INVESTORS CALL PRESENTATION NINE MONTHS 2018 RESULTS POSITIONED FOR GROWTH AND IMPROVED PROFITABILITY

Transcription

1 INVESTORS CALL PRESENTATION NINE MONTHS 2018 RESULTS POSITIONED FOR GROWTH AND IMPROVED PROFITABILITY

2 This presentation contains or incorporates by reference forward-looking statements regarding the belief or current expectations of Diamond Bank, the Directors and other members of its senior management about the Group s businesses and the transactions described in this presentation. Generally, words such as could, will, expect, intend, anticipate, believe, plan, seek or similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the Company and/or its Group and are difficult to predict, that may cause actual results to differ materially from any future results or developments expressed or implied from the forward-looking statements. Such risks and uncertainties include, but are not limited to, regulatory developments, competitive conditions, technological developments and general economic conditions. The Bank assumes no responsibility to update any of the forward looking statements contained in this presentation. Any forward-looking statement contained in this presentation based on past or current trends and/or activities of Diamond Bank should not be taken as a representation that such trends or activities will continue in the future. No statement in this presentation is intended to be a profit forecast or to imply that the earnings of the Company for the current year or future years will necessarily match or exceed the historical or published earnings of the Company. Each forward-looking statement speaks only as of the date of the particular statement. Diamond Bank expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Diamond Bank s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. 2

3 OVERVIEW STRATEGY & BUSINESS UPDATE Q RESULTS & ANALYSIS UZOMA DOZIE CEO UZOMA DOZIE CEO CHIUGO NDUBISI CFO 2018 OUTLOOK & CONCLUSION Q&A UZOMA DOZIE CEO 3

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5 ECONOMIC SUMMARY Q GDP GREW BY 1.50%, A SLOWDOWN COMPARED TO THE PREVIOUS QUARTER. EQUITY MARKET CONTINUES AGAINST EMERGING MARKET VOLATILITY OIL PRICE IMPROVES TO OVER $80 A BARREL WITH FURTHER MOMENTUM EXPECTED POLITICAL UNCERTAINTY INCREASES AFTER FAILURE TO AGREE NEW MINIMUM WAGE CBN INCREASES EFFORTS TO MANAGE EXCHANGE RATE AND FOREIGN RESERVES REDUCTION IN FOREIGN EXTERNAL RESERVE FROM $47.78 BILLION TO $44 BILLION TAX REVENUES INCREASE YEAR ON YEAR BY N1 TRILLION TO N3.9 TRILLION (JAN SEPT. 2018) DELAY IN PASSING PETROLUEM INDUSTRY GOVERNANCE BILL DETERS NEW INVESTMENT BY INTERNATIONAL OIL COMPANIES 5

6 THIRD QUARTER 2018: KEY DEVELOPMENTS SALE OF UK BUSINESS AT ADVANCED STAGE FOCUS ON NIGERIA S SIGNIFICANT MARKET OPPORTUNITY INCREASED CONTRIBUTION FROM NON- INTEREST INCOME IMPROVEMENT IN INTEREST INCOME EXPECTED AS MORE INVESTMENT IS MADE IN BUSINESS BANKING OPERATING EXPENSES REMAIN FLAT YEAR ON YEAR EFFICIENCIES FROM INVESTMENTS IN TECHNOLGY-DRIVEN OPERATIONS START TO EMERGE NON-PERFORMING LOANS (NPLs) REMAIN UNCHANGED AT 12.6% MORE PROGRESS IN RESOLVING IMPAIRED ASSETS EXPECTED 6

7 THIRD QUARTER 2018: KEY DEVELOPMENTS RETAIL DEPOSITS INCREASE BY 18.5% - FOURTH CONSECUTIVE QUARTER OF GROWTH EXPANDED SERVICES ON DIGITAL CHANNELS CONTINUE TO CREATE OPPORTUNITIES OVER N1 BILLION DISBURSED UNDER CASH FLOW BASED SME LENDING FURTHER GROWTH EXPECTED AS LENDING INITIATIVES CONTINUE ACROSS BUSINESS SEGMENTS DEPOSITS DECLINE 8% YEAR ON YEAR BUT LOW COST FUNDING BASE & LIQUIDITY REMAINS STABLE FOCUS REMAINS ON IMPROVING NIM AS WE REPLACE HIGH COST WITH LOWER PRICED DEPOSITS 7

8 STRATEGY AND BUSINESS UPDATE UZOMA DOZIE, CEO

9 STRATEGIC PRIORITIES PROGRESS STATUS EARNINGS OPTIMISATION Conclude divestment from UK business by December Increase lending in the retail segment to 15%-20% (medium term). Grow exposure to the business banking segment to 30% (medium term). Increase non-interest income through activity on digital channels. Increase fee income from loan origination. Completion set for FY2018. Currently at 7.3% of loan book. Currently at 9.3% of loan book. E-business income growing by 12% year-on-year. On track. GOVERNANCE AND RISK MANAGEMENT Reduce exposure of loan book to mid-stream oil and gas sector. Strengthen risk management framework and reduce exposure of loan book to possible currency fluctuations. Continuous review and upgrade of existing risk management framework. Deployment of technology and analytics in loan origination and monitoring. Pay-down on FX related loans continues alongside increasing hedging strategies. TECHNOLOGY-LED RETAIL GROWTH Launch of USSD banking code (*426#) in Diamond Bank MTN Y ello partnership. Extension of agency model to more segments of the market. Strong growth continues. Activity on platform up by over 400% to 3.6million. Agents up 17.85% to 68,269 agents. Cumulative balance up 46.33% YTD. Banking agents increase by 18.07% to 70,052 across Diamond Y ello, CLOSA and BETA platforms.

10 RETAIL BANKING: DELIVERING THE STRATEGY PERFORMANCE SNAPSHOT LOANS (GROSS) N60bn N61bn N52bn N52bn N57bn 28% 30% 29% 28% 22% CHANNEL TRANSACTION SPLIT 11% 11% 10% 8% 8% 26% 24% 24% 22% 24% 42% 37% 39% 39% 44% 7% 3% 7% 6% 6% 6% 3% 3% 3% 2% 20% 23% 24% 23% 25% Sep Dec Mar Jun Sep Personal Loan Auto Loan & Lease Mortgages MSME Credit Card 59% 62% 62% 67% 65% 4% 3% 4% 3% 3% Sep Dec Mar Jun Sep Diamond Online Mobile Banking ATM Branch DEPOSITS N709bn N680bn N758bn N785bn N806bn 10% 15% 13% 13% 13% LOANS Loans grew quarter-on-quarter as more funding was channeled to retail segment, where we continue to see opportunities. We expect improvements in quarters ahead. 90% 85% 87% 87% 87% DEPOSITS Deposits increased year-on-year, and quarter-onquarter as unique product and service offerings gain traction. Sep Dec Mar Jun Sep Low Cost Deposits Fixed Deposits CHANNELS SPLIT More customers adopt digital touch points. The Bank is on track to reduce in-branch transactions to 5% by

11 FASTEST GROWING RETAIL BANK IN NIGERIA FINANCIAL INCLUSION CUSTOMERS EMERGING BUSINESS CUSTOMERS OTHER RETAIL CUSTOMERS 9,928,665 11,694, , ,763 6,532,749 6,788,672 Dec Sep Dec Sep Dec Sep AGENT NETWORK 59,330 70,052 Dec Sep NO. OF DEBIT & CREDIT CARDS IN ISSUE 8,777,745 10,195,816 Dec Sep ATM STATISTCS FUTURE FOCUS Number of Active ATMs 1,218 ATM transaction count 62.4m ATM income earned N1,029m Expand financial inclusion services to the unbanked population. Increase channel footprint. Improve fees and income by encouraging borrowing. through our digital platforms and strategic partnerships. Leverage customers value chain to further penetrate the retail market. 11

12 MOBILE APP AIRTIME PURCHASE USSD (*426#) AIRTIME PURCHASE 7,024,356 12,613,330 5,953,081 5,632,307 5,050,513 5,376,467 9,047,272 5,544,615 4,880,491 5,783,796 4,916,605 4,541,713 4,782,601 2,302, ,715 1,549,872 2,613,659 3,643,437 Sep Dec Mar Jun Sep Dec Mar Jun Sep Trans. value(n'000) Trans. volume Trans. value (N'000) Trans. volume MOBILE APP BILLS PAYMENT 3,517,641 3,288,230 3,159,244 3,565,985 2,364, , , , , ,133 Sep Dec Mar Jun Sep Retail Platforms Our flagship app, Diamond Mobile continues to deliver convenience in banking to our customers. At the end of Q3 2018, we had over 3.3 million customers on the platform. The USSD platform (launched in late 2017) has complimented our suite of digital offerings and highlights the convenience and ease of our proposition. Trans value (N'000) Trans. volume 12

13 BUSINESS BANKING PERFORMANCE SNAPSHOT LOAN (GROSS) NUMBER OF CUSTOMERS (BUSINESS BANKING) N109bn N105bn N82bn N88bn N91bn 16,322 17,111 Sep Dec Mar Jun Sep Dec Sep DEPOSITS LOANS Loan volume increased due to increased risk asset growth within the sector. N138bn N128bn N176bn N141bn N127bn DEPOSITS Decline recorded due to maturities and non-rollover of high deposits, in-line with earlier guidance. Sep Dec Mar Jun Sep CUSTOMERS Increased segment contribution expected through product and service offerings. 13

14 CORPORATE BANKING PERFORMANCE SNAPSHOT LOANS (GROSS) N669bn N655bn N680bn N691bn N636bn CUSTOMER COLLECTIONS (N m) 283, ,196 64% 64% 60% 65% 59.51% 15% 14% 15% 21% 22% 25% 17% 17.10% 18% 23.39% Sep Dec Mar Jun Sep Institutional banking Infrastructure & Transport Energy Business DEPOSITS N232bn N223bn N231bn N153bn N154bn LOANS Dec Sep Decline in loan book resulting from pay downs and recoveries. Action taken to protect balance sheet from currency risks. 40% 42% 38% 50% 65% 14% 12% 14% 16% 10% 10% 16% 19% 11% 3% 31% 33% 41% 15% 21% Sep Dec Mar Jun Sep Institutional banking Infrastructure & Transport Energy Business Treasury DEPOSITS COLLECTIONS Decline recorded due to maturities and nonrollover of high priced deposits. We expect improvement across this segment in the final quarter of the year. Collections improved over the 9-month period due to increased engagement with distributors. 14

15 Q RESULTS & ANALYSIS CHIUGO NDUBISI, CFO

16 Q FINANCIAL SUMMARY GROSS REVENUE FLAT BUT CONTRIBUTION FROM NON-INTEREST INCOME IMPROVED 10.8% YEAR ON YEAR. NET INTEREST INCOME DECLINED QUARTER ON QUARTER AFTER HIGHER INTERST EXPENSE IN FIRST TWO QUARTERS. INTEREST EXPENSE MODERATED IN Q OPERATING EXPENSE INCREASED 2.9% YEAR-ON-YEAR. COST CONTAINMENT MEASURES ARE YIELDING RESULTS AND FURTHER IMPROVEMENTS ARE EXPECTED. NPL RATIO AT 12.6%. ACTION CONTINUES TO ADDRESS CHALLENGES IN OIL AND GAS SEGMENT. DEPOSIT VOLUMES DECLINED BUT LOW COST FUNDING BASE AND LIQUIDITY REMAINS STABLE. 16

17 FINANCIAL HIGHLIGHTS Q INCOME STATEMENT Sep N bn Sep N bn CHANGE Gross Revenue Net Interest Income Non-Interest Revenue (Net) Profit before Tax Profit after Tax (0.6%) (13.6%) 10.8% (38.9%) (38.9%) BALANCE SHEET Sep N bn Dec N bn CHANGE Total Assets Gross Loans & Advances Customers Deposits Total Shareholders Fund 1, , , , (8.2%) (2.8%) (8.0%) (0.7%) KEY RATIOS Sep Sep Dec Net Interest Margin Cost-to-Income Ratio Capital Adequacy Ratio (CAR) NPL Ratio ROAE (Annualised) Cost of Risk EPS (Annualised) 5.8% 70.4% 16.3% 12.6% 1.4% 4.2% N0.13k 6.2% 65.1% 15.8% 9.5% 3.4% 4.5% N0.25k 6.3% 60.0% 16.7% 14.7% 0.4% 6.8% N0.04k Bank Figures Only. See Details in Appendix 17

18 BANK LENDING GROSS LOAN BREAKDOWN BY ECONOMIC SECTORS Sep (Dec. 2017) GROSS LOAN BREAKDOWN BY BUSINESS SEGMENTS Sep (Dec. 2017) Oil & Gas 51% (52%) 81% Retail 7% (6%) General Comm 13% (13%) 13% 13% 4% 1% Manufacturing 13% (11%) Others 1% (1%) 12% 7% Business Banking 12% (10%) Real Est & Const 4% (4%) Corporate Banking 81% (84%) 9% 0% Power & Energy 9% (10%) 51% 1% 2% 1% Government 0% (1%) Transportation & Storage 1% (1%) CUSTOMER DEPOSIT BY BUSINESS SEGMENTS Sep (Dec. 2017) 1% Agriculture 2% (2%) Retail 75% (65%) 4% Finance & Insurance 1% (1%) Information & Communication 1% (1%) General 4% (3%) 75% 11% 14% Business Banking 11% (15%) Corporate Banking 14% (20%) Others comprises Administration & Support, Education, Human Health and Professional & Technical sectors 18

19 BANK NPL ANALYSIS NPL BY SECTOR (Sep. 2018) NON PERFORMING LOANS & PROVISIONS (N BN) General Commerce 2% 5% General 2% 22% 2% 2% 2% 0% 9% 57% Agriculture, Forestry & Fishing 2% Manufacturing 22% Information & Communication 5% Power & Energy 57% Transport & Storage 9% Sep Dec Mar Jun Sep Real Estate 1% Non Performing Loans Provisions NPL BY SECTOR (Dec. 2017) General Commerce 1% General 3% 4% 73% 9% 2% 3% 1% 7% Agriculture, Forestry & Fishing 2% Manufacturing 9% Information & Communication 4% Power & Energy 73% Transport & Storage 7% Real Estate 1% 19

20 OIL & GAS NPL / LOAN ANALYSIS NPL BY SECTOR Sep GROSS LOAN BY SECTOR (Sep. 2018) 100% 35% 45% Upstream 35% Mid-stream 45% 20% Upstream Midstream Downstream Downstream 20% NPL BY SECTOR Dec GROSS LOAN BY SECTOR (Dec. 2017) 100% 37% Upstream 37% 45% Mid-stream 46% 18% Upstream Midstream Downstream Downstream 18% 21

21 2018 OUTLOOK & CONCLUSION UZOMA DOZIE, CEO

22 GUIDANCE AND OUTLOOK FOR 2018 GUIDANCE ROE 9 MONTHS 2018 PERFORMANCE 1.4% FY 2018 GUIDANCE ~ 2.0% Net Interest Margin 5.8% ~ 5.8% Cost to Income Ratio 70.4% ~ 70% NPL Ratio 12.6% ~ 12.0% Cost of Risk 4.2% ~ 5.0% Risk Asset Growth / (Decline) Deposit Growth/(Decline) (3.7%) (8.0%) ~ 4.2% ~ (5.0%) Profit Before Tax N2.6 Billion ~ N3.8 Billion Total Assets N1.6 Trillion ~ N1.6 Trillion 22

23 CONCLUSION TOUGH ECONOMIC BACKDROP IN LAST NINE MONTHS, EXPECTED TO CONTINUE. ACTIONS TO MAXIMIZE DIGITAL-LED RECOVERY REMAIN A FOCUS. NON-INTEREST INCOME TO CONTINUE GROWING. IMPROVEMENT IN INTEREST EXPENSES TO RESULT IN IMPROVED NET INTEREST MARGIN. INVESTMENT IN LOANS ACROSS BUSINESS SEGMENTS TO CONTINUE HAVING POSITIVE MULTIPLIER EFFECT ON OUR REVENUE STREAMS. MANAGEMENT REMAINS FOCUSED ON GROWTH AND IMPROVED PROFITABILITY IN THE MEDIUM TO LONG TERM. 23

24 Q&A

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26 BUSINESS SNAPSHOT Key Strengths 1. Digitally-led proposition is fully aligned to Nigerian lifestyles and preferences. 2. Market leadership in promoting financial inclusion across Nigeria. 3. High quality and expanding partnership network broadening customer access to full suite of financial services. 4. Ethos of continual innovation and technology development. 5. Clear strategy and approach for capturing market opportunity. Countries where we operate (number of branches) Total Assets Total Equity Nigeria (277), UK (1) N1.56 trillion N billion Key partnerships MTN Diamond Y ello IFC MSME Banking WWB BETA Banking Interswitch - Payments USAID Mediloan Visa Debit & Credit Cards Microsoft Cloud Computing Gates Foundation Financial inclusion ATMs/POS 1,218/14,115 Ratings Head Count 3,280 S&P: B- Fitch: BB+ GCR: BBB+ Moodys: B3+ Share Holding (%) 17.75% Market Capitalization* N27.38bn 61.95% 9.25% 4.95% 6.10% Listing Nigerian Stock Exchange (2005) Ticker (Bloomberg) DIAMONDBNK:NL London Stock Exchange (2008) Ticker (Bloomberg) DBPA:LI Carlyle Kunoch Mr and Mrs. Dozie Diamond Partners Free Float Auditors KPMG Professional Services * Bank, as at September 30,

27 BANK COMPREHENSIVE INCOME STATEMENT (Q3 2018) Sep ACTUAL N BILLION Sep ACTUAL N BILLION Y-o-Y % Δ GROSS EARNINGS (0.6) INTEREST INCOME (3.7) INTEREST EXPENSE (41.3) (34.9) 18.3 NET INTEREST INCOME (13.6) IMPAIRMENT CHARGE (25.2) (33.2) 24.1 NET INTEREST INCOME (AFTER IMPAIRMENT CHARGE) (5.8) NON INTEREST INCOME (NET) OPERATING INCOME OPERATING EXPENSES (66.2) (64.3) 3.0 PROFIT BEFORE TAX (40.9) PROFIT AFTER TAX (37.8) OTHER COMPREHENSIVE INCOME (1.4) 0.0 (6,860.0) TOTAL COMPREHENSIVE INCOME (75.7) 27

28 BANK STATEMENT OF FINANCIAL POSITION Sep ACTUAL N BILLION Sep ACTUAL N BILLION YoY % Δ Dec ACTUAL N BILLION QoQ % Δ CASH & BALANCES WITH CENTRAL BANKS (3.2) (7.9) LOANS & ADVANCES TO BANKS (3.9) LOANS & ADVANCES TO CUSTOMERS (1.6) INVESTMENTS PLEDGED ASSETS (23.3) OTHER ASSETS (55.9) FIXED ASSETS & INTANGIBLES DEFERRED TAX ASSET TOTAL ASSETS 1, ,551.9 (0.3) DEPOSITS FROM BANKS DEPOSITS FROM CUSTOMERS 1, , DERIVATIVE LIABILITY OTHER LIABILITIES (25.0) BORROWINGS (26.0) LONG TERM DEBT (13.5) (3.3) (13.2) (57.2) (0.4) 1,695.6 (8.2) 25.9 (35.8) 1,164.7 (8.0) EQUITY (1.4) (0.7) TOTAL EQUITY & LIABILITIES 1, ,551.9 (0.3) 1,695.6 (8.2) 28

29 KEY PERFORMANCE RATIOS Sep Jun Mar Dec Sep NET INTEREST MARGIN (NIM) 5.8% 6.3% 6.0% 6.3% 6.2% COST OF RISK 4.2% 4.7% 4.0% 6.8% 4.5% COST OF FUNDS 4.0% 4.2% 4.2% 3.3% 3.4% COST INCOME RATIO 70.4% 67.7% 70.2% 60.0% 65.1% EPS (ANNUALISED) 13k 10k 16k 4k 33k NET ASSETS PER SHARE (N) ROE (ANNUALISED) 1.4% 2.1% 1.8% 0.4% 3.4% GROSS RISK ASSETS (N BILLION) ,062.4 NPL (N BILLION) PROVISIONS (N BILLION) NPL RATIO 12.6% 12.9% 15.7% 14.7% 9.5% NPL COVERAGE RATIO 54.8% 46.6% 54.6% 49.1% 78.3% NPL COVERAGE RATIO (REG. RISK RSRV INCL) 86.3% 77.6% 78.5% 75.0% 107.0% CAR 16.3% 16.6% 16.4% 16.7% 15.8% LIQUIDITY RATIO 38.0% 42.2% 39.0% 43.0% 327% 29