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ABC Holdings Ltd. Interim Results to June 2009. HIGHLIGHTS. HIGHLIGHTS. African Banking Corporation successfully re-branded to BancABC across all operating territories Total income 9% up to BWP 235 m (H108: BWP 215 m) Cost to income ratio increased to 72% (H108: 50%)

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ABC Holdings Ltd

Interim Results to June 2009



Highlights1
HIGHLIGHTS

  • African Banking Corporation successfully re-branded to BancABC across all operating territories

  • Total income 9% up to BWP 235 m (H108: BWP 215 m)

  • Cost to income ratio increased to 72% (H108: 50%)

    • Retail banking development

    • Dollarisation of the Zimbabwe economy and costs iro strengthening the existing operations

  • Attributable profit of BWP 36.5 m (H108: BWP 73.6 m), and EPS of 25.4 thebe (H108: 51.2 thebe)

  • Strong operational and financial performance in Mozambique entrenches BancABC’s positioning in that market

  • Retail banking development progressing well - branch network to be rolled out H209.



Economic overview global gdp growth
ECONOMIC OVERVIEW GLOBAL GDP GROWTH

Dot-com

Crisis

Asian

Crisis

Source: IMF


ECONOMIC OVERVIEW KEY INDICATORS

  • Global economy is projected to decline by 1.4% in 2009

  • SSA economic growth suffering from the negative impact of global recession but still projected to grow at 1.5% in 2009, outperforming global economy

    • Negative growth in Botswana

    • Zimbabwe expected to registered GDP growth for the first time in 10 yrs

  • Commodity prices weakened significantly in sympathy with the global economic downturn resulting in weak export earnings

  • Inflation pressures have generally been low on the backdrop of weak global demand and subdued oil prices

    • Zimbabwe burst the inflation bubble following the adoption of multi-currency system – hyperinflation turned to deflation


ECONOMIC OVERVIEW COUNTRY OPPORTUNITY

Source: Central Banks, Ministries of Finance and Central Statistical Offices


ECONOMIC OVERVIEW COUNTRY OPPORTUNITY

  • SSA currencies are recovering from significant declines against the USD experienced in Q408 and Q109

  • Volatility in forex markets higher than previously experienced

  • Zimbabwe presents great growth opportunity despite low asset base

  • Depreciation of ZMK has reduced deposit base

  • Banking assets however continued to grow, albeit at a slower pace


Ecomomic overview inflation and interest rates
ECOMOMIC OVERVIEW INFLATION AND INTEREST RATES

*Monthly inflation



Country overview attributable profit
COUNTRY OVERVIEW ATTRIBUTABLE PROFIT

*includes Microfin Africa


Country overview botswana
COUNTRY OVERVIEW BOTSWANA

  • Economy severely impacted by declining diamond prices

    • Loan book declined by 9% from Dec 08 but up 17% from June 08

    • Impairments contained at prior year levels

  • Total income increased by 15% to BWP 39.1 m

    • Net interest income marginally down to BWP 16.9 m (H108: BWP 18.2m)

    • Other income increased significantly to BWP 22.3 m (H108: BWP 15.8m), predominantly foreign exchange trading income

  • Retail expansion and staffing costs impacted profitability

  • Attributable profit stable at BWP 6.0m


Country overview mozambique
COUNTRY OVERVIEW MOZAMBIQUE

  • Impressive performance with attributable profit up 140% to BWP 17.5 m

  • Net interest income up 57% to BWP 21.5m

    • Loan book grown by 25% from Dec 08 and 75% from June 08

  • Other income up 162% to BWP 28.6 m

    • Increase in business volumes

    • Higher margins owing to high volatility

    • Foreign exchange trading income

  • Low levels of impairments due to economy’s lesser dependence on commodity prices

  • Banc ABC’s strong niche position in market place reinforced


Country overview tanzania
COUNTRY OVERVIEW TANZANIA

  • Net interest income increased to BWP 14.2 m (H108: BWP 11.6 m)

    • Loan book grew 43% YOY but declined 14% since Dec 08

  • Other income grew by 32% to BWP 11.9 m

  • Impairments significantly higher at BWP 5.6 m (H108: BWP 1.0 m)

  • Attributable profit lower at BWP 1.7 m (H108: BWP 2.7 m)


Country overview zambia
COUNTRY OVERVIEW ZAMBIA

  • Zambian economy very hard hit by slump in copper prices during 2008, significant lag effect into broader economy and support sectors

  • High levels of impairments of BWP 22m due to resulting economic impact

  • Net interest income stable at BWP 32.4 m, but other income declined due to limited liquidity

  • Management changes implemented

  • Merger of Microfin and ABC Zambia operations expected to produce synergistic cost savings


Country overview zimbabwe
COUNTRY OVERVIEW ZIMBABWE

  • Overall income down vs. H108, but improved from H208

    • Net interest income BWP 2.6 m (H108: BWP 8.6m)

    • Other income BWP 12.8m (H108: BWP 32.1m) due to reduced investment property income and tight liquidity

  • Attributable profit of BWP 2.1 m (H108: BWP 27.6 m)

    • Significant cost increase due to dollarisation

  • Decision taken to divest of investment portfolio to fund banking operations

  • Promising signs of banking sector recovery in Zimbabwe

  • Stabilising Zimbabwe economy presents great growth opportunities off a very low base



Financial overview income statement
FINANCIAL OVERVIEW INCOME STATEMENT

  • Net interest income up 11% to BWP 78.7m

  • Non interest income up 8% to BWP 156.5m, driven by forex income

  • Total income up 9% to BWP 235 m (H108: BWP 215 m);

  • Net interest income contribution to total income stable at 33%

  • Cost to income ratio increased to 72% (H108: 50%) due to the retail banking development, dollarisation of the Zimbabwe economy and strengthening of human capital across the Group

  • Net interest income covered 47% of costs

  • Basic EPS 25.4 thebe (H108: 51.2 thebe);

  • Average return on equity remains positive at 16% (H108: 39%);


Financial overview income split
FINANCIAL OVERVIEW INCOME SPLIT

  • Income composition consistent for last three years

  • Interest income to contribute proportionally more going forward

    • Expected return to stability in the global markets

    • Redeployment of capital from non-core assets to interest earning assets


Financial overview other income
FINANCIAL OVERVIEW OTHER INCOME

  • Significant growth in foreign exchange trading volume, especially in Mozambique and Botswana


Financial overview 5 year earnings
FINANCIAL OVERVIEW 5 YEAR EARNINGS

  • Trend shows effect of inflation adjusted accounting in Zimbabwe

  • Bar Zambia, all banking operations remain profitable


Financial overview balance sheet
FINANCIAL OVERVIEW BALANCE SHEET

  • Deposits increased by 4% from Dec 08 and 26% from June 08 to BWP 1.9 billion

  • Region’s high exposure to commodities impacted significantly on business growth and debt servicing

  • Group impairments as a result increased by 215% to BWP 41m, with Tanzania and Zambia increasing by 340% and 460% respectively

  • Strengthening of Group credit department and systems ongoing

  • Group balance sheet grew by 24% from June 08 and 4% from December 08 to BWP 4.1 billion

  • Loans and advances up by 38% to BWP 2.2 billion compared to June 08, but declined by 4% since December 08 due to deliberate policy to curtail lending

  • NAV per share increased by 15% from December 2008 and 22% from June 2008, to 3.51 thebe per share;


Financial overview deposit growth
FINANCIAL OVERVIEW DEPOSIT GROWTH

  • 26% growth in deposits

  • Botswana, Mozambique and Tanzania grew by over 30%

  • Zambia recorded a decline


Financial overview deposit book split
FINANCIAL OVERVIEW DEPOSIT BOOK SPLIT


Financial overview loan book growth
FINANCIAL OVERVIEW LOAN BOOK GROWTH

  • Net loans increased by 38% from June 08

  • All subsidiaries registered significant growth with the exception of Zambia which grew marginally


Financial overview loan book split
FINANCIAL OVERVIEW LOAN BOOK SPLIT


Financial overview 5 year nav trend
FINANCIAL OVERVIEW 5 YEAR NAV TREND

  • NAV per share increased 22%

  • Consistent NAV growth over the last 5 years

  • Zimbabwe operations positive contribution to capital in 2009


Financial overview capital
FINANCIAL OVERVIEW CAPITAL

*including Tier II

** including TDFL

***including Microfin


Financial overview capitalisation
FINANCIAL OVERVIEW CAPITALISATION

  • Mutually agreed not to draw down the proposed US$25 m investment by CVCI

  • Zimbabwe investment portfolio of equity and real estate assets to be liquidated to fund banking operations – original capital preservation strategy for Zimbabwe no longer necessary

  • The proceeds are expected to meet the Group’s funding needs

  • Planned rights issue postponed

  • IFC to disburse 50% of US$13.5 m convertible loan

    • Balance to be drawn down over the next 12 months


Retail banking
RETAIL BANKING

  • Significant investment in retail banking made in systems and human capital

    • BWP 22 m in direct expenses

    • Investment in IT systems of US$3.2 m

  • Retail Banking head office now appropriately staffed, but contributed to overall higher employee costs

  • 9 branches to be opened by the end of 2009

  • Costs expected to continue to increase as project rolls out

  • Retail banking expected to contribute meaningfully in 2nd half of 2010

  • Branch profitability estimated at between 18 to 24 months


Outlook challenges
OUTLOOK CHALLENGES

  • Economies across the region beginning to show signs of recovery

  • Strengthening commodity prices especially copper, nickel and diamonds

  • Expected improvement in incidence of bad debts

  • Major thrust continues to be consolidation and ensuring modest growth notwithstanding high costs as a result of retail banking

  • Continued proactive management of the loan book

  • Merger of Zambia operations should result in cost savings and turn around

  • Deposit mobilization remains a key focus area for the group, particularly in Zambia

  • Dollarisation of the Zimbabwe economy brings liquidity challenges, but presents huge opportunities




Economic environment grain prices
ECONOMIC ENVIRONMENTGRAIN PRICES

International Grain Prices

Regional Grain Prices

Source: World Bank


Economic environment exchange rates
ECONOMIC ENVIRONMENTEXCHANGE RATES



Ecomomic environment exchange rates
ECOMOMIC ENVIRONMENT EXCHANGE RATES

  • ZWD Old Mutual implied rate

  • ZWD revalued in 2008


Ecomomic environment exchange rates1
ECOMOMIC ENVIRONMENT EXCHANGE RATES

  • ZWD Old Mutual implied rate

  • ZWD revalued in 2008



Economic overview commodity prices
ECONOMIC OVERVIEW COMMODITY PRICES

  • Commodity prices have recovered significantly from Dec-08 prices

Source: World Bank


International banks market capitalisation
INTERNATIONAL BANKS MARKET CAPITALISATION

  • Modest recovery in banks mkt cap indicates that the worst of the banking crisis could be behind us


International equity market cap us billions
INTERNATIONAL EQUITY MARKET CAP US$ BILLIONS

  • International equity markets also showing signs of recovery


Stock market capitalization ssa countries us m
STOCK MARKET CAPITALIZATION SSA Countries US$ m

Mkt Cap: Jul 2009

  • JSE capitalisation up from US$485bn in Dec 08 to US$667bn in July 09

Mkt Cap: Dec 2008

Zambia

Botswana

Tanzania

Zim

Kenya

Nigeria


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