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CAL Bank - Q3 2014 Results & Operating Environment

This presentation provides an overview of CAL Bank's performance in the third quarter of 2014, highlighting key financial metrics and the operating environment in Ghana. It focuses on risk management strategies, credit and foreign exchange risk exposure, and industry performance.

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CAL Bank - Q3 2014 Results & Operating Environment

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  1. FACTS BEHIND FIGURES THIRD QUARTER 2014 RESULTS 5 November 2014

  2. Speakers

  3. Presentation Outline

  4. Overview Established • 1990 Licensing • Universal Banking License Network and Team • 21 branches across Ghana • 90 ATM’s • E-Banking Platform • 669 dedicated employees Focus Segment • Corporate Banking • Treasury Activities • Retail banking Risk Management and Accounting • Basle II • IFRS Key Partnerships • Proparco, DEG, Mauritius Commercial Bank, Citibank, OPIC, Sumitomo Mitsui Bank Corp. Listing • Ghana Stock Exchange since 2004 • Issued Shares – 548.26 million • Public Float – 58.7% • Market Capitalisation – GHS 493.44 million; ~USD 147.2 million* Source: Ghana Stock Exchange, oanda.com (27th September, 2014)

  5. Operating Environment - Ghana INFLATION FOREIGN EXCHANGE 16.5% HEADLINE INFLATION 26.8% DEPRECIATION YTD* • Highest level since March 2010 • Rate pushed higher by non-food inflation • Consumer inflation running well above government target of 13% • The Cedi has started showing slight appreciation due to the recent USD 1 billion Eurobond and cocoa proceeds POLICY RATE 19.0% IN Q3 • Policy rate is up from 16.0% in January 2014. • Bank of Ghana has increased the MPR twice in 2014 to contain inflation pressure and realign interest rates in favour of domestic assets COMMODITY PRICES GOLD: USD 1208.67 per ounce* • Gold prices have increased marginally from USD 1205.90 per ounce in January 2014 INTEREST RATES 36% INCREASE IN RATES YTD COCOA: USD 3313.46 per tonne* • Interest rates trended up on the money market, increasing by an average of 36% • Cocoa prices have risen steadily from USD 2699.79 per tonne in January 2014 • CRUDE OIL: USD 91.16 per barrel* • Global oil demand remains relatively stable, decreasing marginally from USD 95.44 in January 2014 *As at 30th September, 2014 Source: BOG, Bloomberg, ICCO, ICS Research

  6. Operating Environment - Banking Sector in Q3-2014 Banking Sector Overview Banking Sector Metrics • No new banks have opened in 2014 • Sector currently has 27 banks in operation: 14 foreign, 3 government; 10 local private • Similar product offerings across banks (corporate and retail loans, mortgages, auto-finance, etc.) • FNB has rebranded as an international bank under the name; “GN Bank” • Ghana Commercial Bank rebranded under “GCB Bank” in Sept. 2014 • Total assets increased from GHS 33.9 billion in January 2014 to GHS 44.2 billion in July 2014, an increase of 30.4% • Liquidity crunch in the industry has led to proliferation of deposit promotion drives across the industry • New BOG directive on write-off of loans after 180 days of being “Loss-”rated. • CREDIT • Real credit growth of 26.8%; up from 14.6% last year • NPL RATIO • Unadjusted NPL ratio declined to 12.3% compared to 12.9% in the corresponding period last year • CAPITAL ADEQUACY RATIO • CAR declined to 16.2%, compared to 18.6% in the corresponding period last year • RATES • Weighted average interbank rate of 24.2% (48.5% YTD increase) • Lending rates of banks rose to 27.8% (8.6% YTD increase) Source: Bank of Ghana, IC Securities Research , Bloomberg

  7. CAL Bank 2014 - A year of focused risk management Risk Management • Closely monitor exposure to at-risk sectors (government, construction, mortgage, real estate, down-stream oil & gas) due to emerging economic challenges • Effectively manage FOREX assets and liabilities to reduce exchange risk • Minimize exposure to foreign currency denominated expenses • Management of CAL Bank has strengthened the Bank’s Risk Management processes in response to the current deteriorating economic environment • Risk Managers and Business Units have enhanced monitoring and reporting on identified risks for emerging challenges so they can be addressed on-time • Identified risk exposures include: • Foreign Exchange Risk • Market Risk (Interest Rate & Inflation Risk) • Credit Risk • Operational Risk • CAL Bank’s robust risk management practices, efficient credit monitoring and controlled credit growth have resulted in the Bank remaining successful in this challenging economic environment CREDIT RISK FOREIGN EXCHANGE RISK RISK EXPOSURE INFLATION INTEREST RATE RISK • Rigorous cost control to ensure value for money in procurement and capital expenditure • Increase Advisory/Non-funded income to mitigate risk of reduced net Interest income from loans as interest rates rise

  8. Listed Banks Q3 2014 Performance Q3 2014 Industry Profit After Tax (GHS million) Q3 2014 Industry ROE vs. ROA Q3 2014 Industry P/E vs. P/B

  9. Listed Banks Q3 2014 - Rising Industry NPL ‘s Non Performing Loans Ratio

  10. Listed Banks Q3 2014 Performance Capital Adequacy Ratio

  11. CAL Bank Q3 2014 Financial Statement Highlights

  12. CAL Bank - Q3 2014 Group Income Statement Key Highlights • Net Interest Income growth of 20.4% y/y attributable to increases in constituents of earning assets as well as planned volume increases in loan portfolios, government of Ghana securities and placements to banks and other financial institutions. Additionally, volumes and rates on paying liabilities went up as well but were managed to ensure that NII is maximized. • Significant contribution from Net Trading Income, up 278.8% y/y, driven by customer trade volumes and proprietary trades increasing during the period. • Total Operating Expenses growth of 37.7% y/y due to expansion in operations and to general increases in cost of goods & services. Also, branch network increased from 19 to 21 coupled with an increase from 82 to 90 ATMs. • Credit Loss Expense increased by 37.7% in line with loan book growth of 25.0% . Increase also as a result of significant specific provisions made and recognition of BOG directive on loan write offs. • 45.9% y/y growth in Profit after tax • Cost to income improved by 31.2% from 34.8% in Q3 2013 as a result of stringent cost containment measures and higher increase in revenue than in costs, using virtually the same resources.

  13. CAL Bank - Q3 2014 Group Balance Sheet Key Highlights • Total Assets grew by 56.9% y/y largely supported by a 151.2% growth in Investment in Government Securities with total volume on loans and advances increasing to GHc591.8m . • Investment in Government Securities increased as a results of planned strategy to maximize returns on excess liquidity resulting from increased deposits. • Fixed Assets growth of 44.1% mainly from purchase of capital assets in relation to the branch expansion program and revaluation. • Customer deposits increased by 25.0% y/y driven by targeted deposit mobilization efforts of the new branches and deepening of existing relationships with existing branches. • Borrowings increased 143.0% y/y through securing additional facilities to support asset growth and increased volume of trade/ financing activities. • NPL Ratio increased marginally as a result of downgrade of classified accounts to a lower grade other than “OLEM”. However security is held for these loans and we continue to monitor to ensure clients are current with the restructured servicing of such credits.

  14. CAL Bank Q3 2014 - Asset Mix Sectoral Distribution of Loans

  15. CAL Bank Q3 2014 - Deposit Mix Deposit Mix

  16. CAL Bank Share Price Performance (Jan-Sept 2014)

  17. Targets for 2015 Corporate Banking • Continue selective approach to loan growth to preserve healthy balance sheet • Focus on increasing non-funded income • Pursue big-ticket syndicated transactions and advisory mandates Retail Banking • Increase branch network to 30 strategically - selected locations to increase deposit base • Launch further attractive promotions to boost deposits. • Continue targeting growing middle class clientele for retail assets and deposits. • Continue to improve E-banking services and Card products People • Roll-out bespoke training of all staff using dedicated CAL resource Center • Continue to reward staff performance to retain motivated & high quality personnel • Deepen training in key growth sectors - oil & gas, power, syndications, • Remain on-track with Head Office development to provide a modern, world class , conducive work environment Technology • Increase operational ATMs to 110 by year end 2015 • Enhance process and storage infrastructure • Enhance IT products including : • VISA/ MasterCard POS merchant terminals  • MasterCard /China Union Pay Products • ATM acquiring on Mastercard • Issuance of Prepaid Mastercards • Enhance Visa Platform using VBV

  18. FACTS BEHIND FIGURES Thank you

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