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Interim results presentation. For the period ended 31 March 2003. Features. Headline earnings per share of 67,6 cents Net asset value per share of 545,6 cents per share Risk-adjusted revenue up 30% to R1 231 million Interim dividend up 108% to 25 cents
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Interim results presentation For the period ended 31 March 2003
Features • Headline earnings per share of 67,6 cents • Net asset value per share of 545,6 cents per share • Risk-adjusted revenue up 30% to R1 231 million • Interim dividend up 108% to 25 cents • R209,5 million reduction in NPLs in six months • Group capital ratio at 44% and R1 billion in cash • ROA at 10,3% • ROE at 25,8%
Market conditions • Economic landscape positive • Tax relief for individuals announced • Inflation declining • Interest rate cuts expected • Credit bubble working through • Lending remains cautious • Competitive landscape benign with limited competition • Financial services charter development on track • Usury act review should result in a robust regulatory framework
Headline earnings and dividends Cents 59,2 45,2 Restatement effect
6 months ended 31 March 2003 6 months ended 31 March 2002 50,7% (11,9%) 19,0% 6,3% 4,1% 37,4% 30,2% 40,3% 44,1% 2,8 (19,0%) (5,9%) (18,5%) 18,3% (7,7%) 7,3% 9,25% 35,9% 11,54% (6,3%) 89,0% 62% 63% 15,0% 2,5 84,9% 39,4% 4,9% 46,6% 51,6% Bad debts/Margin Bad debts/Margin less less Cost/Income Cost/Income equals equals 43,07% 39,73% Rsk adj cost/Inc Rsk adj cost/Inc less less equals equals multiply multiply multiply multiply = = 10,27% 7,85% multiply multiply = = 21,9% 25,8% RoE/RoA model Interest margin Assurance margin Other income Bad debts to advances Risk adjusted margin Costs to advances Financing to advances Tax Advances/total assets RETURN ON ASSETS GEARING RETURN ON EQUITY
Portfolio trends • Flat advances book: • Saambou and Persal run down • Write-offs • Cautious advances growth as credit criteriaare relaxed incrementally • Continuing deliberate swing from payrollto retail business • Saambou acquisition doing well
Portfolio trendsThe move from payroll to debit order products * Persal consolidations
Portfolio trendsGross advances portfolio mix Rand million
Portfolio trendsAfrican Bank walk forward analysis R millions Core lending Persal Saambou Total books PLB Gross advances as at 30 September 2002 3 084 305 731 559 2 396 266 6 212 131 New loans granted 1 005 944 0 0 1 005 944 Net receipts (721 532)(107 105) (289 889) (1 118 526) Interest & charges accrued 538 752 60 943 279 114 878 809 Gross cash receipts (1 260 284) (168 048) (569 003) (1 997 335) Bad debts written off (188 095) (44 376) (130 152) (362 623) Balance as at 31 March 2003 3 180 622 580 078 1 976 226 5 736 926 R760 million portfolio reduction Cash build-up
Portfolio trendsExtending the market for unsecured credit Over-borrowed segment Collections and rehabilitation Performing segment (ABIL’s main market) Under-serviced segment New products and channels
Credit quality • Leading credit indicators all positive • Overextension to last 18 months • Overall NPLs to come down slowly • Collections making steady progress in all its activities • Persal cancellations down to 348 (March 2003) from 3 464 (March 2002) • New admin orders down to 1 452 (March 2003) from 2 114 (March 2002)
Credit qualityCoverage ratios Mar 03 Sept 02 R 000’s R 000’s Advances Performing 3 882 333 4 176 978 Non-performing 2 780 139 2 989 662 Total6 662 472 7 166 640 Total provisions and reserves 2 190 141 2 375 905 % % Total provisions and reserves 32,9 33,2 NPLs 41,7 41,7 NPL coverage 78,8 79,5 I/S charge for bad debts 7,7 10,6 Bad debt write-offs 12,2 12,2
Credit qualityNPL and provisioning movements Specific NPLs provisions Balance at 30 September 2002 2 990 2 123 Balance at 31 March 2003 2 780 1 957 (210) (166) Bad debts write-offs (422) (422) Movement for the period 212 256 Equals 5,3% of performing loans Represents: • Increased provisions for new NPLs • Provision movements for remaining NPLs
Credit qualityThe movement in NPLs New NPLs Interest and charges NPLs Write-offs Cash received and curing
Credit qualityLeading indicators point to lower risk Vintage analysis Non-performing capital as a percentage of original principal debt (%)
CollectionsImpact growing Percentage missed 1st instalments on payroll book (%)
CollectionsImpact growing Number of PTPs honoured Number % collection rate 66,7% March 2003 (59,4% September 2002)
CollectionsNPL analysis Specific March September provision 2003 2002 % R 000’s R 000’s African Bank Call centre 66 341 304 562 069 Administration orders 61 498 529 381 711 Legal book 72 1 687 965 1 818 275 Pre-legal work in progress 85 861 452 1 318 818 Legal collection order in place 59 826 513 499 457 70 2 527 798 2 762 055 Specialised lending 73 252 341 227 607 Total NPLs 70 2 780 139 2 989 662
CollectionsImpact growing Legal collections portfolio Rand million
CollectionsCapital management African Bank ABIL group Mar ‘03 Sept ’02 Mar ‘03 Sept ‘02 % % % % Tier 1 36,4 31,3 Tier 2 2,3 2,7 Total 38,7 34,0 43,6 38,1 Cash reserves (R million) 1 048 835 • Dividend increased by >100% to 25 cents • Cautious approach to RoE optimisation • Funding stability paramount
Yield on advances % of gross interest-bearing advances 58,4 52,7 50,7 49,0 48,2
Business restructuring • Theta restructuring gaining momentum • CI and MCG to be divisionalised • TSF 80% holding sold for R1,3 million to previous management • BVI 80% holding sold for R20,7 million to previous management • Collections business doing well • Integration of collections effort between African Bank and Saambou a priority
AC 133 • Advances measured at cost; accounted for on cost amortisation basis • PLB accounted for as business combination, i.e. as if African Bank originated the loans – Sep 2002 • Provisions purely based on recoveries from debtor = PV of future recoveries • General provision of R44.5 million as per SARB requirement • Provisioning methodology largely consistent with previous method = no material change; movements included in IS charge • No hedges or other financial instruments
Empowerment 5 pillars: Representativity and human resource development – PDI representivity at Board level 40%, executive level 17%, senior management 32%, middle management 57% Equity ownership – equity participation for management,amongst others Access to financial services – >80% of ABIL’s business from the marginalised community. Broaden these services even more in the future. Procurement policy – Empowerment companies used for approximately 60% of discretionary procurement. Community investment – African Bank Foundation
General • Credit legislation review • Changes to the ABIL board: • Oshy Tugendhaft, Chairman of Moss Morris • David Gibbon, retiring partner at Deloitte & Touche • Ramani Naidoo, attorney and author of the book “Corporate Governance: An essential guide for South African Companies” • Brian Steele, previously Chief Group Financial Manager of Barloworld • Günter Steffens – previously Dresdner Bank’s Group Representative for Southern Africa and Geographic Head • Tami Sokutu, currently managing director of retail banking at African Bank
Outlook for 2003 • Lower risk environment • Challenge: to maintain and grow the good customers • Rehabilitation of market • Further development of collections business • Develop underwriting competency deeper into the market • Cautious opening up of advances growth • Capital management • Medium term targeted cost to income ratio below 35% • Targeted RoA of 10%, RoE of 30%