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ABC Holdings Ltd

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

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  1. ABC Holdings Ltd Interim Results to June 2009

  2. HIGHLIGHTS

  3. 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.

  4. ECONOMIC OVERVIEW

  5. ECONOMIC OVERVIEW GLOBAL GDP GROWTH Dot-com Crisis Asian Crisis Source: IMF

  6. 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

  7. ECONOMIC OVERVIEW COUNTRY OPPORTUNITY Source: Central Banks, Ministries of Finance and Central Statistical Offices

  8. 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

  9. ECOMOMIC OVERVIEW INFLATION AND INTEREST RATES *Monthly inflation

  10. COUNTRY OVERVIEW

  11. COUNTRY OVERVIEW ATTRIBUTABLE PROFIT *includes Microfin Africa

  12. 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

  13. 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

  14. 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)

  15. 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

  16. 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

  17. FINANCIAL OVERVIEW

  18. 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%);

  19. 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

  20. FINANCIAL OVERVIEW OTHER INCOME • Significant growth in foreign exchange trading volume, especially in Mozambique and Botswana

  21. FINANCIAL OVERVIEW 5 YEAR EARNINGS • Trend shows effect of inflation adjusted accounting in Zimbabwe • Bar Zambia, all banking operations remain profitable

  22. 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;

  23. FINANCIAL OVERVIEW DEPOSIT GROWTH • 26% growth in deposits • Botswana, Mozambique and Tanzania grew by over 30% • Zambia recorded a decline

  24. FINANCIAL OVERVIEW DEPOSIT BOOK SPLIT

  25. 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

  26. FINANCIAL OVERVIEW LOAN BOOK SPLIT

  27. 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

  28. FINANCIAL OVERVIEW CAPITAL *including Tier II ** including TDFL ***including Microfin

  29. 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

  30. 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

  31. 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

  32. THANK YOU

  33. APPENDICES

  34. ECONOMIC ENVIRONMENTGRAIN PRICES International Grain Prices Regional Grain Prices Source: World Bank

  35. ECONOMIC ENVIRONMENTEXCHANGE RATES

  36. ECONOMIC ENVIRONMENTGDP GROWTH

  37. ECOMOMIC ENVIRONMENT EXCHANGE RATES • ZWD Old Mutual implied rate • ZWD revalued in 2008

  38. ECOMOMIC ENVIRONMENT EXCHANGE RATES • ZWD Old Mutual implied rate • ZWD revalued in 2008

  39. FINANCIAL PERFORMANCE: NET INTEREST INCOME

  40. ECONOMIC OVERVIEW COMMODITY PRICES • Commodity prices have recovered significantly from Dec-08 prices Source: World Bank

  41. INTERNATIONAL BANKS MARKET CAPITALISATION • Modest recovery in banks mkt cap indicates that the worst of the banking crisis could be behind us

  42. INTERNATIONAL EQUITY MARKET CAP US$ BILLIONS • International equity markets also showing signs of recovery

  43. 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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