Post on 03-Jan-2016
description
Interim results presentation
For the period ended 31 March 2004
2
Features
►Headline earnings per share of 69,2 cents vs 67,6 cents ►Headline earnings of R326,9 m vs R331,6 m ► Return on equity of 27,4% vs 25,9% and return on assets of 10,5% vs 10,3% ►Interim dividend increased to 35 cents from 25 cents ►Free cash reserves of R723 m
3
►Increased sales and improved margins lift total revenues ►Credit performance and market conditions remain positive ►Cost reduction initiatives proving successful with further
benefits expected in second half ►Profit before tax up 16% from R522 million to R607 million ►R60 million STC on special dividend increases total
tax charge from 37% to 47%
Features
4
RoA and RoE
10,5
13,9
8,9 10,310,8
0
2
4
6
8
10
12
14
16
2001 2002 H1-03
H2-03
H1-04
%
RoA Target
Return on assets
31,6
23,225,9 25,8
27,4
0
5
10
15
20
25
30
35
2001 2002 H1-03
H2-03
H1-04
%
RoE Target
Return on equity
5
Dividends per share
1015 12
1825
35
100
31
0
20
40
60
80
100
120
H1-01 H2-01 H1-02 H2-02 H1-03 H2-03 H1-04
Ce
nts
DPS Special DPS
6
FeaturesImpact of changes in drivers on earnings
Deterioration Improvement
66,9
224,5
(155,6)
-200 -150 -100 -50 0 50 100 150 200 250
Change y-on-y in Rm
Interest-bearing assets
Total yield
Revenue
Bad debts
Operating costs
Net funding costs
Net income before taxation
Value added tax and STC
Taxation
Net income after taxation
7
Features
Deterioration Improvement
85,1
2,0
34,8
(18,5)
66,9
224,5
(155,6)
-200 -150 -100 -50 0 50 100 150 200 250
Change y-on-y in Rm
Interest-bearing assets
Total yield
Revenue
Bad debts
Operating costs
Net funding costs
Net income before taxation
Value added tax and STC
Taxation
Net income after taxation
Impact of changes in drivers on earnings
8
FeaturesImpact of changes in drivers on earnings
Deterioration Improvement
(6,9)
(21,3)
(70,7)
85,1
2,0
34,8
(18,5)
66,9
224,5
(155,6)
-200 -150 -100 -50 0 50 100 150 200 250
Change y-on-y in Rm
Interest-bearing assets
Total yield
Revenue
Bad debts
Operating costs
Net funding costs
Net income before taxation
Value added tax and STC
Taxation
Net income after taxation
9
RoE – impact of the special dividend
R change 2004 2003
Headline earnings (5) 327 332
Shareholders’ capital (174) 2 384 2 558
Return on equity (%) 1,5 27,4 25,9
10
RoE model
Margin/advances
Assurance/advances
Other income/advances
Total yield
Bad debts/advances
Opex/advances
Financing costs/advances
Operating margin
Tax rate
Advances/total assets
Return on assets
Gearing
Return on equity
6 mths ended 31 Mar 04
48,2% Bad debts/margin 19,3%
5,5% Cost/income 33,5%
5,7%
59,5%
less
(9,3%)
(19,9%)
(6,5%)
equals 23,8%
less
46,8%
equals 12,7%less
(2,1%)
equals
10,5%multiply
2,6equals
27,4%
6 mths ended 30 Sep 03
44,7% Bad debts/margin 19,8%
5,0% Cost/income 34,9%
5,6%
55,4%
less
(8,8%)
(19,3%)
(6,0%)
equals 21,3%
less
38,1%
equals 13,2%less
(2,4%)
equals
10,8%multiply
2,4equals
25,8%
6 mths ended 31 Mar 03
40,3% Bad debts/margin 19,0%
4,1% Cost/income 37,4%
6,3%
50,7%
less
(7,7%)
(19,0%)
(5,9%)
equals 18,3%
less
36,7%
equals 11,5%less
(1,2%)
equals
10,3%multiply
2,5equals
25,9%
11
299
65
-14
307
116
-16-100
-50
050
100
150
200
250300
350
400
African BankRetail
SpecialisedLending
Discontinuedbusinesses
Rm
Segmental earnings
31 March 2003 31 March 2004
Advances, sales and clients
13
Advances, sales and clientsAdvances analysis
Rm% yoy
growthMarch
2004%
growthSept2003
%growth
March2003
Lending books 18 4 494 9 4 136 8 3 813
African Bank Retail 13 3 595 6 3 381 6 3 181
Specialised Lending 42 899 19 755 19 633
Paydown books (38) 1 778 (18) 2 178 (24) 2 849
African Bank Retail (39) 1 559 (19) 1 931 (24) 2 556
Specialised Lending (25) 219 (11) 247 (16) 293
Gross advances (6) 6 272 (1) 6 314 (5) 6 662
Less: Non-interest-bearing advances 12 (1 135) (20) (1 415) 39 (1 016)
Gross interest-bearing advances (9) 5 136 5 4 899 (13) 5 646
14
Advances, sales and clients
5 136
4 899
5 646
4 400
4 600
4 800
5 000
5 200
5 400
5 600
5 800
H1-03 H2-03 H1-04
Rm
Gross interest-bearing advances
15
Advances, sales and clients
72%66%57%
28%34%43%
0
20
40
60
80
100
March 2003 September 2003 March 2004
%
Lending books Paydown books
Gross advances portfolio mix
16
Advances, sales and clientsSales history
80
120
160
200
240
280
Se
p-0
2
No
v-0
2
Ja
n-0
3
Ma
r-0
3
Ma
y-0
3
Ju
l-0
3
Se
p-0
3
No
v-0
3
Ja
n-0
4
Ma
r-0
4
African Bank Retail Specialised Lending
Rm
17
Advances, sales and clients
►Sales for six months increased by 34% to R2 197 m
►African Bank Retail (up 35%)
►32% increase in number of loans
►2% increase in loan size
►Specialised Lending (up 32%)
►4% decrease in number of loans
►38% increase in loan size
►710 000 new loans advanced
Clients
18
Advances, sales and clients
►Stage 1 – 3rd quarter 2003 differential between highest and lowest interest rate increased by further 9% to 27%
►Stage 2 – 3rd quarter 2004 new scoring models incorporating behavioural, operational and individual risk information and a new set of products
Price differentiation
Impact of stage one since November 2003
34%
30%
36%
Reduced rate Constant rate Higher rate
Underwriting margin and costs
20
Underwriting margin and costsOperating margin analysis
% a
ve
rag
e g
ros
s i
nte
res
t-b
ea
rin
g a
dv
an
ce
s
16,116,8
9,6 11,513,2
12,752,7
48,2 49,0 50,755,4
59,5
6,90,1
10,6 7,78,8
9,3
18,514,0
19,9
17,9 19,019,3
8,1 4,65,8 5,9
6,06,5
8,16,75,18,27,6 11,1
2000 2001 2002 H1-03 H2-03 H1-04
Total yield
After tax operating margins
Charge for bad debts
Operating expenses
Net financing costs
Tax charges
21
Underwriting margin and costsCost-to-income ratio
33,534,9
37,436,6
20
22
24
26
28
30
32
34
36
38
40
2002 H1-03 H2-03 H1-04
%
Asset quality – NPLs and provisions
23
Asset quality – NPLs and provisionsAdvances and provisions analysis
R millions H1-04%
change H2-03%
change H1-03
Advances
Performing 3 852 4 3 689 (5) 3 882
Non-performing 2 419 (8) 2 625 (6) 2 780
Total 6 272 (1) 6 314 (5) 6 662
Ratios
NPLs as a % of total advances 38,6 41,6 41,7
Total provisions as % of NPLs (NPL cover) 74,4 74,7 78,8
Bad debt write-offs as % of average gross advances 13,7 14,2 12,2
24
Asset quality – NPLs and provisionsBad debt charge
%March
2004Sept2003
March2003
Interest yield 48,2 44,7 40,3
Bad debt charge 9,3 8,8 7,7
Bad debt/margin 19,3 19,8 19,0
25
Asset quality – NPLs and provisionsAdvances and provisions analysis
31 March 2004Gross
advances NPLs Total provisionsProvision coverage
Rm Rm
% of gross
advances Rm
% of gross
advances %
Lending books 4 494 1 101 24,5 856 19,1 77,7
African Bank Retail 3 595 986 27,4 738 20,5 74,8
Specialised Lending 899 115 12,8 118 13,1 102,6
Paydown books 1 778 1 318 74,1 944 53,1 71,6
African Bank Retail 1 559 1 135 72,8 789 50,6 69,5
Discontinued businesses 219 183 83,6 154 70,4 84,2
Total 6 272 2 419 38,6 1 800 28,7 74,4
26
Asset quality – NPLs and provisionsVintage chart for African Bank Retail
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
3 4 5 6 7 8 9 10 11 12 13 14
Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03
Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03
No
n-p
erf
orm
ing
lo
an
s a
s %
of
ori
gin
al
pri
nc
ipa
l d
eb
t
VINTAGE GRAPH – African Bank RetailMore than two instalments missed
Months on book
27
►AC133: NPLs are valued at the present value of future cash flows Rm
Non-performing loans 2 419
Less provisions (1 800)
Residual NPLs (NAV) 620
►R162,3 million collected in African Bank Retail in last 6 months
►annualised 52,3% of residual NPLs (nominal) or
►average 30 months to collect residual NPLs (NPV)
Asset quality – NPLs and provisionsCollections
Capital, cash flow and funding
29
Capital, cash flow and fundingCapital adequacy
CA-Ratings credit rating affirmed May 2004:A– (long-term) A1 (short-term)
36,8
44,543,6
38,1
0
5
10
15
20
25
30
35
40
45
50
2002 H1-03 H2-03 H1-04
%
Sept 2002 March 2003 Sept 2003 March 2004
30
Capital, cash flow and fundingCapital adequacy model
* Three times average bad debt charge
Balance sheet
R million Capital %
Required capital
R million
Non-performing loans 2 419
Less: Provisions (1 800)
Net book value 620 100,0 620
Performing loans 3 852 27,2* 1 046
Cash reserves 1 221 4,0 49
Goodwill 17 100,0 17
Other assets 408 20,0 82
Off-balance sheet assets 126 20,0 25
Insurance Company CAR 103
Total assets 6 244
Group risk weighted assets 6 499 29,9 1 941
Actual capital 36,8 2 391
Surplus capital 6,9 450
31
Capital, cash flow and fundingMaturity profile of assets and liabilities
Free cash reserves of R723 million
0
500
1 000
1 500
2 000
2 500C
all
1m
2m
3m
4 –
6m
7 –
12
m
13
– 2
4m
25
– 3
6m
37
– 4
8m
49
+
Rm
Assets Liabilities Cumulative net position
32
Capital, cash flow and fundingCash flow analysis
Rm
6 months to31 March
2004
6 months to30 September
2003
6 months to31 March
2003
Cash generated from operations 935 861 806
(Increase)/decrease in gross advances (391) (105) 82
Other (271) (236) (575)
Increase in cash from business activities 273 520 313
Shareholder payments (729) (219) (84)
(Decrease)/increase in total cash (456) 301 229
Cash at the beginning of the period 1 346 1 045 816
Cash at the end of the period 890 1 346 1 045
Made up as follows:
Short-term deposits and cash 723 1 149 808
Bank overdraft (2) (4)
Statutory cash reserves – Insurance 170 197 240
33
Regulatory changes
► Usury Act and Credit Agreements Act to be replaced
► Independent regulatory body to be established
► Consumer protection to be improved► Improve disclosure of cost of credit► Prohibit undesirable credit terms and practices► Regulate the behaviour of intermediaries
► Consumer education to be improved
► Complaints resolution and debt counselling framework to be implemented
► Provisions on reckless lending to be introduced
► Credit bureau activity to be regulated
► Weaknesses in regulation of debt collection to be addressed
Credit law review – summary of proposed framework
34
Looking ahead
►Sales growth to outpace the decline in the
paydown books
►Gross margins to increase moderately based on changes to portfolio mix
►Bad debt charges steady at current levels
►Operating costs to benefit from initiatives implemented
►Continued focus on optimal capital levels
The outlook for both RoA and RoE remain positive.
Thank you