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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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slide1
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

slide6
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
slide7
ECONOMIC OVERVIEW COUNTRY OPPORTUNITY

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

slide8
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
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 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 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

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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