BancABC Interim Financial Results 2010 Highlights and Economic Overview
BancABC's interim financial results for 2010 showcase positive trends with total income up by 29%, net operating income increased by 80%, and attributable profit at BWP28 million. Operational highlights include the opening of new branches and improved credit risk management. The economic overview discusses global GDP growth projections, highlighting challenges such as the sovereign debt crisis and asset price bubbles in emerging markets. Economic growth trends and monthly inflation trends for 2010 in various countries are also outlined.
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BancABC Interim Financial Results 2010 25 August 2010
Financial Highlights Total income up 29% to BWP251 mill (H109: BWP194 mill) Net operating income up 80% to BWP45 mill (H109: BWP25 mill) Attributable profit of BWP28 mill (H109: BWP36 mill) Share of associate loss Tax charge in H110 vs. tax credit in H109 Impairments down 59% to BWP17 mill (H109: BWP41 mill) Cost : income down from 82% at year end to 77% (H109: 72%) Deposits up 41% and 23% compared to H109 and H209 Total assets increased to BWP5.1 billion, 25% and 16% up from H109 and H209 Average return on equity positive at 14% (H109: 16%) 3
Operational Highlights Six Retail Banking branches opened in Dar es Salaam, Gaborone, Bulawayo, Harare and Chimoio Looking at opening an additional eight new branches before year end Zimbabwe head count right sized BancABC Zambia now profitable and Microfin merger yielding synergistic benefits Improved credit risk management reduces impairments 4
Economic Overview IMF projects global GDP growth to reach 4.2% in 2010 (09: -0.8%): Growth driven primarily by Asia Western economies remain sluggish Economic and business environment in SADC region has improved, growth mainly driven by recovery in commodity prices Down-side risks to global economic recovery still exist due to: Sovereign debt crisis in Europe and Middle-East Austerity measures reducing demand in developed economies Asset price bubbles in some emerging markets 6
Economic Growth Trends 8 % Zimbabwe 6 4 2 0 2007 08 09 10 2007 08 09 10 2007 08 09 10 2007 08 09 10 2007 08 09 10 -2 -4 -6 Botswana Mozambique Tanzania Zambia -8 -10 Average -12 -14 Source: IMF 7
2010 Monthly Inflation Trends 20.0 15.0 10.0 5.0 0.0 Bots Tanz Moz Zamb Zimb SA -5.0 -10.0 Jan Feb Mar Apr May Jun Source: Central Banks, Ministries of Finance and Central Statistics Offices Relatively stable inflation other than in Mozambique where rate worsened rapidly from 5% at start of the year to 14.5% by mid-year. 8
Interest Rate Profiles Botswana Mozambique 20 18 91 day TB Overnight 16 16 14 12 12 10 8 8 Bank rate Prime rate 3m BoBC 4 6 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Sep-06 Sep-07 Sep-08 Sep-09 May-06 May-07 May-08 May-09 May-10 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Sep-06 Sep-07 Sep-08 Sep-09 May-06 May-07 May-08 May-09 May-10 Tanzania Zambia 30 20 25 Overnight rate 91-dy Tbill B.o.Z Rate 91-dy tb 16 20 12 15 8 10 5 4 0 0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Sep-06 Sep-07 Sep-08 Sep-09 May-06 May-07 May-08 May-09 May-10 Oct-06 Feb-07 Oct-07 Feb-08 Oct-08 Feb-09 Oct-09 Feb-10 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 9 BancABC PRESENTATION 10 MARCH 2010 Source: Respective Central Banks
Exchange Rate Developments Local currencies in our markets have generally depreciated against the USD and BWP during the period Mozambican Meticais had the worst depreciation of 25% against the USD and 19% against the BWP This had some adverse impact on reported results for the subsidiary Against the USD, the Zambian Kwacha depreciated 11%, Tanzanian Shilling depreciated by 5% and the Botswana Pula by 6% Against the BWP, the Tanzanian Shilling marginally appreciated by 1% whilst the Zambian Kwacha depreciated by 5% 10
Banking Sector Deposits and Loans Banking Sector Total Deposits (US$m) Banking Sector Loans to the Private Sector (US$m) Bots Moz Tanz Zam Zim Bots Moz Tanz Zam Zim Dec-07 2,236 1,306 2,594 1,351 99 Dec-07 5,214 2,460 4,211 2,435 580 Dec-08 2,281 1,795 3,559 1,635 140 Dec-08 5,046 2,835 4,702 2,354 313 Dec-09 2,963 2,597 3,763 1,586 636 Dec-09 5,574 3,418 5,476 2,680 1,381 May-10 2,908 2,363 3,832 1,524 1,012 May-10 5,464 3,024 5,537 2,745 1,832 The markets continue to be attractive and have generally been growing in the recent past Opportunities exist to enter new market segments in each country The Tanzania and Botswana markets continued being the largest Zimbabwe has rapidly grown in the 2009-2010 period Source: Respective Central Banks 11
Income Statement Performance primarily driven by growth in net interest income and reduction in impairments Opex increased mainly because of Zimbabwe post dollarisation Zimbabwe costs up 138% and accounts for 17% of the 22% YoY increase in expenses BWP 000s H1-2010 % H1-2009 FY-2009 Net interest income 146,815 87% 78,684 178,394 Impairment of loans & advances -16,996 59% -40,969 -51,218 Net interest income after impairments 129,819 244% 37,715 127 176 Non interest income 121,622 -22% 156,542 265,017 Total income 251,441 29% 194,257 392,193 Operating expenditure -205,967 -22% -169,211 -365,694 Net income from operations 45,474 82% 25,046 26,499 Share of (loss)/profits of associates -11,479 -1157% -913 16,164 Profit before tax 33,995 41% 24,133 42,663 Tax -5,269 -141% 12,757 15,768 Profit for the year 28,726 -22% 36,890 58,431 Attributable to: - Ordinary shareholders 28,076 -23% 36,494 58,117 - Minorities 650 64% 396 314 EPS (thebe) 19.5 -23% 25.4 40.4 13
Income Statement (USD) Performance primarily driven by growth in net interest income and reduction in impairments Opex increased mainly because of Zimbabwe post dollarisation Zimbabwe costs up 138% and accounts for 17% of the 22% YoY increase in expenses USD 000 s H1-2010 % H1-2009 FY-2009 Net interest income 21,241 98% 10,703 25,176 Impairment of loans & advances (2,459) 56% (5,573) (7,228) Net interest income after impairments 18,782 266% 5,130 17,948 Non interest income 17,597 -17% 21,294 37,402 Total income 36,379 38% 26,424 55,350 Operating expenditure (29,800) -29% (23,018) (51,610) Net income from operations 6,579 93% 3,406 3,740 Share of (loss)/profits of associates (1,661) -1240% (124) 2,281 Profit before tax 4,918 50% 3,282 6,021 Tax (762) -144% 1,735 2,225 Profit for the year 4,156 -17% 5,017 8,246 Attributable to: - Ordinary shareholders 4,062 -18% 4,964 8,202 - Minorities 94 77% 53 44 EPS (cents) 2.8 -20% 3.5 5.7 14
Attributable Profit Trends Attributable profit (BWP m) and ROE (%) 80 50% 39% 70 40% 60 28% 50 30% 16% BWP m 40 18% 74 14% 20% 30 20 36 10% 31 28 23 10 0 0% Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Attributable profit (BWP m) ROE (%) Lower profit after tax in current year not reflective of real performance Disposal of profitable investments reduces income from associates Prior year tax credit 15
Income Statement Segmental Analysis Attributable Profit BWP 000 s 2010 % Cont 2009 % Cont % change BancABC Botswana 11,147 40% 5,939 16% 88% BancABC Mozambique 13,350 47% 17,475 48% (24%) BancABC Tanzania 5,893 21% 1,678 5% 251% BancABC Zambia 7,547 27% (12,669) -35% 160% BancABC Zimbabwe 7,374 26% 2,133 6% 246% Banking operations Head office 45,311 (17,235) 161% -61% 14,556 21,938 40% 60% 211% (179%) TOTAL 28,076 100% 36,494 100% (23%) 16
Income Statement Segmental Analysis (USD) Attributable Profit USD 000 s 2010 % Cont 2009 % Cont % change BancABC Botswana 1,613 40% 816 16% 98% BancABC Mozambique 1,932 47% 2,402 48% -20% BancABC Tanzania 853 21% 231 5% 270 BancABC Zambia 1,092 27% (1,742) -35% 163% BancABC Zimbabwe 1,067 26% 293 6% 264% Banking operations Head office 6,556 (2,494) 161% -61% 2,001 3,016 40% 60% 228% -183% TOTAL 4,062 100% 5,017 100% -19% 17
Income Statement Net Interest Income Net Interest Margin 200,000 10.0% 8.0% 150,000 6.0% BWP '000 100,000 4.0% 50,000 2.0% - 0.0% Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Net int BWP'000 NIM before impairments NIM after impairments Positive trend in net interest income driven by increased margins, better liquidity and increased balance sheet size Recovering economic environment and improved credit risk management reduced impairments Zimbabwe contribution to net interest income growing (12% vs 3% in H1:09) 18
Income Statement Segmental Analysis Net Interest Income 2010 2009 % change BancABC Botswana 23,076 16,871 37% BancABC Mozambique 15,575 21,475 (27%) BancABC Tanzania 22,416 14,189 58% BancABC Zambia 32,512 32,377 0.4% BancABC Zimbabwe 18,015 2,630 585% Banking operations 111,594 87,542 27% Head office 35,221 -8,858 398% TOTAL 146,815 78,684 87% 19
Income Statement Impairments & NPLs NPL and Credit Loss Ratios 12% 3.0% 10% 2.5% Credit loss ratio NPL ratios 8% 2.0% 6% 1.5% 4% 1.0% 2% 0.5% 0% 0.0% 2006 2007 2008 2009 2010 Gross NPL ratio Net NPL ratio Credit loss ratio Trend of impairments and credit loss ratio is declining Net NPLs covered by collateral Overall NPLs have now stabilised 20
Income Statement Non-Interest Income 100% 80% 60% 40% 20% 0% Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Fees & comms Forex trading Gains on investments FV gains - Inv Prop Other Bulk of equity investments disposed of in 2009, hence no mark-to-market gains Overall quality of non-interest income improving greater portion of earnings are now recurring Trading, fee and commission income increasing whilst gains on equity investments are declining 21
Income Statement Cost to Income Ratio 90% 82% 77% 80% 72% 70% 59% 60% 50% 49% 49% 47% 47% 50% 40% Cost to income ratio declining with retail costs stabilising and other expenses stabilising in Botswana, Mozambique and Tanzania and declining in Zambia Zimbabwe costs up post dollarisation - now normalising; hyper-inflation in the past Head office no longer charging management fees from 2009 Retail costs were 13% or BWP27 mill of total expenses (09:10% or BWP18 mill) Going forward, Retail Banking to contribute positively, decreasing C:I ratio Target C:I ratio remains 50% 22
Income Statement Staff Costs Staff Complement 800 Wholesale Retail 600 400 200 - Total head count in 2010 of 612 vs 561 in 2009 Growth in staff numbers in last 12 months mainly attributable to retail expansion BancABC Zambia staff numbers declined from 147 in June 2009 to 125 in June 2010 following Microfin merger 23
Retail Banking Capex USD 000 5,768 4,449 3,478 13,695 BWP 000 40,780 31,454 24,589 96,823 Branch capital expenditure Systems roll-out Data centre centralisation Group has incurred bulk of costs on retail roll-out All IT systems expected to be in place by year end Incremental capital expenditure to be driven by number of branches opened in subsequent periods 24
Balance Sheet % BWP '000s Jun-2010 Jun-2009 change Dec-2009 Cash and short term funds 717,669 615,471 17% 881,884 Financial assets held for trading 1,423,014 748,819 90% 880,740 Financial assets designated at fair value 4,133 72,033 -94% 17,905 Loans and advances 2,341,744 2,163,487 8% 1,995,325 Property and equipment 302,612 185,245 63% 278,975 Other assets 332,351 298,026 12% 362,916 TOTAL ASSETS 5,121,523 4,083,081 25% 4,417,745 Deposits 4,132,382 2,924,733 41% 3,355,118 Borrowed funds 471,634 553,789 -15% 543,822 Other liabilities 81,101 82,457 -2% 103,026 Total liabilities 4,685,117 3,560,979 32% 4,001,966 Equity attributable to ordinary shareholders 420,189 505,281 -17% 399,069 Minority interest 16,217 16,821 -4% 16,710 Total equity 436,406 522,102 -16% 415,779 TOTAL EQUITY AND LIABILITIES 5,121,523 4,083,081 25% 4,417,745 25
Balance Sheet (USD) % USD '000s Jun-2010 Jun-2009 change Dec-2009 Cash and short term funds 101,514 91,028 12% 132,194 Financial assets held for trading 201,285 110,750 82% 132,023 Financial assets designated at fair value 585 10,654 -95% 2,684 Loans and advances 331,240 319,980 4% 299,099 Property and equipment 42,805 27,398 56% 41,818 Other assets 47,012 44,079 7% 54,401 TOTAL ASSETS 724,441 603,889 20% 662,219 Deposits 584,525 432,568 35% 502,932 Borrowed funds 66,713 81,905 -19% 81,519 Other liabilities 11,473 12,197 -6% 15,443 Total liabilities 662,711 526,670 26% 599,894 Equity attributable to ordinary shareholders 59,436 74,731 -20% 59,820 Minority interest 2,294 2,488 -8% 2,505 Total equity 61,730 77,219 -20% 62,325 TOTAL EQUITY AND LIABILITIES 724,441 603,889 20% 662,219 26
Balance Sheet Overview Deposits up 41% and 23% relative to H109 and H209 respectively Growth across all the markets BancABC Zimbabwe had highest rate of growth off a low base Loans and advances up 8% and 17% relative to H109 and H209 respectively Growth significantly from Zimbabwe as economy stabilised Cautious approach to lending was exercised in other markets Lending in Mozambique constrained by interest rate movements during the period Total assets of BWP5.1 billion, an increase of 25% and 16% relative to H109 and H209 respectively, 27
Balance Sheet Loans and Advances BancABC Botswana continued being largest contributor to Group s loan book BancABC Zimbabwe s contribution grew rapidly on back of economic stability Loan book is stable ABCH 10% Bots:28% Zim 15% Zam 11% Moz:15% Tnz 21% Net Loans and Advances 2,342 2,500 2,163 1,995 2,000 1,621 1,500 1,084 1,000 766 500 - 28 Jun-06 Jun-07 Jun-08 Jun-09 Dec-09 Jun-10
Balance Sheet Deposits Growth in deposits across footprint Additional funds generated invested mostly in short- term financial instruments BancABC Botswana still the largest contributor BancABC Zimbabwe s contribution to deposits growing Deposits (BWP m) 5,000 4,132 4,000 3,355 2,925 3,000 2,281 1,800 2,000 1,380 1,000 - Jun-06 Jun-07 Jun-08 Jun-09 Dec-09 Jun-10 Zim14% Zam 6% Bots 43% Tnz 19% 29 Moz18%
Balance Sheet Capital Adequacy Total capital (BWP m) Jun 10 Capital Adequacy Ratio Min 2010 Subsidiary Jun 09 2009 BancABC Botswana BancABC Mozambique BancABC Tanzania BancABC Zambia BancABC Zimbabwe 166 135 133 83 113 120 157 130 59 98 15% 8% 12% 10% 10% 22% 18% 14% 30% 14% 17% 22% 12% 14% 31% All entities are adequately capitalised Zambia re-capitalised by injection of US $6 mill in tier II capital and conversion of US $5 mill of existing tier II into tier I capital 30
Botswana Economy stabilising and is now growing following recovery in diamond prices PAT improved 84% to BWP11 mill Positive performance driven by increased net interest margins, on a larger balance sheet coupled with reduction in impairment charge Non-interest income declined by 22% to BWP17 mill following reduction in forex trading volumes and margins Operating expenses were flat on prior year 32
Mozambique Economy experienced high volatility in interest and exchange rates during the period PAT declined by 24% to BWP13 mill on account of increased tax rate from 16% to 32% following expiry of fiscal benefits Interest rate volatility negatively affected interest margins leading to reduction in net interest income by 27% to BWP16 mill However, forex trading income increased on the back of increased volume of transactions Operating expenses increased by 7% to BWP29 mill in line with retail expansion 33
Tanzania High exchange rate volatility experienced towards period end, but economy is stable BancABC Tanzania s liquidity position continued to improve leading to higher net interest income Non-interest income also increased 59% to BWP19 mill from increased forex transactions and bond trading Impairment charge increased 77% to BWP10 mill following classification of a few but large accounts Expenses increased 24% to BWP23 mill mostly from retail expansion related costs PAT none-the-less increased 165% to BWP7 mill 34
Zambia BancABC Zambia has now stabilised and is profitable Subsidiary was re-capitalised during the period Recorded a PAT of BWP7.5 mill compared to a loss of BWP13 mill in prior year Impairments declined to BWP3 mill from BWP22 mill in the prior period. Operating expenses declined by BWP4 mill as a result of synergies arising out of the merger of the bank and microfinance unit Subsidiary is now on strong footing to grow business going forward 35
Zimbabwe Economy growing following end of hyper-inflation in Feb 2009 Subsidiary has been able to grow its income by 195% to BWP59 mill Both loans and deposits increased markedly However, expenses increased 138% to BWP49 mill largely due to an increase in staff costs PAT increased 246% to BWP7 mill 36
Retail Banking Update Six new branches opened up to half-year One each in Botswana, Mozambique and Tanzania Three in Zimbabwe Expecting to open a further 8 branches by year-end All IT systems to be fully operational by year-end Retail has started contributing to the Group s income stream 37
Outlook Economies generally stable in operating countries Both Retail and Wholesale units expected to do well in the second half Head Office costs continue to be a challenge although stabilising Impairments now under control which bodes well for the Group going forward Would like to start paying dividends in the near term 39
Exchange Rate Developments Movement in Exchange Rates vs. the USD (End Period) Movement in Exchange Rates vs. Botswana Pula (End Period) Bots Moz Tanz Zam RSA Moz Tanz Zam RSA BWP/US$ MZN/US$ TZS/US$ ZMK/US$ ZAR/US$ BWP/MZN BWP/TZS BWP/ZMK ZAR/BWP Dec-07 6.01 23.66 1,147 3,845 6.80 Dec-07 3.94 190.85 639.77 0.88 Dec-08 7.52 25.09 1,280 4,832 9.36 Dec-08 3.34 170.21 642.55 0.80 Dec-09 6.67 27.51 1,326 4,641 7.40 Dec-09 4.12 198.80 695.80 0.90 Mar-10 6.79 27.79 1,345 4,704 7.37 Mar-10 4.09 198.09 692.78 0.92 Apr-10 6.80 34.16 1,358 4,743 7.34 Apr-10 5.02 199.71 697.50 0.93 May-10 7.05 33.73 1,390 5,002 7.61 May-10 4.78 197.16 709.50 0.93 Jun-10 7.06 34.51 1,394 5,156 7.64 Jun-10 4.89 197.45 730.31 0.92 Source: BancABC 41 BancABC PRESENTATION 10 MARCH 2010
Banking Sector Deposits and Loans Banking Sector Total Deposits Banking Sector Loans to the Private Sector (US$m) (US$m) Bots Moz Tanz Zam Zim Bots Moz Tanz Zam Zim Dec-07 5,214 2,460 4,211 2,435 580 Dec-07 2,236 1,306 2,594 1,351 99 Dec-08 5,046 2,835 4,702 2,354 313 Dec-08 2,281 1,795 3,559 1,635 140 Mar-09 4,429 2,754 4,739 2,059 400 Mar-09 2,283 1,856 3,498 1,535 118 Jun-09 5,417 2,931 4,902 2,217 710 Jun-09 2,636 1,987 3,585 1,544 267 Sep-09 5,601 3,066 5,300 2,496 970 Sep-09 2,861 2,229 3,675 1,668 455 Dec-09 5,574 3,418 5,476 2,680 1,381 Dec-09 2,963 2,597 3,763 1,586 636 Jan-10 5,462 3,485 5,582 2,663 1,406 Jan-10 2,937 2,639 3,732 1,555 759 Feb-10 5,336 3,455 5,608 2,690 1,546 Feb-10 2,947 2,627 3,759 1,533 802 Mar-10 5,461 3,469 5,608 2,783 1,689 Mar-10 3,076 2,682 3,810 1,541 940 Apr-10 5,678 3,004 5,758 2,873 1,752 Apr-10 3,115 2,299 3,929 1,534 937 May-10 5,464 3,024 5,537 2,745 1,832 May-10 2,908 2,363 3,832 1,524 1,012 Source: Respective Central Banks 42 BancABC PRESENTATION 10 MARCH 2010
Income Statement Net Interest Margins BancABC Botswana BancABC Mozambique BancABC Tanzania 4.0% 10.0% 10.0% 5.0% 2.0% 5.0% 0.0% 2006 2007 2008 2009 2010 0.0% 0.0% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 NIM before impairments NIM after impairments NIM before impairments NIM before impairments NIM after impairments NIM before impairments NIM after impairments BancABC Zambia BancABC Zimbabwe Consolidated 30.0% 45% 10.0% 40% 35% 20.0% 30% 25% 5.0% 20% 10.0% 15% 10% 5% 0.0% 0% 0.0% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 NIM before impairments NIM after impairments NIM before impairments NIM after impairments NIM before impairments NIM after impairments 43 BancABC PRESENTATION 10 MARCH 2010
Income Statement Opex by Operation 60,000 50,000 40,000 BWP '000 30,000 20,000 10,000 - Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 44 BancABC PRESENTATION 10 MARCH 2010
