operations 111,214 320% 26,499

Share of (loss)/profits of associates (20,134) -225% 16,164

Profit before tax 91,080 113% 42,663

Tax (22,495) -243% 15,768

Profit for the year 68,585 17% 58,431

Attributable to: - Ordinary

shareholders 66,710 15% 58,117

- Minorities 1,875 497% 314

EPS (thebe) 46.4 15% 40.4

2006 2007 2008 2009 20100

20

40

60

80

100

120

140

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

86 124 86 58 67

37%

42%

23%

14%16%

Attributable Profit (BWP m) and ROE (%)

Attributable profit

ROE


Income Statement (USD)

20

USD’ 000’s 2010 % ∆ 2009

Net interest income 43,873 74% 25,176

Impairment of loans & advances (2,331) -68% (7,228)

Net interest income after impairments 41,542 131% 17,948

Non interest income 38,930 4.1% 37,402

Total income 80,472 45% 55,350

Operating expenditure (64,089) 24% (51,610)

Net income from operations 16,383 338% 3,740

Share of (loss)/profits of associates (2,966) -230% 2,281

Profit before tax 13,417 123% 6,021

Tax (3,314) -249% 2,225

Profit for the year 10,103 23% 8,246

Attributable to: - Ordinary

shareholders 9,827 20% 8,202

- Minorities 276 527% 44

EPS (cents) 6.8 19% 5.7

2006 2007 2008 2009 2010 -

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

11,868 16,597 12,560 8,202 9,827

37%

42%

23%

14%16%

Attributable Profit (USD '000) and ROE (%)

Attributable profit

ROE


Attributable Profit Trends

Improvement in quality of earnings

Current year profitability driven by:• Higher net interest income from better

margins and higher asset base• Lower impairments in all entities other than

BancABC Tanzania

Profitability was negated by:• Loss in share of results of associates• Taxation compared to prior year tax credit

21


Income Statement – Segmental Analysis

22

Attributable Profit

BWP 000’s 2010 % Cont 2009 % Cont

% chang

e

BancABC Botswana 20,040 30% 17,413 30% 15%

BancABC Mozambique 22,919 34% 30,266 52% -24%

BancABC Tanzania 15,804 24% 5,155 9% 207%

BancABC Zambia 11,203 17% (33,567) -58% 133%

BancABC Zimbabwe 27,716 41% 19,362 33% 43%

Banking operations 97,682 146% 38,629 66% 153%

Head Office(30,972

) -46% 19,488 34% -259%

TOTAL 66,710 100% 58,117 100% 15%


Income Statement – Segmental Analysis (USD)

23

Attributable Profit

USD 000’s 2010 % Cont 2009 % Cont

% chang

e

BancABC Botswana 2,952 30% 2,457 30% 20%

BancABC Mozambique 3,376 34% 4,271 52% -21%

BancABC Tanzania 2,328 24% 728 9% 220%

BancABC Zambia 1,650 17% (4,737) -58% 135%

BancABC Zimbabwe 4,084 41% 2,733 33% 49%

Banking operations 14,390 146% 5,452 66% 164%

Head office (4,563) -46% 2,750 34% -266%

TOTAL 9,827 100% 8,202 100% 20%


Income Statement – Net Interest Income

24

Positive trend in net interest income

driven by increased margins, better

liquidity and increased balance

sheet size

Impairments were largely under control

improving net margins after impairments

2006 2007 2008 2009 2010 -

50,000

100,000

150,000

200,000

250,000

300,000

350,000

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Net interest margin

Net int BWP'000 NIM before impairments NIM after impairments

BW

P '0

00


Income Statement – Segmental Analysis

25

Net Interest Income (BWP’000)

2010 2009%

change

BancABC Botswana 51,452 34,831 48%

BancABC Mozambique 29,057 38,594 -25%

BancABC Tanzania 48,038 35,178 37%

BancABC Zambia 67,331 61,632 9%

BancABC Zimbabwe 57,443 14,339 301%

Banking operations 253,321

184,574 37%

Head office 44,524 (6,180) 820%

TOTAL 297,845 178,394 67%

Mozambique affected by exchange and interest rate volatility


Income Statement – Impairments & NPLs

26

Impairment and credit loss ratios declined

Credit losses declined sharply owing to

improved credit risk management

Net NPLs covered by collateral

Overall NPLs have now stabilised

2006 2007 2008 2009 20100.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

NPL and credit loss ratios

Gross NPL ratio Net NPL ratio Credit loss ratio

NP

L r

ati

os

Cre

dit

loss r

ati

o


Income Statement – Non-Interest Income

Trading income, fees and commissions now main source of non-interest income

Bulk of equity investments disposed of in 2009, hence no mark-to-market gains

Overall quality of non-interest income improving – greater portion of earnings are now recurring

27

2006 2007 2008 2009 2010

-50,000

0

50,000

100,000

150,000

200,000

250,000

300,000

Non-interest income

Fees and commissions Trading income Gains on investment activities MTM - investment property Other income

BW

P '0

00


Non-interest income

BWP 000’s 2010 Contribution 2009Contributio

n % change

Fees and commissions 103,189 39% 84,013 32% 23%

Trading income 139,586 53% 128,997 48% 8%

Non recurring items - - 51,926 20% -100%

Other income 21,513 8% 80 0.03% 26791%

Total 264,288 100% 265,016 100% -0.3%

Income Statement – Non-Interest Income


Income Statement – Cost to Income Ratio

29

Costs have increased as retail rollout is progressing and Zimbabwe is normalising

However, cost to income ratio is declining•To continue declining as retail income contribution increases•Medium term target is cost to income ratio of 50%

Retail costs were 15% or BWP63 mill of total expenses (09: 9% or BWP35 mill)

Staff cost were BWP243 million (09: BWP180 million)

Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-100%

10%

20%

30%

40%

50%

60%

70%

80%

90%

49% 47%

59%

82%77%

Cost to Income Ratio


Income Statement – Staff Costs

30

Total head count in 2010 of 668 vs 592 in 2009

Growth in staff numbers in last 12 months mainly attributable to retail expansion

2006 2007 2008 2009 2010

-

100

200

300

400

500

600

700

800

337 395

450 504 475

-

-

34

88 193

Staff compliment for the year

Wholesale Retail

337 395 484 592 668


Retail Banking CAPEX

31

USD ‘000 BWP ‘000

Branch capital expenditure 9,526 65,539

Systems roll-out 4,550 31,303

Data centre centralisation 3,478 23,926

17,554 120,768

All funded from internal resources


Balance Sheet

32

BWP '000s 2010 2009 % change

Cash and short term funds 999,338 881,884 13%

Financial assets held for trading 1,117,827 880,740 27%

Financial assets designated at fair value 79,139 17,905 342%

Loans and advances 3,078,110 1,995,325 54%

Property and equipment 330,218 278,975 18%

Other assets 406,809 362,916 12%

TOTAL ASSETS 6,011,441 4,417,745 36%

Deposits 4,907,045 3,355,118 46%

Borrowed funds 579,420 543,822 7%

Other liabilities 87,116 103,026 -15%

Total liabilities 5,573,581 4,001,966 39%

Equity attributable to ordinary shareholders 422,337 399,069 6%

Minority interest 15,523 16,710 -7%

Total equity 437,860 415,779 5%

TOTAL EQUITY AND LIABILITIES 6,011,441 4,417,745 36%


Balance Sheet (USD)

33

USD '000s 2010 2009 % change

Cash and short term funds 154,997 132,194 17%

Financial assets held for trading 173,375 132,023 31%

Financial assets designated at fair value 12,274 2,684 357%

Loans and advances 477,415 299,099 60%

Property and equipment 51,217 41,818 22%

Other assets 63,097 54,401 16%

TOTAL ASSETS 932,375 662,219 41%

Deposits 761,083 502,932 51%

Borrowed funds 89,868 81,519 10%

Other liabilities 13,512 15,443 -13%

Total liabilities 864,463 599,894 44%

Equity attributable to ordinary shareholders 65,504 59,820 10%

Minority interest 2,408 2,505 -4%

Total equity 67,912 62,325 9%

TOTAL EQUITY AND LIABILITIES 932,375 662,219 41%


Balance Sheet – Overview

34

36% growth in balance sheet from BWP4.4bn to

BWP6bn

Deposits up 46%• Growth across all the

markets• Significant growth from

BancABC Botswana and BancABC Zimbabwe

Loans and advances up 54%• Significant growth in

Zimbabwe as economy stabilised

• Focus during the year for Tanzania was mostly on collections


Balance Sheet – Loans and Advances

35

BancABC Zimbabwe now largest contributor to Group’s loan book

Lower growth experienced in other markets

Compounded annual growth rate of 34%

BancABC Botswana

26%

BancABC Mozam-bique14%BancABC

Tanzania15%

BancABC Zambia:8

%

BancABC Zimbabwe:

32%

ABCH & Other

6%

Loans

2006 2007 2008 2009 2010 -

500 1,000 1,500 2,000 2,500 3,000 3,500

941 1,247

2,250 1,995

3,078

Net Loans and Advances (BWP m)


Balance Sheet – Deposits

36

Growth in deposits across footprint, CAGR = 32%

Additional funds generated invested in loans and money market instruments

BancABC Botswana still the largest contributor

BancABC Zimbabwe second largest contribution

BancABC Botswana:40%

BancABC Mozambique:17%

BancABC Tanzania:16%

BancABC Zambia:5%

BancABC Zimbabwe:22%

Deposits

2006 2007 2008 2009 2010 -

1,000

2,000

3,000

4,000

5,000

6,000

1,595 1,962

2,822 3,355

4,907

Deposits (BWP m)


Balance Sheet – Capital Adequacy

37

Total Equity (BWP m)

Capital Adequacy Ratio

Subsidiary 2010 2009 Min 2010 2009

BancABC Botswana 171 160 15% 18% 23%

BancABC Mozambique 162 145 8% 24% 17%

BancABC Tanzania 97 96 12% 15% 23%

BancABC Zambia 86 42 10% 21% 10%

BancABC Zimbabwe 191 102 10% 21% 20%All entities are adequately capitalised


OPERATIONAL OVERVIEW

Francis Dzanya

38


Operations Summary

› 17 Retail branches as of now

› Staff compliment now

Botswana Mozambique

Tanzania Zambia Zimbabwe

SquareFairgroundsFrancistown

MaputoBeira

MatolaTete

Chimoio

UpangaKariako

Pyramid Plaza

LumumbaKitwe

Mount PleasantHeritageAbercornMutare

ABCH Group693 Employees

Botswana

BancABC Botswana

106 Employees

Mozambique

BancABC Mozambique102 Employees

Tanzania

BancABC Tanzania

81 Employees

Zambia

BancABC Zambia

125 Employees

Zimbabwe

BancABC Zimbabwe

232 Employees

South Africa

100% 100% 81% 100% 100%

BancABC South Africa47 Employees

100%


Improved quality of loan book

Net impairment charge was low

Non-performing loans down from prior year

High collections on previously impaired accounts

Botswana

Mozambique

Tanzania

Zambia Zimbabwe

Net Impairment charge

Down Down 77% to BWP2m

Up 41% to

BWP18m

Down Down

› Overall improvement of loan book

Operations Summary


› All subsidiaries adequately capitalized

› Mozambique additional tier I capital of US $3m and tier II capital of US $2m

› Zambia additional tier I capital of US $5m and tier II capital of US $1m

› Zimbabwe additional tier I capital of US $10m

Operations Summary

Botswana Highlights

PAT improved 20% to BWP21m

• Increased profitability driven by higher net interest income:• Improved margins and increased interest earning assets• NII increased 48% to BWP51m

• Non-interest income declined by 22% to BWP17m following reduction in forex trading volumes and margins

• Operating expenses increased 27% to BWP59m – retail expansion

Balance sheet increased 30%, customer deposits increased 40% to BWP2b; funds invested in loans and money market instruments


Mozambique Highlights

PAT of BWP23m, 24% lower than prior year• Lower income due to lower margins and

heavy depreciation of Meticais against BWP and USD

• Expense growth lower at 6% even with retail expansion mainly due to currency depreciationGrowth in balance sheet subdued


Tanzania Highlights

Despite increased impairment and operating expenses, PAT increased 207% to BWP16m• Expenses increased 18% to BWP48m mostly from

retail expansion related costs• Non-interest income increased 40% to BWP38m from

increased forex transactions and bond trading

BancABC Tanzania’s liquidity position improved significantly leading to higher net interest income• Deposits grew 18% to BWP0.8bn• Loan book declined 8% to BWP0.4bn• Excess liquidity invested in money market

instruments• Margins higher due to low funding rates for most of

the year44 BancABC Full Year Financial Results 2010

Zambia Highlights

PAT of BWP11m compared to a loss of BWP34m in prior year• Operating expenses increased 5% to BWP80m• Costs tightly managed• Synergies from the merge of the bank with Microfin • Net recovery of BWP3m compared to a net impairment charge

of BWP27m in prior year

Balance sheet now better structured:

• Deposits increased 21% to BWP253m• Cost of funds declined resulting in higher margins• Loan book down 22% to BWP233m, efforts were devoted to

collections• Net interest income up by 9% to BWP67m


Zimbabwe Highlights

PAT up 38% to BWP27 mill• Expenses up 71% to BWP107m due to industry-

wide staff costs increase and retail expansion• Bank’s income increased 93% to BWP140m

Subsidiary grew its balance sheet significantly:• Deposits increased 316% to BWP1.1bn• Loans and advances increased 810% to BWP0.9bn• Transaction flows have also increased• Combined effect was to increase subsidiary’s

income



STRATEGY AND OUTLOOK

Douglas Munatsi

Follow up on 2010 Objectives

48

Grow & Diversify Customer Base

Increase Non-Interest Income

Reduce Impairments

Boost Net Interest Income

Control Operatingcosts

Reduce cost of Funding

Invest for growth

› Merge Microfin and Zambian ops and cross sell

› Convert wholesale banking customers to retail bank

› Expand Retail Banking business

› Cross sell products to borrowing customers

› Improved credit management

› Managed growth of the loan portfolio

› Costs driven by incremental revenue potential

› Improve turnaround times

› Expansion of Retail Banking footprint

› Invest in human capital

› Retain a substantial amount of Group‘s earnings

OBJECTIVE STRATEGIC ACTIVITIES RESULTS

On-going

Achieved, but results lagging in Tanzania

On-going

Cost to Income ratioOn-going

On-going

Merger successfully closed, rollout of

retail products on-goingBancABC Full Year Financial Results 2010

2011 Objectives

49

Grow & Diversify Customer Base

Increase Non-Interest Income

Reduce Impairments Boost Net Interest Income

Control Operatingcosts

Reduce cost of Funding

Manage investment in Growth

› Increase both wholesale and retail customer numbers

› Embed Retail Banking business

› Cross sell products to borrowing customers

› Improved credit management

› Managed growth of the loan portfolio

› Costs driven by incremental revenue they can generate

› Improve turnaround times

› Embed Retail Banking rollout across footprint

› Invest in human capital

› Retain a substantial amount of Group‘s earnings

OBJECTIVE STRATEGIC ACTIVITIES On-goin

g



Dividend declaration

50

A final dividend of 10 thebe per share to be paid out to shareholders on register on 1 April

2011

Outlook

51

Economies generally stable in operating

countries

Downside risks exist :• Unrest in Middle East and

North Africa • Debt crisis in Europe• Risk of price bubbles in China• Quantitative easing and other

stimulus packages

Retail rollout to continue until fully embedded in

all subsidiaries

Group to also continue growing wholesale

division

Impairments largely under control; results in Tanzania to show in the

near future

Sustained dividend payments going forward



THANK YOU

Abch analyst presentation 31 dec 2010 v5-final-14_march_2011

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Transcript of Abch analyst presentation 31 dec 2010 v5-final-14_march_2011