FCMB/CSL Investor Conference

Transcription

1 FCMB/CSL Investor Conference presentation

2 Forward looking statements 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 py that the earnings ofthecompany 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 Outline Overview H Financial Performance Business Segments Performance Concluding Remarks 3

4 Operating Segments The Bank s Business Segments are split into Retail, Business and Corporate Banking as follows: Retail Banking We are a niche player focussing on Consumers & Micro, Small and Medium Sized Enterprises (MSMEs) Business Banking Incorporating all business activities relating to Middle Market Corporates Coverage and Channels Strong presence in Nigeria 220 branches across 36 states including the FCT (target 300+ branches) West Africa Expansion Benin Republic with over 15 branches Togo, Senegal and Cote D Ivoire (commenced operation in Q2) ATMs, Contact Centre Internet Banking, Mobile Banking Corporate Banking Focus on Core Business We are a niche player focussing on Corporate Banking Evolving into an international commercial bank from customers with monthly turnovers of above N1 billioninthe a universal bank.; disposing of non-bank following market segments: subsidiaries: o o o o o Multinational Corporations Specialised Industries Public Sector Institutions Financial Institutions Investment Banking ADIC Insurance Ltd sold to Group NSIA Diamond Mortgages Ltd integrated into the bank Diamond Securities Ltd and Diamond Registrars Ltd sold to Kaizen Ventures. Operating license of Diamond Capital Ltd sold to Kaizen Ventures, while the assets will be stripped and sold individually. DPFC In the process of being sold. 4

5 Update on Strategic Priorities Continuing i Retail Banking Strengthth Tighter Risk management Discipline Partnership to test branchless banking for the under / (un)banked Strengthened loan monitoring team to reduce loan loss occurrence Dedicated segmented branch staff in Decentralized loan monitoring to regions to keep abreast MSME/Xclusive banking intensify customer with issues on ground Introduction of risk based delegated lending authority to recruitment and grow monthly fee income to at least improve quality of risk assets N650 million by year end Appoint experienced head of retail credit risk SavingsXtraSeason4 tocontinuethegrowthin our flagship product Improving Operating Efficiency Re-Launching Corporate Banking Growth Rigorous implementation of project sparkle initiatives: Talent & Performance Mgt. Expanded scope of corporate banking for enhanced Reorganization of support units performance and increase in market share Sales optimization Renewed drive in distributors ib t collection for major clients with new accounts opened and dormant Customer Centricity Leadership accounts resuscitated Issue customer charter our promise on service delivery The implementation of e-banking platform to drive Consequence management deposit volume customer satisfaction levels impact staff bonus payments Target Improved Earnings via Contingent / Off Exceptional mystery shopping results will lead to Balance sheet transactions instant reward or disciplinary action 5

6 Outline Overview Half-year Financial Performance Business Segments Performance Concluding Remarks 6

7 Profit and Loss Account (H1 2011) Group Group Bank Bank H N' billion H N' billion YoY % H N' billion H N' billion YoY % Comments Gross Earnings (4.3) (6.0) Interest Income (11.5) (11.5) Interest Expense (4.8) (11.2) 57.1 (4.3) (11.0) 60.9 Net Interest Income Other Income Operating Income Operating Expenses (26.3) (23.2) (13.4) (23.5) (20.6) (14.1) Operating Profit Group net interest income up 11% to N25.3 billion (YoY), bank net interest income up 13.2% to N24.9 billion (YoY) Group operating Profit up 11.1% to N13.0 billion (YoY), Y) bank operating profit up 10.4% to N12.7 billion (YoY) The provision for losses of N11 billion is made up of: Impact of divestment from non- bank subsidiaries N5.0 billion. Accruals for existing and new NPLs N4.4 billion General provisions N1.6 billion Provision For Losses (11.0) (5.5) (100.0) (10.9) (5.4) (101.9) Profit / (Loss) Before Tax (67.7) (70.5) Profit / (Loss) After Tax (73.9) (73.9) 7

8 Balance Sheet (H1 2011) Group Group Group Bank Bank Bank H N' billion FY 2010 N' billion H N' billion YoY % H N' billion FY 2010 N' billion H N' billion YoY % Comments Liquid Assets (18.9) (23.8) Risk Assets Other Assets (34.9) (35.9) Investments Fixed Assets (8.1) (8.4) Total Assets Deposits Other Liabilities (7.7) Borrowings Equity Total Liabilities Off Balance Sheet (0.4) (6.6) Group risk asset volume up 23.6% to N354 billion (YoY), and up 13.4% against FY Bank risk asset volume up 21.4% to N341.1 billion (YoY) and up 9.0% against FY 2010 Risk assets growth is net of NPL sale to AMCON of N21 billion and write-off of fully provisioned NPL 0f N5.9 billion. Group deposit base up 0.8% to N464.8 billion (YoY) and up 12.8% against FY Bank deposit base up marginally 0.3% to N425.7 billion (YoY), up 12.4% against FY Balance Sheet Size

9 Key Performance Metrics September 2011 Group Bank Sep. Jun. Mar. Dec. Jun. Sep. Jun. Mar. Dec. Jun NIM 9.1% 10.3% 10.1% 9.2% 9.6% 10.7% 10.6% 9.4% NPL 10.8% 14.4% 14.8% 17.7% 10.5% 14.0% 13.6% 17.5% Cost of funds 2.0% 2.2% 3.4% 4.5% 2.0% 2.0% 3.4% 4.8% Coverage 50.4% 72.1% 64.1% 90.3% 43.9% 66.1% 60.1% 86.4% Capital Adequacy 16.2% 15.2% 16.6% 17.5% 17.9% 17.2% 18.7% 18.6% Liquidity 38.0% 42.9% 41.5% 43.9% 38.0% 42.9% 41.5% 43.9% Cost to Income Ratio 66.9% 65.2% 62.8% 66.4% 64.8% 62.8% 61.4% 64.1% 9

10 Group Operational Highlights Deposits Operating (N Bn) Profit (QoQ, N Bn) Cost of Funds % 2.0% Mar Jun Sep Mar Jun sep Cost to Income Ratio Net Interest Margin 10.3% 65.2% 66.9% 91% 9.1% Mar Jun sep Mar Jun sep

11 Group Lending Gross Loan Breakdown Jun-11 Jun (2010) N374Bn (N341Bn) Gross Loan Breakdown Dec-10 Dec N345Bn 1% 1% General Comm 23% (18%) 23% 2% 2% Oil & Gas 15% (19%) 3% Manufacturing 14% (15%) Power 10% (8%) 4% General 8% (9%) 15% 5% Construction 6% (5%) 6% Real Estate 6% (2%) Finance & Insur. 5% (7%) 6% 14% ICT 4% (6%) 8% Government 3% (0%) 10% Transport 2% (2%) Capital Market 2% (6%) Agriculture 1% (1%) Others 1% (2%) 1% 1% 0% General Comm 21% 2% 21% 2% Oil & Gas 18% Manufacturing 16% 4% Power 8% 5% 18% General 8% Finance & Insur. 7% 7% Construction 7% Real Estate 5% 7% ICT 4% 16% Transportation 2% 8% 8% Capital Market 2% Others 1% Agriculture 1% Government 0% 11

12 Group Lending Gross Loan Analysis by Maturity (N Bn) Jun 2011 Chart Title (2010) Gross Loans, Non Performing Loans (N Bn) Over 12 months 0-30 days 1-3 months 3-6 months Dec Mar Jun Sep months Jun Jun Gross Loans Non Performing Loans Comments Loan to Deposit Ratio 9.6% of the loan portfolio relates to an exposure in power generation 57% of loan portfolio falls within 12 months while 43% are medium to loan term loans 83.7% 81.3% 80.6% Dec Mar Jun Sep

13 Group NPL Analysis NPL by Sector (June 2011) NPL by Category Manufacturing 43% General Commerce 31% Transportation & Comm 15% N60.3Bn 40% N51.1Bn 40% N40.6Bn 35% N40.6Bn Oil & Gas Downstream 6% others 3% Consumer Credit 1% 36% 33% 24% 27% 64% Real Estate & Mortgage 1% Jun Dec Jun Sep Finance, Insur. & Cap. Mkt 1% Substandard Doubtful Lost NPL by Sector (June 2010) Oil & Gas Downstream 26% others 20% General Commerce 18% Comments The Manufacturing and general commerce sectors accounted for over 74% of the total NPLs. N60.3Bn Finance, Insur. & Cap. Mkt 15% Transportation & Comm 15% Manufacturing 5% Consumer Credit 1% Real Estate & Mortgage 1% 13

14 Group Asset quality NPL Ratio Coverage Ratio 17.7% 14.8% 14.4% 10.8% 90.3% 64.1% 72.1% 50.4% Jun Dec Mar Jun Sep Jun Dec Mar Jun Sep Comments Cost of Risk NPL ratio improved to 10.8% in June 2011 (Jun %) following sale of NPLs to AMCON and write-off of fully provisioned NPLs These resulted to a temporary drop in NPL coverage ratio to 50.4% from 72.1% in Q However, we intend to improve this ratio to about 80% by year end through additional provisioning in H2 Net P&L impact of AMCON sale of N1.9 billion loss 3.1% 6.4% 51% 5.1% 6.1% Cost of risk is 6.1% in Jun (Jun %), Target < 5% end of 2011 Jun Dec Mar Jun Sep

15 Group Capital and Liquidity Capital Adequacy (CAR) Liquid Assets June 2011 (2010) 16.6% 15.2% 16.2% 10% 10% 10% Dec Mar Jun Sep Placement 62% (52%) Cash & Equivalent 20% (29%) Treasury Bills 18% (19%) Actual CAR Stat. Minimum Requirement Liquidity 41.5% 42.9% 25% 25% 38.0% 30% Comments Strong liquidityidit at 38%, above statutory t t minimum i of 30% Tier 2 capital inflow of $70 million from two multilateral credit agencies expected in Q3. This will facilitate growth and promote capacity for transaction Tier 1 increase not currently considered Dec Mar Jun Sep Capital release of about N14.3 billion following the sale of subsidiaries will positively impact CAR Liquidity Stat. Minimum Requirement 15

16 Bank Funding Mix & Deposits Composition Building Stable Low Cost Funding Base 26% 24% 22% 22% 74% 76% 78% Deposit by Type N378.7bn N410.7bn N425.7bn Dec Mar Jun Sep Dec Mar Jun Sep Time Deposits Demand & Savings Deposits Savings Time Demand Deposit Mix, By Business Loans & Segments Advances June 2011 Retail Banking, 46% Business Banking, 43% Corporate Banking, 11% Comments Increasing influence of Retail Banking leading to rise in low cost deposit and reduced concentration risk Growth of over 22% YoY recorded in low cost deposits accounts Drop of over 38% YoY recorded in time deposits 16

17 Bank Operational Highlights Deposits (N Bn) Operating Profit (QoQ, N Bn) 8.1 Cost of Funds 3.4% % 2.0% Dec Mar Jun Sep Dec Mar Jun Sep Cost to Income Ratio Net Interest Margin 61.4% 62.8% 64.8% Dec Mar Jun sep % 8.0% 6.0% 4.0% 2.0% 0.0% 10.6% 10.7% 9.6% Dec Mar Jun sep

18 Bank Staff Productivity Operating Income Per Staff (N 000) Staff Cost to Total Cost YoY QoQ 23,107 27,123 26,112 28, % 33.3% H H Q Q Q Q Mar Jun Sep Key Operational Enhancements Continued improvement expected as a result of full implementation of Project Sparkle initiatives Growth in staff productivity attributable to increase in centralised processing 18

19 Outline Overview 2010 Financial Performance Business Segments Performance Concluding Remarks 19

20 Nigeria s fastest growing Retail Bank Deposits (N Bn) Retail Monthly Fee Revenue (N mn) Retail Deposits Deposits (N Bn) to Bank s Total Deposits Naira (%) % 48% 52% 313 Jun Dec Jun Sep Jun Dec Jun Sep Retail Deposits (N Bn) Comments Retail Banking now contributes around one third of the bank s income and has a growing influence on the bank s results As our customer base grows, the recurring monthly fee income 150 will continue to grow giving consistent, steadily increasing fee income. Daily product sales numbers continued to average about 1,800 per day. Growth in Retail liabilities has helped to push down COF and maintain a healthy percentage of low-cost deposits to total Jun Dec Jun Sep deposits We have a very effective Direct Sales Force of 1,200 outsourced agents 20

21 Retail Risk Assets Growth Retail Banking Risk Assets Trend (N Bn) Comments Another strong half year for Retail lending, 42.2 helping the bank to maintain the best in class 27.2 net interest margins 13.1 Lending is sufficiently diversified across products, with MSME representing about 40% Jun Dec Jun Sep and personal loans just under 30% Retail Risk Assets Classification (N Bn) Despite the high growth rate, retail lending is expected to peak at no more than 15% of total bank lending in 2011, growing to 20% in 2012 The growth looks high but is in line with our projections and budget Jun Dec Jun Sep Personal Loan Autoloan and Lease Mortgages MSME Credit Card 21

22 Outline Overview 2010 Financial Performance Business Segments Performance Concluding Remarks 22

23 Diamond Bank Outlook H A challenging period for management s first 100 days We found a good business with a great franchise, a strong brand, and market leading retail business that needs tighter disciplines. H1 result showed remarkable abe trend te in Retail business growth go with improving po cost of funds and operating income. As per our guidance the underlying performance of the bank was strong and classification of new NPLs in Q2 resulted in lower than expected profitability Provisioning for losses of N11 billion in H1 implies an additional charge of N19 billion will be taken in H2 (in line with N30 billion projected for the year). Our cost to income ratio was affected by one off costs which we don t expect to see in H2. With the continued implementation of Project Sparkle initiatives, we expect that the targeted cost to income ratio will be achieved. 23

24 Diamond Bank Outlook (contd.) H Concluding on Legacy Issues The remaining provisioning for legacy loans and subsidiaries will be concluded in Q4 The sale / integration of the remaining non-bank subsidiaries will be concluded in Q3 Despite challenges from the Bank s NPL levels, we are well positioned to deliver improved performance in the 2 nd half of the financial year New management is already implementing a clear recovery plan to unleash growth potential and build on the strong Diamond Bank Brand: Rebuild corporate business Drive recoveries and unwind NPLs Enhance risk management, processes and upskill team Reduced cost base and divestment of unprofitable subsidiaries Drive retail business penetration Support growth ambition with Tier II capital 24

25 Thank You 25