Results presentation. for the period 4 April to 30 September 2016

Transcription

1 Results presentatin fr the perid 4 April t 30 September Nvember 2016

2 Intrductin First set f results fr the new African Bank grup Significant imprvement in all aspects f the business Gd fundatin fr transparent reprting Slid base fr business transfrmatin Cnsiderable supprt frm a wide set f stakehlders Suth African Reserve Bank Gvernment Emplyees Pensin Fund Banking Cnsrtium Funders Curatr and deal team African Bank peple 2

3 Highlights Financial results Results R615 millin better than frecast cntained in the Offer Infrmatin Memrandum (OIM) Bth Bank and Insurance entities are prfitable befre impairment f gdwill Credit risk under cntrl, despite macr ecnmic pressures Cnservative prvisining Strng balance sheet, imprved by liability management exercise Stabilised custmer franchise 1,25 millin custmers n bk Extensive branch netwrk f 386 branches lan applicatins per mnth 3

4 Grup verview 4

5 Strategy frmulatin The legacy business Mnline, largely branch based unsecured lending business Highly liquid, well capitalised but inefficient balance sheet Belw par IT infrastructure Sme peratinal and prcess imprvements under curatrship Lw mrale Required a full scale business review New Missin, purpse and strategy, underpinned by: New set f Values New perating mdel New balanced set f Success Factrs Fur business units Branch, direct, digital and crprate segmentatin Creating a differentiated custmer service experience Investing in a new IT radmap t align t strategy Driven by a mtivated wrkfrce 5

6 Strategy verview 6

7 Operating mdel 7

8 Successes t date Fcused cmmitment t strategy Business unit segmentatin cmplete Custmer service measures established Net Prmter Scre in median f Suth African banks Humanity thrugh banking and We are yu eths CEO is custdian f custmer experience African Bank brand Remains strng in traditinal custmer base Brand develpment plan in place Prduct ffering imprved Extra Value Lans Funeral cver Savings and Investment fferings t be scaled up 8

9 Successes t date (cntinued) Significant gvernance and cmpliance imprvements New Bard with a diversified skill set Risk sub-cmmittees Asset and Liability Cmmittee (ALCO) and Technical Mdel Cmmittee, with independent external expertise Majr peratinal imprvements Central data management Practive and nimble implementatin f credit changes New custmer friendly website Cllectin peratins wrking exceptinally well IT imprvements Increased system stability Radmap t future IT business mdel agreed Cmmitted peple Abve average engagement scre 43 % (75% participatin) 9

10 New business disbursements Stable with increased market share R Millin Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nv-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Disbursements t 30 Sep 2016 R4 188 millin, 4% dwn year-n-year (2015: R4 368 millin) Ecnmic pressures Cmpetitive market Natinal Credit Regulatr (NCR) pricing changes 6 May 2016 Further credit tightening criteria in Sep 2016 Marginal increase in market share in disbursements, reaching 6,4% in Jun 2016 vs. a lw f 3,5% in Feb % 6% 5% 4% 3% 2% 1% 0% NCR changes Apr May Jun Jul Aug Sep Mnthly 2015 Mnthly 2016 Credit tightening * % calculated based n Experian credit bureau data 10

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12 Results highlights Operating prfit befre tax fr the perid R335 millin (after tax R269 millin) Grss custmer advances balances R27,6 billin Strng liquidity, with cash balances f R12,9 billin Cre Equity Tier 1 capital adequacy 31,5% 12

13 Earnings cmparisn t OIM* Decreased yield as a result f higher debt cunselling Lwer credit impairment charge as a result f review f underwriting criteria and better cllectins Liability management exercise gains Favurable VAT ruling frm SARS n Residual Debt Services Limited asset purchase * The OIM is the Offer Infrmatin Memrandum, issued by the curatr, f the ld African Bank as part f the Exchange Offer t affected creditrs 13

14 Credit quality Cntinuing imprving/stable trend in arrears Driven by cntinuing imprvements in underwriting against a deterirating ecnmic envirnment and early risk experience adjustments Early risk experience cntinues t be indicative f verall risk experience 14

15 Term and lan size distributin Increasing fcus n lwer risk custmers Apr Sep 2016 Average lan size R R Average term 26,3 31,0 mnths 100% 80% 60% 40% 20% Drivers Reduced appetite fr shrt term lans Increase f maximum lan size and term t R200K ver 72 mnths Increasing expsure t lwer risk custmers, qualifying fr larger lans 0% 100% 80% 60% 40% 20% Card < R10K R10K-R25K R25K-R50K R50K-R75K R75K-R100K > R100K 0% Card < >72 15

16 Credit quality A rbust and prudent prvisining plicy Advances with cntractual arrears up t six mnths impaired prgressively Based n expected cash flws A 90-day emergence perid Advances are written ff if n payment has been received fr six mnths The written-ff bk has zer value Restructuring f advances des nt affect arrears classificatin Arrears calculatins are runded up Any partial missed instalment is runded up t full perid, n matter hw small 16

17 Cllectins Cntinuing stable cllectins n a decreasing bk R millin Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Cntinuing fcus n all cllectins mechanisms Electrnic, effective striking f custmer accunts Special cllectins fcus increased in current envirnment Legal cllectins 17

18 Strng liquidity and capital Earliest funding maturity April 2018 R millin Successful R11,7 billin liability management exercise saving negative carry f apprximately R2,3 billin ver the full term f the bnds Freign liabilities largely hedged by cash and swaps at 30 Sep 2016 Cash balance R12,9 billin 4 April September 2016 Psitive liquidity gap Psitive repricing gap Deferred maturity prfile cmmencing Apr Cllateral cash Strng capital adequacy CET/Tier1 31,5% Ttal 38,3% < 6M 6-12M 12-18M 18-24M 24-30M 30-36M 36-48M 48-60M >60M Funding liabilities 18

19 Insurance Financial highlights All Credit Life plicies transferred t Guardrisk R33 millin net prfit after tax, after having built up apprpriate reserves African Bank earned R215 millin in fees and cmmissin Claims rati 35% Value f investment R314 millin Ttal assets R797 millin 19

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21 Challenges Suth Africa Lw predicted GDP grwth Vlatile ecnmic and plitical backgrund Cmpetitin Large SA retail banks have made significant imprvements t their business mdels Regulatin Left field play Increasing cst and cmplexity may hamper innvatin Will make sme higher risk business unprfitable, pssibly driving these custmers t unregulated lenders Brand recgnitin Investrs Higher earners Operatinal imprvements Welcme regulatin that levels Remaining IT imprvements playing field IT infrastructure fr new business Right size cst base 21

22 Challenges (Cntinued) African Bank Hldings cntext As an immature business, we must grw by Ensuring prduct fferings are aligned t custmer needs Imprving cmpetitiveness Distributing thrugh target market apprpriate channels Ensuring prduct, service and pricing has an excellent chance f success Macr ecnmic factrs are less f a cncern 22

23 Prspects Different plans fr different business units Branch netwrk Mature business, cntinue t imprve and right size Utilise channel fr mre prducts Maximise returns Credit direct Remte fulfilment Evlving business Marketing spend t grw Scale up early 2017 Digital Significant investment required Value Transactinal Banking Differentiatin essential Launch late 2017 Crprate Cntinue t right size balance sheet within defined risk appetite Manage balance sheet and transfer price t business 23

24 Cncluding remarks Better assets and an unusual balance sheet acquired frm the ld bank, buying sufficient time t Establish the new African Bank Prvide sufficient evidence that the strategy has gained tractin by the time we will need new funding We have the right strategy supprted by engaged peple We have a stable custmer base with a viable grwth strategy Our fundatin fr success is being laid We ve made significant prgress in a shrt perid We are cnfident that we will deliver ur strategy t the benefit f all stakehlders 24

25 Cntact details Investr relatins Financial media Luise Brugman 25