Results Presentation. For the financial year ended 30 September 2017 AFRICAN BANK HOLDINGS LIMITED 1 DECEMBER

Transcription

1 Results Presentation For the financial year ended 30 September 2017 AFRICAN BANK HOLDINGS LIMITED 1 DECEMBER

2 Contents CEO review Financial review Outlook 2

3 Introduction Good set of results Core loans business performing well Diversification strategy roll out progressing well Building a competitive retail bank for South Africans 3

4 Highlights Financial results Headline earnings up 75% (H vs. H2 2016) Credit loss ratio down to 11.7% from 13.2% (H vs. H2 2016) Core operating costs flat New business loan volumes down 9%, given conservative risk appetite Retail deposit book up 148% off a low base 4

5 Highlights Significant business developments Branch Network o right-sized cost base o all branches to be refreshed by May 2018 Credit Direct - progressing well Digital core transactional banking system fully operational, on track for 2018 launch Corporate further reduction in negative carry, and strengthened capital adequacy MMI partnership commenced o o July 2017 Insurance October Lending 5

6 Strategy overview 6

7 Strategy scorecard * Comparative reference is to the September 2016 period 7

8 Retail deposits growth An emerging product line gaining traction RETAIL DEPOSITS GROWTH R 357 m R 100 m R 144 m R 204 m 4 Apr Sep Mar Sep 2017 Predominantly longer date deposits 5 year deposits amount to 60% of new business Lower average cost of funding than wholesale funding Market leading deposit rates 8

9 Financial review 9

10 Results Operating profit R1 130 million (excluding foreign exchange movement) Full year RoE 9.0 % (Branch Network 20%) Continuing risk, cost and efficiency focus, contributing positively to the bottom line Strong capital and liquidity Core Equity Tier 1 ratio 29.9% (Bank) Available cash balances R10.1 billion 10

11 Increasing operating profit EARNINGS AND RoE OVERVIEW R 379 m % R 501 m 6,7% 7,5% +26% R 629 m 10,6% R m 9,0% A A A A A A A A A AA 32% 27% 22% 17% 12% 7% 0 H2 16 H1 17 H2 17 FY 17 Net profit before tax, FX and goodwill write off ROE (%) 2% RoE in later periods increasingly diluted by higher equity H includes R251 million buy back profit 11

12 Returns on average gross advances ROA overview H2 16 H1 17 H2 17 2,0% 6,5% 13,2% 0,4% 4,0% 5,1% 6,1% 5,8% 15,9% 15,6% 1,7% 2.7% Insurance Non-interest revenue Net interest income Impairments Operating costs ROA (13,2%) (13,8%) (11,7%) (9,2%) (8,8%) (10,3%) Higher insurance earnings, after creation of IBNR (incurred but not reported) R440 million in H Decreasing Net Interest Revenue (NIR) larger loans to lower risk customers Increasing Net Interest Income (NII) impact of debt buybacks decreasing negative carry (excludes profit on buybacks) Decreasing impairment charge reflective of lower risk customer base Increasing operating costs investment costs and a decreasing average advances balance 12

13 Branch RoE above target range Emerging businesses and balance sheet overhang dilutes Group ROE FY 2017 RoE DRIVERS ANALYSIS 2,8% 20,0% 5,8% 2,4% 9,0% Group ROE Credit Direct & Digital Negative carry Surplus capital Branch ROE 13

14 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Percentage of original loan granted Credit quality early risk Early risk continues to be indicative of overall risk experience QUARTERLY DISBURSEMENT EARLY RISK EMERGENCE TRENDS (TOTAL BOOK) 35% 30% 10 Aug 14 4 Apr 16 Old African Bank Curatorship New African Bank 25% 20% 4@12 : 12 Month moving average 4@12 : Quarterly data point 2@6 : 12 Month moving average 2@6 : Quarterly data point 1@3 :12 Month moving average 1@3 : Quarterly data point 15% 10% 5% 0% 14 Note: The last data point for all Early Risk Indicators are based on one month of results and not a full quarter

15 Percentage Distribution Consistent focus on lower risk customers RISK BAND DISTRIBUTION (QUARTERLY) C C C C C C C 100% 71% 76% 87% 88% 87% 89% 0% 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Low Risk Medium Risk High Risk New To Credit New to credit Over 80% disbursements to lower risk customer base (best 5 risk bands of 22) Larger, longer term loan sizes with better risk emergence 15

16 Percentage distribution Average term Percentage distribution Average loan size Term and loan size distribution Reflection of lower risk customer base LOAN SIZE DISBURSEMENTS 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q CARD < R25K R25K < R50K R50K < R75K R75K < R100K >= R100K Average Loan Size Reduced appetite for short term loans Increased maximum loan size Increasing exposure to lower risk customers, qualifying for larger loans TERM DISTRIBUTION 100% 45 90% % 35 70% % % % 30% 15 20% 10 10% 5 0% Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 CARD < > 72 Average Term 16

17 Percentage of original loan granted Credit quality early risk Larger, longer term loans to low risk customers continue perform according to expectations 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 QUARTERLY DISBURSEMENT EARLY RISK EMERGENCE TRENDS (BOOK SPLIT) 40% 10 Aug 14 4 Apr 16 Old African Bank Curatorship New African Bank 35% 30% 25% 4@12 : 12 Month moving average (other) 4@12 : 12 Month moving average (> = R100K >= 60M) 2@6 : 12 Month moving average (other) 2@6 : 12 Month moving average (>= R100K >= 60M) 20% 15% 10% 5% 0% Note: The last data point for all Early Risk Indicators are based on one month of results and not a full quarter 17

18 Credit quality coverage and book split A robust and prudent provisioning policy COVERAGE BY CONTRACTUAL DELINQUENCY BUCKET FY 2016 H FY 2017 CD 0 5% 5% 5% CD % 35% 36% CD 4+ 63% 67% 65% Book remains well provided for Steady, conservative provisioning verified by back-testing Total Book 27.1% 30.0% 29.3% BOOK SPLIT AND SIZE FY 2016 H FY 2017 CD 0 54% 52% 53% CD % 14% 13% CD 4+ 31% 34% 34% Total (R m) W/Off Book (R m) Reduced book as a result of lower, new business volumes (better risk) and earlier write-off (Recency 5 vs. recency 6) No value assigned to the writtenoff book No restructuring of loans in arrears 18

19 Credit quality collections vs. model Discounted actual cash flows continue to track above modelled cash flows ACTUAL VS. EXPECTED CUMULATIVE % OF IN ARREARS BALANCES 48% 57% 38% 42% 33% 36% * * Months from observation date: March 2015 Actual Actual Discounted Expected (Discounted) 19

20 Credit quality collections vs. model Consistent out performance against model over time ACTUAL VS. EXPECTED DISCOUNTED % OF ARREARS BALANCES 45% 40% 35% 30% 38% 33% 25% 20% 15% 10% 5% 0% 06 - Actual 06 - Expected 12 - Actual 12 - Expected 24 - Actual 24 - Expected 20

21 R million Collections/arrears migration Improved collections resulting in positive arrears migration trend CONTRACTUAL DELINQUENCY (CD) FORWARD ROLL RATE (BALANCE) A A A 57% 51% 18% 3,9% 54% 49% 39% 35% 16% 3,4% Collections CD4 CD3 CD2 CD1 CD0 Forward roll rates decreased on a year-on-year basis QUARTERLY COLLECTIONS FY 2017 Collections remain steady, despite decreasing advances book Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 21

22 R million Operating costs overview Increase <1% vs. FY 2016 Business as usual basis VSPs Transactional Banking Core Operating cost Costs (BAU) FY16 * FY17 Total FY 2017 operating costs R2 605 million FY 2017 operating costs increased due to once off payments Voluntary Severance Payments (VSPs) (R67 million) Transactional banking operating costs (R79 million) Operating expenditure on a business as usual basis FY R2 459 million Increased <1% vs. FY 2016 * FY16 = H216 x 2 22

23 New business disbursements Impacted by risk appetite TOTAL BANK DISBURSEMENTS BY QUARTER R million Q1 Q2 Q3 Q4 FY2016 FY2017 Total disbursements R7 989 million, 9% down year-on-year Economic pressures Lower affordability Lower risk appetite Credit Direct R298 million, up 142% year-on-year 23

24 R million Liquidity Earliest funding maturity April 2018 MATURITY PROFILE FUNDING LIABILITIES FY 2017 Buybacks <6M 6-12M 12-24M 24-36M 36-48M 48-60M >60M FY 17 Liability profile excl 2017 buybacks FY 17 Liability profile Positive impact of a liability management exercise on earnings and capital Bought back R4.1 billion ZAR denominated Domestic Medium Term Note Programme (DMTN) and bilateral deposits (FY 2016 : total R11.7 billion) Available total cash balance R10.1 billion, invested with large SA Banks and in RSA sovereign 24

25 Solid capital levels REGULATORY CAPITAL ADEQUACY RATIOS 30 Sep ,2% 30 Sep ,3% 36,2% 29,9% 30,0% 32,9% 31,5% 30,5% CET1/Tier1 Total ABL ABH ABL ABH Strong capital adequacy (CET1/Tier1) Significantly above CET1/Tier1 internal target of 27% Well positioned for International Financial Reporting Standard 9 (IFRS9) impact (R500 million R1 billion) o Regulatory capital impact phased in FY19 FY22 South African banks credit ratings downgrades decreased regulatory capital by 4% to 5% 25

26 Outlook 26

27 Outlook Business environment Struggling economy Indebted consumer in a static market Political instability adding further risk to the downside Regulation Increasing complexity e.g. Risk Data Aggregation and Risk Reporting (RDARR) Increasing cost of compliance Protection vs. constraint/growth (opportunity cost) Industry More competition in a reducing market Margin erosion is evident everywhere Cyber security threats escalating The only constant is change 27

28 Looking ahead Conservative approach to credit will continue Growth opportunities exist in all business units Emphasis on customer experience paramount to success Continuation of partnership strategy MMI partnership to create embedded value Telco relationship to be established Strategic initiatives to be implemented Omni-channel banking Digital Branch network modernisation and additional branches opened Further right-sizing of liabilities and capital optimisation 28

29 Overview of Omni-channel approach 29

30 Concluding remarks Delighted with progress to date Strategy is on track Success factors all achievable by 2021 Competition tough but we have a strong team Moving brand from recovery to relevant 30

31 Contact details and information Investor relations Financial media Louise Brugman Investor relations website African Bank Holdings Limited Integrated Report 2017 African Bank Holdings Limited Results presentation 2017 African Bank Holdings Limited Audited Consolidated Financial Statements 2017 African Bank Limited Audited Financial Statements 2017 African Bank Holdings Limited and African Bank Limited Basel III Pillar 3 Report