3. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Financial Highlights
› Total income increased 10% to BWP 392 million
› Solid income growth across all operations except BancABC
Zambia
› Significant investment in Retail Banking and Zimbabwe
dollarisation increased operating expenses 54% to BWP
366 million
› Impairment charges increased 15% to BWP 51 million
› Basic EPS down 33% to 40.4 thebe
› RoE of 14% (2008:23%) and NAV of BWP 399 million
(2008: BWP 438 million)
› Balance sheet grew 11% to BWP 4.4 billion
› Customer deposits grew 19% to BWP 3.4 billion
3
4. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Operational Highlights
› Microfinance operation successfully integrated into
BancABC Zambia and customer base expanded
› Retail Banking commenced business with first branches
opened in Harare and Dar es Salaam
› Credit function strengthened
› New products successfully introduced in Tanzania and
Mozambique boosted non-interest income
› Business rapidly expanded at BancABC Zimbabwe post
economic stabilisation
4
5. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Economic Overview - 2009
› Economic deterioration experienced in late 2008, cont’d
into 2009
› Regional GDP growth slowed to 1.5% in 2009, from 5.4%
in 2008
› Zimbabwe economy grew for first time in 10 years post
formation of GNU and dollarisation
› Botswana and Zambia hardest hit by declining commodity
prices
› Policy interest rates declined across all territories
– Associated margin pressure for banks
› Credit growth declined significantly across all territories
except Mozambique
5
9. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Economic Overview – 2010 Outlook
9
› The worst of the recession appears
to be over but economic recovery
remains fragile
› Growth in employment levels lagging
private sector economy growth
› Central Banks remain focused on
restoring credit growth to the
productive sectors of the economy
› Rising commodity prices supports
recovery in Group’s markets
› Improved growth prospects are
envisaged in 2010 in all of Group’s
markets
11. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Income Statement - Overview
60.240.4Earnings per share (thebe)
87,93158,431Profit for the year
-33,64215,768Tax
121,57342,663Profit before tax
2,30016,164Share of results of associates
119,27326,499Net income from operations
-236,941-365,694Operating expenditure
356,156392,193Total income
216,126265,017Non interest income
140,030127 176
Net interest income after
impairments
-44,365-51,218Impairment of loans and advances
184,395178,394
Net interest income before
impairments
20082009BWP’000s
11
12. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Income Statement – Interest Income
› Margins on interest income
generally declining due to change
in asset mix
› Margins widened in 2008 due to
aggressive loan growth
› Decreased demand for credit in
2009, resulted in excess cash being
invested in low yielding money
market and t-bills
› Lower policy rates resulting in a
squeeze in banking margins
12
13. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Income Statement – Impairments and NPL’s
› Overall NPL’s and credit loss ratio
is declining
› 2009 increase attributable to
economic circumstances
› Quality of loan book is improving
13
14. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Income Statement – Non-interest Income
› NI income increasing overall and as
a % of total income
– 2009 NI % increased to 68%
(08: 61%)
› Trading activities, esp in forex are
primary source of growth
› Introduction of Retail Banking
expected to increase net interest
income going forward
14
15. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Income Statement – Segmental analysis
% change20082009
(3%)184,395178,394TOTAL
(249%)4,147(6,180)Head office
2%180,248184,574Banking operations
-6314,339Zimbabwe
(16%)73,56161,632Zambia incl Microfin
14%30,94135,178Tanzania
13%34,29538,594Mozambique
(16%)41,38934,831Botswana
Net Interest Income
15
17. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Income Statement – Cost to Income Ratio
› Target C:I ratio of 50% over the
medium to long term
› Once off costs associated with
Pyramid Plaza pushed ratio from
77% to 82%
› Dollarisation of Zimbabwean
economy brought in BWP 62 mill of
costs vs. nil for 2008
› Significant investment in Retail
Banking; people, systems and
processes the bulk of which were
expensed
› Retail head count now at 89 (08: 35)
17
18. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Income Statement – Staff costs
› Total head count in 2009 of 592 vs. 484 in 2008
› Growth in ABCH portion attributable to Retail Banking
18
19. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Balance Sheet - Overview
19
3,967,938
456,508
437,654
3,511,430
599,814
2,822,352
3,967,938
216,942
2,249,903
26,100
659,587
513,050
2008
11%
(9%)
(9%)
14%
(9%)
19%
11%
29%
(11%)
(31%)
34%
72%
% change
4,417,745TOTAL EQUITY AND LIABILITIES
415,779Total equity
399,069Equity attributable to ordinary shareholders
4,001,966Total liabilities
543,822Borrowed funds
3,355,118Deposits
4,417,745TOTAL ASSETS
278,975Property and equipment
1,995,325Loans and advances
17,905Financial assets designated at fair value
880,740Financial assets held for trading
881,884Cash and short term funds
2009BWP '000s
20. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Balance Sheet – Capital Adequacy
20
Capital Adequacy Ratio
20%
10%
23%
17%
23%
2009
19%
22%
16%
32%
16%
2008
10%Zimbabwe
10%Zambia
12%Tanzania
8%Mozambique
15%Botswana
MinCountry
› Botswana recapitalised to the extent of BWP 35 mill in H209
› All entities now adequately capitalised
› Zambia to be reacapitalised in 2010
21. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Balance Sheet – Loans and Advances
› Active decision taken to curtail
lending due to poor economic
circumstances
› Liquidity constraints precluded further
lending in Tanzania and Zambia in
H109
› Excluding Zambia, impairments across
Group reduced from BWP 34 mill in
2008 to BWP 27 mill in 2009
› Actively support good clients in
difficult economic environment
21
Loans and
advances per
country to
follow
22. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Balance Sheet - Deposits
› Customer deposits increased over the
year by 19% to BWP 3.4 bill
– Zimbabwe increased BWP 158 mill
due to economic stability
– Mozambique increased BWP 200
mill as client base grew
– Tanzania increased BWP 132 mill
with deposit mobilisation
› Excess cash invested in t-bills and
money market instruments
› Resulting squeeze on margins with
consolidated spreads reducing from
5.9% in 2008 to 5.1% in 2009
22
24. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Botswana
› Economic activity sharply declined in 2009 as diamond
revenues remained subdued
› Management decision to curtail lending in light of poor
economic circumstances
› Impairments well managed down to BWP 9 mill (08: BWP
22 mill)
› Increased customer deposits and capital injection from
ABCH positions Balance Sheet well for 2010
› Forex trading volumes and associated non-interest income
increased
› Expenditure tightly controlled with only 10% increase
› Overall PAT improvement of 32% to BWP 17 million
24
25. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Mozambique
› Slow down in commitments to long term projects across
the economy reduced demand for credit from corporates
› Interest income increased in line with increased customer
deposits, despite lack of growth in loan portfolio, as cash
was invested in t-bills and money market
› Significant growth in non-interest income, predominantly
from forex trading
› Operating expenditure increased 32%, bulk of which was
on Retail Banking
› PAT up 82% to BWP 30 million
25
26. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Tanzania
› Lending restricted early on in the year as liquidity
constraints kicked in
› This plus increased impairments of BWP 13 mill (08: nil)
contributed to decline in net interest income after
impairments to BWP 22 mill (08: BWP 31 mill)
› Increased customer deposits by year end of 24% to
BWP 677 mill
› Non-interest income increased 29% with introduction of
bond trading providing new income stream
› Operating expenditure increased 17% to BWP 40 mill
› PAT decline of 49% to BWP 5 mill
27. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Zambia - BancABC
› BancABC experienced significant loss in 2009
– Reduced market activity
– Large impairments mostly from mining customers
› Economy hard hit by declining copper price in 2008 and
recovery of spot price slow to impact the real economy
› Loan book declined 45%, interest income down 19% to BWP
11 mill
› Accordingly Balance Sheet shrunk 37% to BWP 286 mill,
customer deposits were down 10% to BWP 176 mill
› Impairments were BWP 24 mill vs. BWP 10 mill in 2008
› New management team making progress in addressing credit
controls and reputational issues
› Recapitalisation planned for 2010
28. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Zambia - Microfin
› Microfin, BancABC Zambia’s microloans business, made
good progress with loan book increasing to BWP 104 mill
(08: BWP 90 mill)
› Impairments drastically reduced from BWP 9 mill to
BWP 3 mill
› Average yield on IEA however declined to 35% from 47%
› Decision taken to integrate BancABC and Microfin
operations to reduce costs and cross sell retail products
› Merger successfully concluded and brand integration
planned for 2010
29. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Zambia – write offs
› BancABC Zambia was advisor to the financing of
construction project
› Construction ran over budget resulting in significant loss
for investors
› To protect BancABC reputation, board took the decision to
reimburse investors
› Total reimbursements of BWP 36 million paid out over
2008/ 09
› Building taken over by the Group
30. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Zimbabwe
› Significant economic improvement on the back of
formation of GNU and dollarisation
› Positive economic trend for first time in 10 years
› Lack of liquidity in the banking sector still problematic
– Limited capacity of lender of last resort
– Inactive interbank market
– Limited FDI
› Net interest income of BWP 14 mill vs. nil in 2008
› Expenses of BWP 62 mill vs. nil in 2008
31. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Retail Banking - Update
› IT systems largely in place and testing has commenced
across territories
› First branches opened in Harare and Dar es Salaam
– Branches to open in Mozambique in March
– Botswana to follow in Q2 and Zambia Q3
– Total of 10 branches to be opened by half year
› Visa accreditation acquired in Botswana, Mozambique and
Tanzania
› Partnerships remain key driver of growth
33. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Investment Case
› NAV per share of 273 thebe vs.
share price of 130 thebe
› Historic PE multiple of 3.2.
› Only regionally diversified bank listed
in Botswana/ Zimbabwe – reduced
country risk
› Traditionally valuing assets in
Zimbabwe was a challenge, this has
changed following dollarisation
35. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Strategy – Vision and Mission
BancABC is realising this vision by building profitable,
lifelong customer relationships through the provision of a
wide range of innovative financial products and services;
to the benefit of all our stakeholders
BancABC’s vision is to offer world class financial solutions
that make it Africa ’s preferred banking partner
› Balanced Scorecard introduced as the Group’s performance
management strategy implementation tool
› Setting and reviewing the performance targets to become a more
transparent process
36. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Strategy – Key Objectives 2010
Grow & Diversify
Customer Base
Increase Non-Interest
Income
Boost Net Interest
Income
Control Operating
costs
Reduce cost of
Funding
Manage investment in
Growth
› Merge Microfin and Zambian operations and cross sell
› Convert wholesale banking customers to retail bank
› Expand Retail Banking business
› Cross sell products to borrowing customers
› Improved credit management
› Managed growth of the loan portfolio
› Costs driven by incremental revenue they can generate
› Improve turnaround times
› Expansion of Retail Banking footprint
› Invest in human capital
› Retain a substantial amount of Group‘s earnings
37. BancABC 2009 ANNUAL RESULTS 10 MARCH 2010
Outlook
› Continue to grow wholesale business
› Bed down merger in Zambia, recapitalise this operation
› Use Microfin branch network to leverage Retail Banking
growth in Zambia
› Retail Banking coming on stream – cash flow positive and
profitable in next 18-24 months
› Revisit capital raising initiatives in H210
› Draw down on AfDB loan of US$30 million in Q210
› Balance sheet positions bank well to grow all operations
as regional economy improves
› Year started well, sustained profit growth expected for
remainder of 2010