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Half Year Financial Results 2012 14 August 2012

Half Year Financial Results 2012 14 August 2012. Agenda. Highlights. Economic overview. Financial review. Operational overview. Strategy and outlook. Highlights. DOUGLAS MUNATSI. Financial Highlights. Group performance is satisfactory setting the group well for the rest of the year.

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Half Year Financial Results 2012 14 August 2012

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  1. Half Year Financial Results201214 August 2012

  2. Agenda • Highlights • Economic overview • Financial review • Operational overview • Strategy and outlook

  3. Highlights DOUGLAS MUNATSI

  4. Financial Highlights • Group performance is satisfactory setting the group well for the rest of the year

  5. Financial Highlights • Profitability improved on the back of increased business volumes across all lines of business. Expansion into Consumer Lending bearing fruits in Botswana, Zambia and Zimbabwe. Cost to income still high

  6. Financial Highlights Group total assets have increased steadily mainly in Botswana, Zimbabwe and to lesser extent Zambia. Group total loans grew faster than deposits essentially fuelled by Botswana’s book which has grown over 200%

  7. Operational highlights 7

  8. Economic review DOUG MUNATSI

  9. Economic overview 9

  10. Economic overview (cont’d) • Just like temperature in Europe, the financial crisis is heating up once more • US economic activity less robust • Euro area periphery economies at the epicentre of escalation in financial crisis • Investors are increasingly unsatisfied with the steps taken to tackle the euro crisis • Euro area is expected to enter into a mild recession in 2012 10

  11. Economic overview (cont’d) 11

  12. Fiscal & debt levels in selected countries Negative fiscal Balance means budget deficit 12

  13. Inflation development - H112 13

  14. Policy interest rates Policy interest rates – key monetary policy tools to fight inflation Bots Bank rate remained flat at 9.5% Moz policy rate was lowered from 15% in Feb-12 to 13.5% in Jun in line with declining inflation In TZ, firming up of overnight rate in H2:2011 was due to tight liquidity conditions In ZM, bank rate averaged 9% in H1:2012 compared to 7.7% H1:2011 14

  15. Interest rates landscape – H112 15

  16. Exchange rate movement vs. USD 16

  17. ZAR correlation to Euro Correlation between Euro & ZAR is ≈ 0.6 Suggesting that ≈ 60% of US$/ZAR movement is explained by US$/Euro movement Has implications for regional trade 17

  18. Exchange rate movement per Pula ZMK Appreciating ZMK Depreciating 18

  19. Deposits per capita (US$) 19

  20. Minimum capital requirements * * * For new applications. Full compliance date for existing banks: Dec 2012 in Zambia and June 2014 in Zimbabwe 20

  21. GDP Size (US$ bn)Minimum Cap & No. Banks 21

  22. ABC Markets – Banking Sector Landscape (US$m) 22

  23. Operational Overview FRANCIS DZANYA

  24. BancABC Botswana Highlights 24

  25. BancABC Mozambique Highlights 25

  26. BancABC Tanzania Highlights 26

  27. BancABC Zambia Highlights 27

  28. BancABC Zimbabwe Highlights 28

  29. Financial review BEKI MOYO

  30. Income Statement Performance driven by increase in net interest income and non-interest income – expansion into Consumer Lending Impairments higher due to loan growth and downgrade in Tanzania & Mozambique Operating expenses higher in line with expansion 30

  31. Income Statement Performance driven by increase in net interest income and non-interest income – expansion into retail space Impairments higher due to loan growth and downgrade in Tanzania & Mozambique Operating expenses higher in line with expansion 31

  32. Attributable Profit Trend Higher attributable profits driven by increase in core earnings Upward trend in past 3 years supported by sustainable earnings ROE only marginally higher – loss in Tanzania impacted earnings Dip in 2009 due to dollarization & change in business model 32

  33. Income Statement- Segmental Analysis • Attributable profits Tanzania performance impacted by lower interest margins and higher impairments Significant growth in Botswana and Zambia – consumer loans Zimbabwe continued growing profitability from all business segments 33

  34. Income Statement – Segmental Analysis • Total income by entity Strong growth in income other than Tanzania and head office entities 34

  35. Income Statement – Segmental Analysis • Total income by business and subsidiary 150% growth in Retail banking income mainly due to Botswana, Zambia and Zimbabwe. Retail contribution up from 22% in Jun-11 to 36% in Jun-12. 26% growth in Wholesale banking income mainly due to Botswana, Mozambique and Zimbabwe. Wholesale contribution down from 78% in Jun-11 to 64% in Jun-12. * Restated: BancABC Microfin’stotal income moved from wholesale into retail 35

  36. Income Statement – Segmental Analysis • Total net interest income by business and subsidiary Growth across all subsidiaries other than Tanzania Retail NII up 135% Wholesale NII up 29%* Retail contribution up to 41% from 25% Lower margins in Tanzania 36 * Excluding Head office entities

  37. Income Statement – Net Interest Income • Overall Group margins at 6.2% (2011: 6.5%) • Positive trend in net interest income driven by increased balance sheet size – growth in Consumer Lending 37

  38. Income Statement – Impairments & NPLs • Gross and net NPL ratios reduced marginally during the period • Credit loss ratio declined from 1.2% to 0.8% • Increased NPLs in Mozambique, Tanzania and Zimbabwe • Change for impairments in Botswana higher mostly due to increased loan book size 38

  39. Income Statement- Cost to Income 39

  40. Operating Expense per Entity Increase in costs largely driven by retail banking expansion 40

  41. Income Statement- Opex per entity • Operating expenses (BWP’000) Wholesale banking contribution down to 61% from 79% Retail banking contribution up to 39% from 21% Wholesale banking costs up 19% Retail banking costs up 192% 41

  42. Balance Sheet Overview 42

  43. Balance Sheet 43

  44. Balance Sheet- USD 44

  45. Balance Sheet- Loans and Deposits 29% growth in loans since Dec – 11 95% YoY 48% CAGR since Jun-08 19% increase in deposits since Dec-11 46% YoY 40% CAGR since Jun-08 45

  46. Balance Sheet – Segmental Analysis • Loans and advances by business and subsidiary 492% growth in Retail Loans mainly due to Botswana, Zambia and Zimbabwe. Retail contribution to total Loans and advances up from 11% in Jun-11 to 32% in Jun-12. 48% growth in Wholesale Loans mainly due to Botswana, Mozambique and Zimbabwe. Wholesale contribution to total Loans and advances down from 89% in Jun-11 to 68% in Jun-12. 46

  47. Balance Sheet – Segmental Analysis 46% growth in deposits largely driven by Botswana and Zimbabwe 14% decrease in Retail deposits mainly due to withdrawal of a large short term deposit in Zimbabwe. Retail contribution to total deposits down from 15% in Jun-11 to 9% in Jun-12. 57% growth in Wholesale deposits mainly due to Botswana, Mozambique and Zimbabwe. Wholesale contribution to total deposits up from 85% in Jun-11 to 91% in Jun-12. 47

  48. Balance Sheet – Capital Adequacy US $50 million rights offer successfully completed in July 2012 However, current business growth entails raising additional capital Plan is to raise between US $75 - $100 million in tier II capital Zim has new capital reqs and min CAR = 12% effective 1 Aug 2012 48

  49. BancABC Tanzania Challenges Tanzania • Population: 43m • GDP size: US$25 bn • Banking Assets: US$9.8bn BancABC Tanzania recorded a loss of BWP5 million in current period due to reduction in interest margins and high impairment charges Entity also had a loss in 2011 of BWP3.3 million – MTM losses, high impairments Entity was profitable in the preceding four years prior to 2011 Historically Tanzania had low capital levels, low single obligor limits High NPLs exacerbated by a slow legal process 49

  50. Tanzania market analysis • From 2002 To 2011 50

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