Introduction Absa Investor Day 31 May 2010 - Barclays Africa · Absa Investor Day 31 May 2010 Maria...

Introduction

Absa Investor Day

31 May 2010

Maria Ramos

Absa Group Exco Structure May 2010

2

Identifying opportunities for growth

3

Customer

and

people centric

Organisation

Sustainable

growth in

targeted

Markets

Balance sheet optimisation

and

proactive risk management

Simple,

streamlined Group

for

customer delivery

13 Key Initiatives

Louis von Zeuner

4

Customer and people centred organisationSimple, streamlined Group for customer delivery

Balance sheet optimisation and proactive risk managementSustainable growth in targeted markets

Enabled Through

• Performance Through People Strategy

• Customer service and relationship management

Enabled through

• Balance sheet optimisation & regulatory changes

• Strengthen risk and credit management portfolios

Enabled through

• Establish the bank for entry level banking customers

• Create a leading position in serving the wealthy

• Implement target operating model in Africa

• Establish ABB market leadership

• Establish lead FX centre in SA

• Establish a corporate bank

• Growth in retail business

• Growth in deposits

Enabled through

• Standardise, streamlined the group

• One Absa – target operating model

Realising the One Absa StrategyThe One Absa strategy is defined by four themes, and will be delivered through the implementation of

13 aligned workstreams, each working towards agreed outcomes, and measured on quantifiable metrics

5

One Absa

One Absa Strategy Programme GovernanceA CEO led governance structure has been embedded to ensure that the One Absa strategy is executed

across the organisation in a focused, seamless and structured manner

6

CEO ExCo

DGCE OpsCo

Workstream

Workstream

Group

Integration

Programme

Finance and

Strategy

Alignment

Workstreams

Clusters/ Functions

Retail AfricaWealthAFSAbCapACBB Services

13

1

One Absa Workstream GovernanceEach workstream has a clearly defined mandate and structure, with clearly defined success criteria and

metrics being tracked through a Common Programme Management platform

7

Standardise, Streamlined the Group

One Absa – Target Operating Model

Performance Through People Strategy

Balance Sheet Optimisation & Regulatory Changes

Strengthen Risk and Credit Management Portfolios

Establish the Bank for Entry Level Banking Customers

Create a Leading Position in serving the Wealthy

Implement Target Operating Model in Africa

Establish ABB Market Leadership

Establish Lead FX Centre in SA

Establish a Corporate Bank

Growth in Retail Business

Growth in Deposits

Workstreams

Clusters/ Functions

Retail AfricaWealthAFSAbCapACBB Services

SponsorOverall programme

management

Workstream 11 project

management

Sourcing & CRESStreamline end-to-

end processes

Overhead Value

Analysis

CRES Space

Optimisation

CRES Outsourcing

E2E Homeloans

E2E Cash

Management

GPU

Project Giraffe

Telephony

1

2

3

4

5

6

7

8

9

10

11

12

13

Tracking the progress of the One Absa Strategy implementationA common Programme Management Platform has been created to ensure that we are tracking the

progress of each workstream against pre-defined deliverables and success criteria

8

• Progress controlling,

i.e., monitoring of the project

from a timing perspective

• Traffic light monitoring,

i.e., standardised decision basis

for Executive

• Activity Controlling,

i.e., steering the gradual

implementation of measures

towards the final goal

• KPI tracking,

i.e., comprehensive "dashboards"

to enable performance

discussions

• Rapid initiative

implementation

• Swift decisions and

efficient use of resources

• Realisation of full earnings

improvement/ cash

savings potential

• Create transparency

on the performance of

the organisation

Initiative teams:

• Milestones

•Project schedules

• ISP (status and critical

issues per project)

• Initiative teams

with level of

attainment of

bottom-line impact

• KPI data

Objectives RealisationProgramme Management Platform

Growth in Retail

Gavin Opperman

9

% Market share: Total Advances - Individuals

The challenging environment reflected in our financial results

but Absa managed to remain resilient…

• Retail Earnings of R2,8bn in 2009

• Top-line income up 4.9%

• Net interest income down but Non-

Interest Revenue growth of 14%

• Deposits increased by 3.9% to R133bn

• Cost control resulting in 0.6% growth

• CTI improved by 2%

• Impairment charge, sign of customer

distress, increased by 41% year-on-year

but decreased by 15% since June 2009.

• The impairment ratio of 2.34% expected

to further improve

• Stress testing confirm quality of new

business in secured lending

• Customer numbers increased by 10%

• Leading in market share, advances and

deposits

10

2005 – 2007 2008 2009

Attributable Earnings (CAGR) 27.3% -25.0% -21.1%

Non-Interest Revenue growth (CAGR) 16.9% 13.7% 14.3%

Net Interest Income growth (CAGR) 26.7% 16.7% -1.8%

Operating Expense growth (CAGR) 17.1% 14.5% 0.6%

Impairments of advances to avg.

advances (average)0.5% 1.7% 2.3%

Cost-to-income (average) 58.2% 54.4% 52.3%

ROA (average) 1.4% 0.8% 0.5%

ROEC N/A 19.8% 14.2%

Key financial ratios

1st

% Market share: Total Deposits - Individuals

Recap on 2009 results… Retail

11

Earnings Drivers Customer & Transaction Growth

Strong balance sheet

New business qualityTop-line income

Award Winning Accolades

Western Union

SA First pre-paid

Debit card

Cash SendCoolest Brand Accolades

Various successes were celebrated, delivering innovative solutions

to customers and our brand remain well renowned…

Innovation highlights

• Absa has been first to market with a number of innovative solutions:

• Money Transfers through ATMs, Internet and Mobile

• Utilipay, SMS utility payments

• Mobile transactional account with mobile network (P2P)

• Western Union money transfer

• Remote banking solutions

• To date we have received three international awards for innovation

Absa Brand Highlights

• “Coolest” banking brand in South Africa (5 years in a row)

• No. 1 Islamic Bank in Africa (3 years in a row)

• No.1 “Employer in the banking sector” in South Africa 2009

• Number 2 “consumer Banking Brand”in South Africa 2009

12

Physical

• 692 branches

• 13 Premier Suites; 3 Wealth Suites

• 14 Business Satellites; 6 Business Centres; 9 Small Business Centres; 9

Small enterprise development offices

• 56 Loan Centres; 24 Micro Finance Centres; 10 Student Bureaus

• 62 Work Place Banking/ Kiosks

• 10 Mobile (Bank on Wheels) & 7 Mobile Sales units; 14 Extended teller

counters

• 8,351 ATMs and Self service machines

• 2,053 ConnectZone Seats

Digital• Internet banking (1.2m registered customers)

• Telephone banking (680k registered customers)

• Mobile banking ( 1.7m registered customers)

External

Sales

Force

• 254 Direct Sales Agents (Quest)

• 141 Core middle market sales agents

• 20 Islamic bank sales agents

• 215 Personal loan lead generators

• 79 Micro Enterprise Finance Community Finance Officers

• 130 Home Loan Express Agents

Absa’s market share in various customer segments and product lines remains

strong…

• Customer numbers continue to grow– The banking customer base grew to 11.7

million customers as at 31 Dec 09 – an

increase of 9.3% on the previous year

– Internet banking users increased by

10.6%

– Cell phone banking customers increased

by 113%

– Notify me users increased by 36.2%

– Number of active Mzansi accounts

increased by 24%

• Channels (branches, digital, external

sales)– Interdependent channel operation will

increase value

– Cultivate multi – channel processes and

procedures

– Aim for consistent levels of service and

sales across all channels

– Products (#1 or #2 market share across

all Product sets)

• Reduce the cost of acquisition– Increase application conversion rates

– Reduction in product proliferation –

more focus on products that address

customer needs

13

Leading Customer Market Shares

Youth &

Student

Entry

Level

Banking

Core

Middle

Market

Retail

Affluent

Private

Bank

Small

BusinessOther

Total

Retail

Sector

# of

Customers739k 5.4m 3.2m 580k 118k 473k 370k 10.9m

Estimated

Market Share36% 36% 34% 34% 29% 35% N/A 36%

Vast footprint

We however realise that the world around us continues to change … we face a

myriad of environmental challenges, which could impact our strategy …

• Slow economic recovery expected

• Customer indebtedness and financial

strain still high

• Lower interest rates provide

some relief but uncertain

• Employment growth still low

14

Environmental analysis

• Regulatory changes will

continue to affect the way

we do business

• Basel III; Consumer Protection

Bill; Competition Commission

Enquiry

• Capital requirements Regulatory backlash

following the global banking crisis

• We choose to embrace the associated

impacts as drivers for positive change

• Margin pressure persists amid intense

competition for term deposits, cost of

funding rising

• Non-traditional competitors eroding the

value chain

• War for talent in the industry

• Consumer indebtedness in

Retail core segments high,

which challenges traditional

credit risk appetite approach

• Consumerism on the rise

• Customers more demanding

and willing to shop around

(multi-bank)

• Consumers less “push” and

more “demand” orientated

• Communication more

convenient and faster

(adoption of cell phones and

and delivering through

interdependent channels…

to increase product holdings…

and optimise operating costs

Aim to deliver a distinct customer

experience…

By aligning our business and

operating models…

Customer and people

centred organisation

Sustainable growth

in targeted markets

Balance sheet optimisation and

proactive risk management

Simple, streamlined

Group for customer

delivery

• Customer Experience

Management

• People Work Stream

• Value Based Management • Customer Value Extraction

• Cross-Product capability

• Inter-dependent Channel

Management

• Integration capability

The Retail Strategy is founded on a basic recipe enabled by 7

capability themes … which directly support our “One Absa” Group intent …

15

Retail recipe for sustainable growth Retail capability themes in support of Group



• Customer Experience Management

• Increase CSM (Customer Satisfaction Measure)

• Increase NPS (Net Promoter Score)

• Increase number of root cause problems resolved

• People Workstream

• Staff satisfaction index

• Decrease regrettable loss staff ratio

• Value Based Management

• Increase Retail Cluster ROEC

• Decrease CTI

• Customer Value Extraction

• Increase in customer retention

• Increase in primary relationships

• Increase share of wallet

• Cross-Product capability

• Increase product utilisation

• Improve liquidity ratio

• Improve burden ratio (NII/fixed costs)

• Interdependent Channel Management

• Decrease cost to serve per customer

• Increase number of channels used per

customer

• Integration capability

• Increase ROI

We will know that we are being successful when we make

further progress on a number of key value drivers…

16

• Make banking easy for our customers

• Simplify product offerings

• Enhance access and convenience (channels)

• Trusted advice

• Making banking easy for our people

• Tools for servicing customers

• Workplace design

• Talent selection and development

• Rewards and recognition

• Enable organisational transformation in support of the revised strategic intent

(e.g., culture, values, diversity, etc.)

• Determine, measure, and report key value drivers (for the customer, for the

bank) and link to incentive scheme

• Continue to embed ROEC approach to pricing and Basel II principles as a

control measure

• Allocate capital based on portfolio view across the Retail bank in line with

agreed risk appetite and performance expectations (i.e., risk/return)

• Close the funding gap through informed asset growth trade-offs and deposit

acquisition at reasonable cost

• Perform credit and operational risk management proactively, incl. appropriate

early warning system

• Conduct appropriate product portfolio alignment and rationalisation

• Enhance value of the Group Payments franchise

• Enhance customer value extraction from existing customer base

• Build primary transactional relationships in key markets (i.e., middle market,

affluent)

• Expand relationships with existing customers (i.e., cross-sell)

• Focus on customer retention to reduce value leakage (e.g., active customer

lifecycle management)

• Refine segmentation, aimed at enabling a model, which balances customer need

and value with cost-to-serve

• Invest selectively in acquiring profitable customers in line with market potential

and growth

• Aggressively Grow the Islamic Business

• Reposition the Private Bank

• Enhance customer experience by defining standards for key customer touch

points, measurement against standards and elimination of root

cause problems

• Process standardisation and simplification for key customer interactions

(e.g., account opening, query resolution and procuring advice)

• Execute distribution network optimisation opportunities

• Footprint value alignment

• Interdependent channel configuration and functionality

• Appropriate sales and service models

• Implement new target operating model in line with functional

accountabilities to optimise intra-cluster and Group relationships

… and translates into clear business imperatives

17



Unsecured Lending …

an engine of growth

Daphne Motsepe

18

Unsecured Lending Cluster

19

Personal Loans

MEF

Unsecured Lending Cluster

Card

WFS

Virgin

ELIB

AllPay

Slow return to economic growth supports Unsecured Lending market

• SA UL ~R185bn in gross

advances yielding ~R7bn H/E

(excl. Small Business)

• Medium term CAGRs: ~10%

advances; ~8% H/E

• Average ~4% market return on

advances (excl. card acquiring

and Big 4 bancassurance)

• Best-in-class 2009 returns ~

8% - 11% African Bank, Capitec

• Absa’s current UL book largest

in SA at ~ R38bn (incl. WFS &

ODs)

• … plus Absa leads in Card

Acquiring and Small Business

Note: Per BA900 analysis and UL Strategy & Planning analysis; Card Issuing only, excludes Acquiring; excludes Small Business lending

Source: BA900 returns; UL S&P analysis 20

118 130 135 146 160182

1511 7

78

9

3840 43

4649

52

0

50

100

150

200

250

300

2007 2008 2009 2010F 2011F 2012F

Gross UL Advances

Rbn170

181185

200217

243

Bank UL

Credit

Retailers

Microlenders

10%CAGR

1344 1368 1517 1752

733 797 868 958

2322 25302720

2958

10251092

114611881489

16101738

1929

0

2000

4000

6000

8000

10000

2009 2010F 2011F 2012F

Headline Earnings

Rm

Bank C/Cards

Bank ODs

Bank PLs

Retailer Cards

Retailer PLs7.0bn

7.5bn8.1bn

8.9bn8%

CAGR

The UL Cluster grew its contribution by 141% from FY08 to FY09 …

1. Personal card advances, excl. commercial cards, Absa excl. WFS; 2. PL market including Capitec PL/ODs, Absa excl. WFS, ABIL excl. Ellerines; 3. By # customers

Note: UL Cluster results include UL HO and AllPay; exclude ELB, Rewards, Ventures & Innovation

Source: UL S&P and UL Finance

Unsecured Lending has successfully delivered on

its primary objective to deliver profitable growth

Operating

Income,

Rbn

Cost-to-

Income, %

Impairment

ratio, %

Net Profit

After Tax,

Rbn

5.6

6.8

55.7

42.2

9.38

7.65

0.8

1.9

FY09

FY08

In addition we have improved/maintained

our performance in the following areas:

33.1 32.123.6 24.4

Net Loans & Advances, Rbn Customer Deposits, Rbn

Dec 08 Dec 09 Dec 08 Dec 09

Net Customer Accounts, m

7.2 7.3

Dec 08 Dec 09

27 2834 32

Credit Card Gross Advances

market share1, %

Dec 08 Dec 09

SB

SA

SB

SA

Personal Loans Gross Advances

market share2, %

Dec 08 Dec 09

2118

26 28

AB

IL

AB

IL

SB

SA

SB

SA

33 32

2427

Small Business

market share3, %

Dec 08 Dec 09

21

… with significant achievements in core UL businesses …

1. Card results include consolidated WFS and Virgin JVs

Card achievements

• Strong top-line growth and

cost containment in a

tough economy

• Successful integration and

growth of WFS joint

venture

• Investments in Card team

and One Absa approach

FY08 FY09

Card1 NPAT, Rm

491

921

FY08 FY09

(437)

40

Personal Loans NPAT, Rm

Personal Loans achievements

• Turnaround of PL start-up BU

to profitability

• Significant strides in credit risk

management, cost reduction

and collections

• Growth in new channels: Loan

Centres, LGs, retail originators,

online / mobile

FY08 FY09

Small Business NPAT, Rm

696

914

Small Business achievements

• Bedding down of new

operating model improving

segmented service offers

• Tight cost control, middle office

implementation

• Staff enablement tools,

strongly motivated front-line

sales and service staff

22

Small

Business

transferred

to ABB

23

… creating a solid platform to explore new avenues of growth

Strengths

• Leading franchise positions in the UL businesses

in which we operate - #1 or #2

• Huge client base and well positioned brand

• Extensive distribution footprint, including

branches / Loan Centres, ATMs / SSKs, LGs,

online and mobile, Work Place Banking

• Core UL businesses have experienced and stable

management teams and large talent pools

across the organisation

• Credit and operational risk management

reviewed as world-class by Barclays

Areas of focus / opportunity

• Value extraction from existing customer base

• Cross-Group commitment to ‘One Absa’

collaboration to better solution clients and

capitalise on strength of collective capabilities

• Payments innovation opportunities – ‘owning

the world of simple payments’

• Build share of lucrative short-term loan market

• Vendor financing and other partnership lending

opportunities for Small Business

• Renewed emphasis on streamlining operations

for efficient, low-cost service

• Entry Level and Inclusive Banking

Our UL growth strategy seeks leadership in our target markets

Key drivers of medium term growth

• Build on our leading Card franchise to drive payment innovation in credit and debit, enhancing

merchant mix and value-adds, expanding commercial card solutions

• Reposition Small Business Banking within Absa Business Bank to present an integrated go-to-market

strategy and for enhanced capability leverage

• Expand our personal loan capabilities to provide best-in-market service and maximise value extraction

from existing and new customer segments

• Continued value creation through selected strategic retailer partnerships providing access to broader,

low-cost distribution capabilities

• Transform Absa’s current strong position in Entry Level and Inclusive Banking to one of true market

leadership for service, access and value creation

24

Sustainable growth in targeted marketsAchieving true leadership in Card

Strengths …

• ~R53bn spend on 1.9m Absa card accounts;

~R7bn spend on 1.9m WFS card accounts;

~185k active WFS loan accounts

• Gross Absa Card advances R14.6bn1; WFS gross

advances R6.6bn2

• 27% card advances market share (excl. WFS),

#2 to SBSA at 34%; WFS 15% share of credit

retail advances, #2 to Edcon at 26%

• Leading African card acquiring business with

R103bn spend at over 38k Absa merchants

… and weaknesses

• Commercial card penetration low (10% share)

• Merchant mix biased to larger retailers yielding

lower margins

Areas of focus

• Card Acquiring refresh: New segments, RM

capabilities, Value Added Services at POS

• Consumer Issuing growth: Absa Rewards lead

out and ‘WFS Club’, WWBlack, single limits and

usage initiatives, chip EMV roll-out

• Low Value Payments solution / contact-less in

transit / retail and mobile payment innovations

• Develop Commercial Card proposition to

increase market share and value adds for

corporate, travel and purchase cards

• Integrate Virgin Money into Absa Card as

challenger brand

• Systems and process enhancements and

efficiencies, continued CVM excellence

25

1. Card advances includes Virgin JV book. 2. WFS book Store Cards + VISA Cards (R5.4bn) and PLs (R1.1bn)

Sustainable growth in targeted marketsAchieving true leadership in Personal Loans

Strengths …

• ~600k customers, 57 dedicated Loan Centres,

strong sales through branches, outbound

campaigns and online (internet / cell-phone)

• Gross advances R10.5bn1 made up of R8.3bn

PL/RLs and R2.2bn MLs

• 18% PL advances market share (excl. WFS), #2

to ABIL at 28%

• Strong credit risk management and collections

capabilities resulting in ~ 11% impairment ratio

to average advances

… and weaknesses

• No short term loan offering

• Opportunity to streamline application process

• Under-penetrated into Absa customer base

Areas of focus

• Reposition revolving loans to increase profits

• Enable short term and multiple loan offers via

multiple channels, including ATM/SMS, digital

pre-screening

• Bed down new single scored for all PL products

and commence risk appetite expansion plans

• Loan Centre expansion plans – positioning to

support Entry Level Banking; focused Sales

Consultants in branches; employ 200 more LGs

• Expand originator model for POS lead flow

• Digital, telephonic and cellular channel

optimisation

261. UL PL advances excludes WFS JV PL book, also excludes Absa Student Loans within Retail T&D

Sustainable growth in targeted marketsAchieving true leadership in Small Business

Strengths …

• ~430k customers segmented into four distinct

value tiers with segmented service models

• Gross advances R5.1bn, including R2.1bn

Commercial Property Finance

• Customer deposits R22.3bn

• 32% market share, #1 by number customers;

SBSA # 2 at 27%

… and weaknesses

• Opportunity to grow share of most valuable

small business segments / sectors

• Underweight in assets relative to customer

market share

• Low cross-sell at 1.8 overall

Areas of focus

• Continue to bed down the SB operating model

• Secure share of procurement-backed cash-flow

lending opportunity – R180bn market

• Capture profits by bringing un-banked cash

enterprises into Absa – R20bn opportunity

• Improve cross-sell, client portfolio mining and

retention through right-sizing of RM portfolios

/ re-segmentation; enhanced sales tools

• Credit scoring systems upgrade

• Repositioning within ABB to enable seamless

go-to-market and full leverage of One Absa

capabilities

27

Sustainable growth in targeted marketsAchieving true leadership in Entry Level and Inclusive Banking

Strengths …

• 6.5m mass market customers bank with Absa;

2.1m social grant recipients paid by AllPay

• 33% share of transactions and deposits

• > 850 branches, > 800 LGs, > 8.3k ATMs, > 1.5k

AllPay pay-points, > 38k merchants, > 1.2k

active Bank@Work schemes

• > 4m mass market customers use Notify Me;

> 1m use cell-phone banking services

… and weaknesses

• High transactional pricing

• Limited loan and AFS cross-sell

• Expensive branch-based distribution and

legacy infrastructure

Areas of focus

• Simplification of mass market customer value

proposition and value-added bundling

• Enhanced customer education services to

promote usage of cheaper channel solutions

e.g. cell-phone and self-service

• Outlet reconfiguration to streamline customer

experience – remove paper, <10 minutes

• Expansion of role of AllPay and MEF

• Further cell-phone banking innovations, money

transfer solutions

• Correspondent banking partnerships

• Dedicated executive and management team

with mandate and resources to deliver

28



• Customer Experience Management

• Increase organisational focus on targeted customer

segments, detailed customer insights

• Proactively manage and fix customer experience issues

• Investing in our People• Targeted training investments

• Transformation and talent management

• Value Based Management and Risk Control

• New scorecards in Personal Loans / Small Business,

enhanced risk segmentation and appetite

• Deployment of new credit / collections technologies to

enhance efficiency and effectiveness

• Focused approach to maximising RoEC

• Grow share of short-term lending through sweating existing

channels and capabilities

• Customer behavioural change strategies to enhance liability

balances, reduce funding costs

• Always in control – 100% credit / operational risk focus

• Customer Value Extraction and Market Growth• Improve cross-sell of Cards, Personal Loans, AFS products

into existing customer base

• Increase Card transactional and limit utilisation

• Create additional value from POS network services

• Enhance ABB linkage to develop commercial card

opportunities

• Expand services and relationships in social grants and

micro-enterprise markets

• Expand reach via retailer partnerships

• Service Optimisation• Simplify product set, make it easy to apply and use

• Streamline end-to-end processes to deliver faster,

paperless banking to customers

• Assist customers to right-channel and so reduce cost to

client, cost to serve, enhance efficiency and access, use of

digital channels

• Extract synergies across multiple channels

Unsecured Lending … an engine of growth

29

Absa Financial Services

Willie Lategan

30

Outline of the Presentation

31

Business overview Describes the business structure and market positioning of the Absa bancassurance clusters.

AFS value propositionDescribes bancassurance cluster value proposition to the Absa Group

Financial overview Overview of financial performance and track record

External environment Describes the impact of external environment developments and the bancassurance cluster responses

Internal environmentDescribes the impact of internal environment challenges and the bancassurance cluster responses

Looking aheadGives an overview of the bancassurance cluster focus areas in the medium term

Business OverviewWithin the five lines of business, there are fourteen operational companies

32

Life Insurance

Absa Financial Services

(Bancassurance Cluster)

Short term

Insurance

Absa

Investments

Fiduciary

services

Distribution

• Absa Life Limited

• Absa Insurance Company Limited

• Absa idirect Limited

• Absa Insurance Risk Management Services Limited

• Absa Fund Managers Limited

• Absa Investment Management Services (Pty) Limited

• Absa Stockbrokers (Pty) Limited

• Absa Portfolio Managers (Pty) Limited

• Absa Asset Management (Pty) Limited

• Absa Mortgage Fund Managers (Pty) Limited

• Absa Trust Limited

• Absa Consultants and Actuaries (Pty) Limited

• Absa Healthcare Limited

• Absa Insurance & Financial Advisors (Pty) Limited

Business A provider of short term insurance products primarily to Absa’s customers

ClientsApproximately 570,000 individuals, 52,000 companies, and another 570,000 individuals through outsourced administration

Main distribution channels Bank branches, Absa advisers, direct channel.

Size2009 annual gross premium income of R3 042 million. The 2009 profit after tax of R265million, which was approximately 4% of ABSA Group profit.

Market positioningGross premium market share of approximately 5%. Consistently ranked 1st in the industry as measured by underwriting margin.

BusinessLong term insurer focusing on risk and investment products that complement Absa’s offerings to various market segments

ClientsApprox. 2,450,000 individuals, excluding investment, group and embedded business.

Main distribution channels

Bank branches, Absa advisors, direct channel, tied agents, call centres, ATM and mobile.

Size2009 annual gross premium income of R1 290 million. The 2009 profit after tax of R587million, which was approximately 9% of ABSA Group profit.

Market positioning

7th largest Life company in South Africa with a market share of approximately 2%. Embedded value of new business (EVNB) compares favourably to major players and the Return on embedded value (ROEV) consistently ranked 2nd in the SA Life industry

Life Insurance

Short term

Insurance

Business Overview - Nature of businessAbsa Life and Absa Insurance Company contribute between 65% to 70% of total ABSA

Bancassurance earnings, and between 13% and 14% of ABSA Group earnings

33

Business Overview - Nature of businessAbsa Investments and Absa Fiduciary services contribute between 30% to 35% of total ABSA

Bancassurance earnings, and between 5% and 6% of ABSA Group earnings

34

BusinessCustodian in the Absa Group for the provision of fiduciary services. The operations include Absa Trust, Absa Consultants and Actuaries (ACA) and Absa Health Care Consultants (AHCC).

ClientsOver 1.4 million wills under custody, 23 000 Trusts, 7 000 Estates and 430 000 Retirement fund members under administration


Absa Distribution, Absa Investments, Retail Bank, Workplace banking, Private Bank & Wealth Cluster

SizeAssets under administration (AUA) of R8 billion at Dec 2009 . The 2009 profit after tax of R121million, which was approximately 2% of ABSA Group profit.

Market positioning Largest trust company in South Africa

Asset

Management

Fiduciary

Services

BusinessOffers high-quality investment products manufactured in-house, as well as selected third-party products via its linked investment platform

ClientsOver 400 000 customers, including both Retail and Institutional customers. More than half of the customers are money market fund customers


Various Absa channels, Independent financial advisers (IFAs), in-house sales team

SizeAssets under management and administration (AUM) of R153 billion at Dec 2009 . The 2009 profit after tax of R303million, which was approximately 4% of ABSA Group profit.

Market positioning8% market share of Collective investment scheme industry assets under management. Highest Asset Growth in industry over last two years

Absa bancassurance value propositionA unique bancassurance model

• Pioneer of bancassurance in SA

• A well diversified portfolio of products and services

• Leverages off existing bank infrastructure, low acquisition cost model

• Largest insurance and financial advisory network in SA

• Enables increased cross-sell with largest existing retail bank customer base

• Supports customer retention and diversification of Group earnings

• Improves key performance ratios for the Group – ROE accretive for the Group

35

Financial overviewPerformance historically stable and business well diversified

36

Operating

income

Shareholders’

funds return

Growth

(2008-09)

%

(11.5)

(11.4)

200920082007

Historical earnings have been stable, but felt the

effects of the financial crisis in 2009

Profit before tax, Rm

Volatility of earnings and the reliance on investment

market performance have been decreased over time

Business unit contribution, %

39

19

8

19

15

37

13

9

18

23

30

16

10

29

15

29

14

10

35

12

2006

Insurance

Life Fiduciary

Return on shareholders’ fundsInvestments

AIFAGroup

contribution18% 15% 15% 19%

2009200820072006

Financial overviewSuperior performance from the Insurance companies

2007 2008 2009CAGR

(07 – 09)

Gross premium R 1.2 bn R 1.2 bn R 1.4 bn 7.4%

Complex Life R 0.4 bn R 0.4 bn R 0.5 bn 10.7%

Non-

underwrittenR 0.5 bn R 0.4 bn R 0.5 bn 1.8%

Mass market R 0.3 bn R 0.4 bn R 0.4 bn 11.9%

EVNB R 213 m R 331 m R 294 m 17.5%

ROEV 21.8% 35.7% 26.0% -

37

2007 2008 2009CAGR

(07 – 09)

Gross premium R 2.3 bn R 2.8 bn R 3.0 bn 15.0%

Home owners

coverR 1.0 bn R 1.1 bn R 1.2 bn 5.2%

Personal Lines R 0.4 bn R 0.5 bn R 0.6 bn 24.4%

Commercial &

nicheR 0.9 bn R 1.2 bn R 1.2 bn 22.9%

Underwriting

margin11.5% 10.2% 3.8% -

Policies in force

(‘000)1 126 1 216 1 391 11.1%

*

AIC have maintained a superior gross premium growth in

all lines of business. Although the underwriting margin has

recently come under pressure, the underwriting

performance continues to be profitable

Absa Life top line performance has been good. The

business continues to deliver market leading Embedded

Value of New business (EVNB) and superior Returns on

embedded value (ROEV)

Short term insurance Life insurance

Financial overviewGrowing significance of the Investment cluster and stable performance from Fiduciary

2007 2008 2009CAGR

(07 – 09)

Sales capacity 1 497 1 533 1 775 8.9%

Estates/Trust

AUMR 8.6 bn R 7.6 bn R 8.1 bn (3.0%)

Wills under

custody (‘000)1 379 1 375 1 373 (0.2%)

38

2007 2008 2009CAGR

(07 – 09)

Assets under

managementR 118 bn R 117 bn R153 bn 13.9%

Net flows R 16.0 bn R 6.4 bn R24.9 bn 24.7%

Number of

Customers

(‘000)

466.9 453.8 422.9 (4.8%)

*

Absa Investments has continued to develop its core

competencies, and use the strength of the Absa brand to

grow its market share. The business has also strategically

scaled down on low value customers and focused on

more profitable high value customer base

Although retention of sales advisers continues to be a

challenge, Absa Insurance and Financial Advisers (AIFA)

has managed to grow its distribution capacity primarily

by driving the tied agency force. Assets under

management in the Trust business as well as wills under

custody has also remained relatively stable

Asset management Other key indicators

Key

DevelopmentsDetails

AFS

Response

AFS

Strategy

Industry

consolidation

• Merger of Metropolitan and Momentum

• Number of active retirement funds declined from

over 6000 in 2006 to around 4 000 today

• Identify and execute on potential inorganic

growth opportunities

• Build umbrella funds capacity�

Social security

and Retirement

reform

• Discussion paper released

• Proposal that a percentage of retirement funds

be invested in government social initiatives

• Build sufficient scale in our retirement business

• Playing leading role in engagement with

stakeholders�

Increased

offerings and

new entrants

• Discovery launch of the Financial Integrator series

–life cover that changes with economic conditions

• Entrance of Covision Life

• Direct insurers aggressively growing market share

• Focus on key customer value propositions

• Customer orientated approach a key pillar of the

Group strategy�

Expedited

expansion into

Africa

• Liberty acquisition of a 57% stake in Kenya's Cfc

Insurance Holdings • Expedite our focus on plans for Africa �

Bank

divestment of

Insurance

interests

• FirstRand proposed unbundling of its shares in the

MOM/MET MergedCo

• AFS remains of strategic significance to the Absa

Group

• Enables increased cross-sell and up-sell, supports

customer retention and is ROE accretive for the

Group

�

Healthcare

reform

• Government proposed reform in the form of a

National Health Insurance (NHI)

• Healthcare business model and strategy review

taking place in light of proposed Healthcare

reform�

Consumer

Protection Act

• Specific changes to the policyholder protection

rules

• Opportunities may exist to develop insurance

cover for newly exposed target markets �

External environmentWe consistently scan the external environment and adjust our strategies to address challenges

39

Key

ChallengesDetails

AFS

Response

AFS

Strategy

Legacy

Technology

• Inefficiencies in back-office operations

• System platform challenges

• Insurance companies System Replacement

• Paperless processing

• Telephony roll-out

• New Financial Planning (NFP) Platform

• Multi-Manager System Replacement

• AIMS (Bravura) Phase II

�

People/

Customers

• Insufficient progress on transformation

• Complex organisation leading to silo culture

• People orientated culture

• Customer orientated business model �

Distribution• Financial Adviser retention

• Insufficient sales capabilities

• Insufficient use of digital channels

• Grow our share of Independent Financial

Adviser (IFA)

• Set up Adviser academy

• Enhance distribution channels value proposition

• Focused brand positioning - MyAbsa campaign

• Extend roll out of Lifestyle consultants

• Electronic delivery channels

�

Cross sell• Deterioration of the cross sell ratio

• Need to deepen understanding of customer

segments and needs

• Penetrate affluent segment

• integration across the Group

• Database mining and Trigger events

• Loyalty program

�

Product• Complex product portfolio

• Sub-optimal customer centricity and service

• Unclear Healthcare strategy

• Above the line marketing

• Finalise Healthcare strategy

• Contractual savings offering �

Internal environmentWe also address our internal challenges through implementation of key initiatives

40



• Accelerate the diversity agenda through people

• Enhance our employee value proposition and

strengthen talent management

• Differentiate ourselves through true focus on

customers

• Drive competitiveness through market-leading

profitability

• Strengthen risk and control environment

• Drive organic growth by focusing on key customer

value propositions

• Accelerate cross sell ratios through leading customer

insight

• Grow distribution capacity and productivity through

multiple channels

• Expand Africa bancassurance business

• Accelerate growth through Inorganic opportunities

• Simplify the operating model, IT platform and

governance to effectively support AFS and enable

integration with Absa

• Drive operational excellence and efficiencies

Focus areasOur strategy is aligned to Group and addresses our challenges and harnesses our strengths

41

Q & A

?

42

Absa Business Bank

Bobby Malabie

43

Business Overview – operating approachABB has an innovative business model and a large customer base which positions us to lead the market

Customers

• Serve the 2nd biggest commercial customer base in

SA (79 988 client groups)

Sales

• Highly motivated sales force with a broad footprint

…which are:

• segmented in 3 value tiers and service models to

serve the market (separate focus on Africa, Public

Sector and Agri and Corporate re-positioned

alongside AbCap)

• Equipped and enabled with appropriate sales tools

to provide financial solutions to clients

Products

• Full range of products in ABB or through leveraging

the product expertise in AbCap, Retail, and AFS

Sector expertise

• A mature centre of excellence which is being

leveraged across ABB to support focused client

value propositions.

Credit and risk

• Responsible credit practices and policies , prudent

management of capital and a capability to recover

NPL’s and support distressed clients

44

Turnover R100m –

R 750m

Turnover R10m –R100m

Account Services Card

Short term & long term

investments

Cash services

Payments & collection

International Banking

FX & hedging

Electronic banking

CPF

Commercial Asset Finance

Debtor finance

Workplace

banking

STCF

BS Advisory

Transactional products Commercial Lending Specialised Finance

Me

diu

mLa

rge

Segmented sales

Product

Sector centre of excellence

All segments

Afr

ica

Pu

bli

c S

ect

or

Ag

ri

ba

nk

ing

Turnover <R10m

Sm

all

Absa Vehicle Mngmt Systems Acq & Lev

Finance

Investments

Debt &

Capital

Markets

Sourced

from AbCap

Sourced

from Retail

Sourced

from AFS

Insurance &

assurance

Manufacturing

Service Industries

Info. Comms

Technology

Construction

Retail & FranchiseTransport &

logistics

Health & Education

Credit and risk management

79 988Customers

Income statement2009

Rm

2008

Rm

Change

%

Net interest income

(excluding suspended interest)5 995 5 922 � 1.2

Non-interest income 3 099 2 898 � 6.9

Operating expenditure (4 474) (4 443) � 0.7

PBT Before Impairments (4 620) (4 377) � 5.6

Impairments (871) (287) � 204

Interest in Suspense (386) (103) � 275

Taxation (1 002) (1 168) � 14

Attributable earnings 2 322 2 824 � 17.8

Headline earnings 2 278 2 749 � 17.1

ROEC 18.2% 24.8% � 6.6

RWA 105 611 107 935 � 6.9

Return on RWA 2.1% 2.6% 0.5

EP (4 474) (4 443) � 0.7

FTE’s 3 656 3 191 � 12.7

Impairments 876 287 � 203%

Deposits 104 628 100 046 � 4.6

Loans and advances 122 545 122 174 � 0.3

Financial overview - 2009 performanceIn 2009 ABB achieved a growth of –17.8%. We continued to grow top line income positively, grew

our balance sheet and made a 31.4% contribution to group earnings

• Revenue (excl interest in

suspense) of R9 094 million (�3.1%)

• Attributable earnings of R2 322 million

(� 17.8%)

• Sharp rise in impairments 204%

• Cost to income ratio maintained at 50%

• Margin increased by 21 bpts due to

re-pricing

• Customer numbers grow across all

segments

• Funding gap closed by a further R5bn

• Maintained an ROEC of >18%

• Staff cost reduced by 8% YoY

• Moved contribution to group from

25.1% to 31.4%

Balance sheet

Key metrics

45

Execution of strategic intentOur 2009 performance was only possible through a change in direction and a rigorous execution of

our 2009 objectives. This serves as an important platform for 2010

� Focused on a number of short term actions to address balance sheet challenges

� ROEC approach to pricing

� Pricing and or management of unutilised facilities

� Capped growth in high risk products (CPF; CAF)

� Capped growth in high risk industries (Residential, construction; transport)

� Actioned a number of quick-wins that impact the income statement

� Cost savings initiative

� Re-Pricing banking services and products

� Reduced our dependence on capital intensive products and moved our focus to short term working capital lending

� Reduced our dependence on CPF

� Closely managed distressed clients and have implemented a recovery capability

� Prepared ourselves to compete with best of class in electronic banking, cash handling,

account services and card offerings by putting interim platforms in place and improving

functionality

� We established a focus on other NIR product areas (Fx and Trade)

Changes in our core business model In support of key strategic objectives ..and successfully executing numerous actions

From:

A growth

and advances

bias

To:

A value

and NIR

bias

Sh

ift

in f

ocu

sAs a result of the economy and a stall

in previous positive growth, ABB

changed its core strategy in 2009

Cost & Efficiency

Optimisation of BS

and Capital

Diversify Income

streams

Manage risk

Strengthen the internal

and client franchise

1

2

3

4

5

• Focusing on advances market share

• A strong CPF focus

• Steep Headline Earnings targets

• Emphasis on products areas with earnings potential but higher risk (e.g. CAF, CPF equities, DevCo)

• Extract value from existing customers (Customer share of wallet)

• Manage Capital carefully and price for risk

• Economic Profit focus

• Focus on deposits and NIR

• Risk-reward focus with embedded ROEC measurement

• Focus on establishing primary banking relationships

46

Internal opportunitiesWe remain focused on our vision of establishing ABB as the number 1 player in the market and are

therefore constantly seeking ways to refine our business model and serve our clients better

To be leading provider of business banking

solutions in South Africa and SS Africa

SectorCentre of excellence

Credit and

Risk

…implies constant refinement of the ABB model

…and a relentless drive to obtain

the best talent available

SALES

Challenges

• Improve sales efficiency

• Accelerating good progress made to build a strong

Corporate Franchise

Areas of focus

• Consider a better model to serve Corporate clients by

migrating key clients to a new Corporate coverage cluster

(positioned alongside AbCap)

• Migrating small business segment to ABB

• Re-look segmentation

• Re-visit sales operating model

• Re-consider key processes to streamline and simplify

• Up-skill sales force to allow ABB to differentiate itself

through its sales approach and thought leadership

provided to clients

SECTOR

Challenges

• Enable ABB to differentiate itself through the

thought leadership our sales people provide to

their clients

Areas of focus

• Implement focused CVP’s for each subsector and

enable frontline with knowledge, tools and

product solutions to solution clients

PRODUCT

Challenges

• Accelerate advances growth and particularly uptake of CAF

product

• Unlocking back-office synergies in commercial lending

products

• Build a leading transactional banking offering

Areas of focus

• Review frontline sales model of CAF

• Create a “key accounts” management capability for CAF

• Review JV’s, and alliances to keep only the best

• Streamline back-offices of CAF and CPF

• EB platform convergence and

CREDIT

Challenges

• Reduce impairments

• Optimise capital

Areas of focus

• Implement business support capability to do pro-

active re-structuring of debt and to move up the

risk curve

• Implement advanced internal rating approach

PEOPLE

Challenges

• Accelerate the transformation agenda

• Develop best talent in the industry

Actions

• Implement an ABB training academy

• Reward performance

PRICING APPROACH

Challenges

• Unsophisticated pricing approach

Areas of focus

• Implement a customer portfolio pricing approach

• Develop a pricing and billing engine for

transactional pricing

Product

client

47

External opportunitiesGrowth in NIR, Africa, establishing a dedicated Agri bank, working capital finance and achieving primary

banking status with clients are key strategic priorities to move forward

1

2

NIR income

opportunities

Africa

Opportunities

Strategic rationale Areas of focus

• Best opportunity for future market relevance lies in

growing NIR. Our market share indicates that we have

opportunities in Fx and transactional banking (specifically

electronic banking)

• ABB requires a leading EB offering to maintain market

relevance and gain primary banking market share

• ABB NIR% to total income lies at 35.6% vs competitors as

high as 52.2% (FNB)

• Market leading trade and FX capability on a group wide

basis (Project FoeniX)

• Cash handing and acceptance

• Bulk Cash send capability

• Account services (Remote account opening and

transacting - AMS)

• Platform convergence and reduction of legacy

technology

• Pricing and billing engine for transactional business

• Automated processes for client migration to new EB

platforms

• Absa not represented across Africa

• Absa’s current In country product propositions is basic

and largely commoditised which limits our ability to

provide e2e client solutioning

• Increasingly ABB’s ability to do business with SA

corporates depends on strength and depth of our Africa

Offering

• Africa has generated superior growth across al industries

delivering real GDP CAGR of 5% since 2000

• Competitor snapshot reveals that Absa has 120 MNC

clients but only R33m income vs Standard with 300 MNC

clients and R1.8bn income

• Cash Management and electronic banking capability

• Trade Services

• Agri competence into Africa

• Deposit suite

• Expand ABB product capability (CPF, CAF, WCF)

• Structured trade and commodity finance

• Accelerate Bank Windhoek synergies

• Representative offices in non-present countries

48

External opportunities (cont)

Drive primary

banking and

cross selling

Be the industry

leader for

Working Capital

solutions

Develop a

dedicated Agri

banking

capability

Strategic rationale Areas of focus

ABB can differentiate itself by establishing dominance and

strategic control in key strongholds where we already have

an established franchise. Agri banking is a natural focus

area to establish dominance

• Production credit to producers

• Revolving monthly credit (store cards)

• Stock and trade finance (in silo and warehouse stock

finance based on silo certificates and usage of collateral

managers)

• Trade finance and hedging

• Asset finance and leveraging of John Deere alliance

• Working capital to Agri business

• Africa opportunities

Working Capital and trade cycle financing form attractive

shorter term financing opportunities where cash flow

lending can be optimised and where the onerous effects of

capital holding for long term lending can be relieved

ABB should aim to develop product competence to

dominate these lending opportunities

• STCF product development

• Debtor Finance (WCF) product expansion

• Sales force training in usage of STCF and WCF products

• A cross sell analysis shows that ABB has many good

stand alone product relationships, and in most cases we

have a cheque account coupled

• Cross selling to other product relationships from this

transactional base is however weak, which shows that

ABB have not yet captured the primary banking space

and that significant opportunity for further cross selling

exist

• The core strategy can be described as follows:

Use

current

Balance

Sheet

product

relationships

..high cross

holdings

of

transactional

banking

Relationships

(Cheques)

..establish

primary

banking

relationships

..deepen

customer

share

of wallet

with

full range of

ancillary

products

wit

hto to

3

4

5

49

Strategy execution – 5 work streams are currently driven to execute this strategy

50

…fundamental to enabling these workstreams is redefining

the Sales Operating Model and processes…

WS 1:

Transactional

Banking

Objective: Ensure a market leading transactional banking offering

Key Actions: Implement a number of key projects to develop a competitive and market

leading transactional value proposition

WS 2: Develop

an Agri bank

Objective: Establish an Agri Bank by driving market leading new product development in the Agri

and Structured Trade and Commodity Finance (STCF) areas

Key Actions: Implementation of the Agri Procurement Solution , see thru credit process and new

product development on the STCF solutions -

WS 3:

Commercial

Lending

Product

Objective: Rekindle focus on advances sales (especially CAF) by reviewing capacity of frontline

staff and by building a “key accounts” capability

Key Actions: Redefine frontline roles; Streamline back office for CAF & CPF

WS 4:

Recoveries

& Business

Support

Objective: Improve recoveries and business support capabilities

Key Actions: Restore distressed customers to a satisfactory credit status, limit further

deterioration of book through intensive management, of EWL’s and seek adequate reward

for any additional risk (fees; increased margin)

Objective: Increase focus on sales by unleashing capacity of frontline staff and review

segmentation

Key Actions: Review frontline roles. Review segmentation model. Streamline & standardise

processes across business

WS0:

Sales

Operating

Model

+Time

EWL 1

EWL 2

EWL 3

B & D

Health

Consensual Coercive

Earnings

declineBS Strain

Cash Crisis

Insolvency

Move up

the risk

curve



• Enhanced customer experience

• People agenda

• Investment in training

• Transformation

• Talent development

• Diversified advances growth

• Deposits growth

• Advanced internal ratings approach

• Business Support capability and recovery of

impairments

• Focused CVP’s to penetrate markets further

• Agri Bank

• Pricing

• Sub-Saharan commercial opportunities

• NIR growth through transactional banking and

Fx opportunities

• Primary banking & Cross selling

• Advances growth (CAF)

• Cross cluster collaboration with AbCap, Retail, and

AFS

• Best of Breed relationship selling model

• Improved coverage – Corporate segment

• Back-Office efficiencies

• Collaborative technology solutions and a drive

towards platform convergence

Outlook and strategyWe developed our strategic agenda to align with the Group’s priorities and are driving these themes

relentlessly

51

Absa CapitalStephen Van Coller

52

� Global leader in risk management

and financing products

� Strong international origination

and distribution capabilities

� Significant balance sheet and

commitment to SA business

� Access to global and domestic

products and client franchise

� Strong local and global balance

sheet

� Access to world-class technology

and know how

+ =� Comprehensive local product suite

� Depth of local relationships

� Large balance sheet and market

presence

Chicago

Los Angeles

Miami

San Francisco

Portland

Boston

Washington, DC

Mexico City

Calgary

Sao Paulo

Paris

Frankfurt

MilanDubai

Johannesburg

Geneva

Amsterdam

Madrid

ZurichLuxembourg

BeijingHong Kong

Singapore

Seoul

Taipei

Sydney

Shanghai

Bangkok

Mumbai

London

Tokyo

New York

Lugano

Lisbon

Manchester

Birmingham

Dublin

Jakarta

Labuan

Kuala Lumpur

Houston

Tel Aviv

Toronto

Menlo Park

Buenos Aires

Doha

Moscow

Rome

Manila

Atlanta

Seattle

Santa Monica

Dallas

San Diego

Puerto Rico

As an affiliate of Barclays Capital, Absa Capital is the only SA bank

that can lay claim to be fully local and fully global

53

54

Our business model is now closely aligned with that of global investment banks…

Issuer Clients Investor Clients

AdvisoryCapital structure

Financing Hedging

Securitisation

Access to marketsRisk-return optimisation

StructuringYield

Investment Banking

Distribution

Corporate coverage

Sales

Risk Management

Commodities

Credit products

Equity products

Foreign exchange

Fixed income products

Money marketsFinancing

BondsLeveraged Finance

LoansSecuritisation

Research

Private Equity

• ZAR centre of

excellence for Barclays

Capital

• Regional lead for

investment banking in

sub-Saharan Africa

• Client-centric model

which enables us to

offer holistic client

solutions

• Focus on originate-and-

distribute

55

…which enables us to deliver a full suite of products to our clients

Clients

Coverage

Markets

Investment

Banking

Equity Investments

Product

Corporate

Institutions

Product area offering

• Foreign Exchange, Money Markets, Fixed Income,

Equities, Equity Financing & Credit, Commodities

• DCM: Bonds, Hybrids, Securitisation

• Loans: Lev Finance, Structured Equity Finance (incl.

BEE), Structured Trade Finance, Syndicated

Lending

• Structured Lending

• Private Equity

• Infrastructure Equity Investments

• Absa Structured Products

• Investor Services

Infrastructure

RiskFinance &

Ops

IT & Other

Business

Support

Human

Capital

56

Since inception, we have focused on six strategic objectives

1

2

3

4

5

6

Key strategic objectives Our strategic enablers

• Continue to

attract, develop

and retain the

best people

• Invest in support

infrastructure

and robust

controls

To be the leading

investment bank in

Sub-Saharan Africa

Our vision

Talent and

Culture

Productivity

and Cost

Control

Our business pillars

ClientsCapital and Risk

Management

Diversify revenue mix

Grow the client franchise

Optimize usage of balance sheet and capital

Derivatize the client base and develop

innovative solutions

Develop opportunities with other Absa

business clusters

Expand into Sub-Saharan Africa

35%

65%

Our performance to date indicate that our model is bearing fruit

56% 36%

8%45%

44%

11% 35%

59%

7%

Re

ve

nu

es

• Transformed from a

corporate lending

business to a market

based business

• Ignoring 2009 once-offs,

Absa Capital has shown

good growth

Co

sts

• Cost to income ratio of

49% (2008: 41%)

• Total costs 7% lower

than the prior year

• Cost control remains key

focus but still under

pressure

CAGR

29% IB

Markets

Private Equity

Notes:

1. Totals include Management & ISS revenues, however analysis only includes IB, Markets and PE

2. Total includes writedowns due to SSFs and PE where actual size indicated by grey circle

3. Total costs exclude Wealth

Revenue after impairments1, 2006-2009

Total costs3, 2006-2009

Rm

Key messages

Key messages

Actual revenue

including PE

and SSFs

Excludes PE and SSFs

CAGR26%

2009200820072006

2009R2.50bn2

2007R3.87bn

2008R5.35bn

2006R2.52bn

57

58

…and our efforts have not gone unnoticed in the domestic market

Eskom Finance

Company (Pty) Ltd

Structured and Lead Arranged

the first securitisation in the

South African Market in 2009

Absa Capital

2009

ZAR4.3bn

Refinance Facilities

Sole Bookrunner

Mandated Lead Arranger

Hedging Bank

Facility Agent

Absa Capital

2009

USD1.5bn

South Africa’s largest ever transaction

in USD

Joint Bookrunner

Absa Capital

Barclays Capital

2009

Listed South Africa’s first sector ETFs

on the JSE

Absa Capital

2009

PWC Banking Peer Review Survey

No. 2

Money Markets, Derivatives and Fixed Income

2009

Euromoney Awards for Excellence 2009

Best Debt House in Africa

2009

No. 1

South African BookrunnerUSD1.500m

2009

Overall best fixed income house

Best bond sales team

Best primary markets house

Best credit analyst

Best bond price making team

Best bond trading house

Best interest-rate derivative trading team

Best interest-rate sales and structuring team

Best derivatives trading house

2009

Awards and recognitionNotable transactions NOT EXHAUSTIVE

59

Challenge Our response

• Uncertainty to timing of

market recovery

• Continue to manage costs in line with revenue

development

• Depressed private equity

market

• Continue to manage current portfolio to maximize

shareholder value - no fire sale

• Aligned team size to be in line with new strategy

• Establishing an on-the-ground

presence in Nigeria

• All regulatory approvals have now been received

• Absa Capital is moving ahead to establish a

representative office in the next 6 months

• Single Stock Futures • Clean slate review to reinforce controls and risk

management

• Executed work-out strategy with residual disposal of

SSF assets (residual risk limited to R 215m)

Market conditions

Regulatory and

other

Drivers

Global market recession presented us with challenges

60

FX front-to-back reengineering

� Lack of integration and collaboration

throughout the Group

� FX touches each business area and

therefore represents a big growth

opportunity

We are currently pursuing initiatives in…

Mozambique

Seychelles

Mauritius

Ghana

Egypt

Botswana

UgandaKenya

Tanzania

Zimbabwe

Zambia

South Africa

Cash Equities

� Barcap/Absa partnership gives

significant competitive advantages

� Direct benefits to Prime Services and

Equity Capital Markets

Equity Capital Markets

� Leverage our balance sheet strength

� Institutions have specific SSA prudential

relaxations

Prime Services

� Strong international demand for South

African Prime Services offering

� Prime Services is complementary to the

existing business units

� Significant progress in the past 3 years

in operating product

� Limited cross sell to date across Abcap

and ACBB

� Abcap has top rated Markets platform

Corporate Banking Model

Capital Optimisation

… New businesses … Africa … Optimisation

� Combined, Absa and Barclays have a

presence in 12 financially attractive

African economies

� Both our domestic and international

peers are who have a presence in Africa

are reaping huge benefits

� We are driving a number of short term initiatives aimed at increasing collaboration and cross selling opportunities

Barclays presence

Absa presence

Dual Presence

� To utilise the Advanced Internal Ratings

Based approach to calculate our

regulatory capital requirements from Jan

2011

� Entails development of improved models

for measuring risk in our Wholesale

business

61

ZAR 5bn JSE-listed

DMTN programme

Sole lead arranger

November 2009

ZAR 500m Commercial

Paper issuance

Sole lead arranger

November 2009

Capital Structure &

Ratings Advisory

Advisor

November 2009

Umbrella ECA

programme

Arranger

December 2009

USD 261m facility to fund

USD 290m contract with

Shaft Sinkers

Mandated lead arranger

and ECIC agent

April 2010

Risk Management

transactions

March 2010

Risk Management

transactions

March 2010

Risk Management

transactions

March 2010

Risk Management

transactions

March 2010

Early wins indicate that clients approve of our new Corporate Banking model

Customer and people centred

organisation

Simple, streamlined Group for customer

delivery


• Corporate Bank Model

• Africa

• Capital Optimization• Cash Equities

• Equity Capital Markets

• Prime Services

• Front-to-back FX

62

All our key initiatives are aligned to the One Absa Strategy

In conclusion

63

Good progress has also been made in:

•Corporate

•Wealth

•Africa

•Deposits

64

What progress have we made to date?

Abcap and ACBB potential co-coverage

client database with a total of 1000

clients

� In September 2009, Abcap and ACBB identified an initial

list of 65 corporate names for co-coverage and embarked

on active engagement of these identified clients

� 45 names have seen initial engagement

� 28 of these clients have seen collaborative actions

� Collaborative transactions have either been initiated or

concluded on 12 clients

� Future opportunities and transactions have been identified

for 40 of the co-coverage clients

Q & A

?

65

Introduction Absa Investor Day 31 May 2010 - Barclays Africa · Absa Investor Day 31 May 2010 Maria...

Documents

Transcript of Introduction Absa Investor Day 31 May 2010 - Barclays Africa · Absa Investor Day 31 May 2010 Maria...