annual results presentation for the period ended 30 september 2003
TRANSCRIPT
Annual results presentationFor the period ended 30 September 2003
Features
►Headline earnings per share of 140,4 cents
►Sales up by 15,4% to R3,5 billion
►Non-performing loans down by R364 million
►Total ordinary dividends up 86,7% to 56 cents
►Special dividend of 100 cents
►RoA of 10,6%
►RoE of 25,9%
RoA and RoE
10,810,68,9
13,9
0
2
4
6
8
10
12
14
16
2001 2002 2003 Proforma
%
RoA Target
Return on assets
30,4
25,923,2
31,6
0
5
10
15
20
25
30
35
2001 2002 2003 Proforma
%
RoE Target
Return on equity
Dividends per share
2530
56
100
0
20
40
60
80
100
120
2001 2002 2003
Ce
nts
DPS Special DPS
Capital, cash flow and funding
Capital, cash flow and funding
►Establishing capital requirements►Capital adequacy►Return on equity
►RoA/RoE focus, underpinned by strong cash flow
►Dealing with surplus capital ►Ordinary dividends►Other capital reduction strategies
Capital philosophy
Capital, cash flow and funding
35,1
44,543,6
38,1
0
5
10
15
2025
30
35
40
45
50
Sep '02 Mar '03 Sep '03 Pro forma*
%
ABIL Group capital %
Capital adequacy
Target
* After the special dividend
R million Capital % Required capital
Non-performing loans 2 625,3Less provisions (1 914,4)Residual book value 710,9 100,0% 710,4Performing loans 3 688,8 24,6%* 907,5Goodwill 20,5 100,0% 20,5 Cash reserves 1 628,0 4,0% 65,1 Other assets 526,8 various 183,2
Total assets 6 575,0
Group risk weighted assets 6 239,8 30,2% 1 887,2 Actual capital 44,5% 2 775,1
Surplus capital 14,2% 887,9
Capital, cash flow and fundingCapital adequacy model
* Three times average bad debt charge
Impact Data R000’s
AssumptionsDividend cents 100Average number of shares 000’s 484 398Average interest rate 11,7% 56 745Tax rate 30,0% 17 023
As reported Pro forma %Impact on ratiosHeadline EPS (excl STC) 140,4 132,2 (5,8%)Return on assets 10,6% 10,8%Return on equity 25,9% 30,4%Net asset value per share (cents) 588,1 467,4 (20,5%)ABIL group capital adequacy 44,5% 35,1%
Capital, cash flow and fundingImpact of special dividend
Capital, cash flow and fundingCash flow analysis
R million 2003 2002
Cash from operations (net of tax) 1 163 1 029
Change in gross advances (22) (325)
Net cash flow from operations 1 140 705
Purchase of Saambou book (1 000)
Payments to shareholders (863) (132)
Ordinary dividends paid (205) (132)
Share buy-backs (125) 0
Special dividend to be paid (incl STC) (533) 0
Net cash inflow/outflow 277 (428)
Advances, sales and clients
% 30 September 30 September R million growth 2003 2002
LENDING BOOKS 12,5% 4 137,7 3 678,4
African Bank Retail 11,2% 3 430,4 3 084,3
Specialised Lending 19,1% 707,3 594,1
PAY DOWN BOOKS (37,6%) 2 176,4 3 488,3
African Bank Retail (38,3%) 1 930,6 3 127,8
Specialised Lending (31,8%) 245,8 360,5
TOTAL (11,9%) 6 314,1 7 166,6
Average gross interest-bearing 3,4% 5 414,8 5 237,7 advances
Advances, sales and clientsAdvances analysis
Advances, sales and clients
880
232209209
2 367
3 0383 579
4 3833 671
2722 2421 524
1 473
2 396
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
1999 2000 2001 2002 2003
Rm
SMME Payroll business
Retail/debit order business Saambou PLB
Gross advances portfolio mix
Lending Saambou R millions books Persal PLB Total
Gross advances as at 30 September 2002 3 084,3 731,6 2 396,3 6 212,1
New loans granted – 1st half 1 005,9 – – 1 005,9 – 2nd half 1 209,8 – – 1 209,8
Loans transferred 208,3 – (208,3) –
Net receipts (1 677,6) (171,5) (476,3) (2 325,4)
Interest, charges and adjustments 1 139,4 97,6 517,6 1 754,7
Gross cash receipts (2 817,0) (269,1) (993,9) (4 080,0)
Bad debts written off (400,4) (102,5) (238,6) (741,5)
Balance as at 30 September 2003 3 430,3 457,5 1 473,1 5 361,0
Advances, sales and clientsAdvances walkforward analysis (African Bank Retail)
Sales in 2nd half of 2003 20% up on 1st half
Advances, sales and clientsAfrican Bank Retail sales
60
80
100
120
140
160
180
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Ind
ex
ed
2002 2003
The 2002 sales exclude R152 million of once-off Persal consolidation loans in October to December
Advances, sales and clientsClients
►Sales up 15,4%
►Number of loans up 8,0%
►Average loan size up 6,9%
► 1,4 million new loans:►1,1 million repeat clients►290 000 new clients
Underwriting margin and costs
Underwriting margin and costs
5,95,84,68,19,7
19,117,918,514,013,1
8,210,60,16,9
9,8
19,714,825,0
23,725,8
1999 2000 2001 2002 2003
% g
ros
s in
t b
ea
rin
g a
dv
an
ce
s
Net financing costs Operating expenses
Charge for bad debts Operating margin
58,452,7
48,2 49,052,9
Operating margin analysis
Underwriting margin and costs
29,529,4
3,11,2
4,93,8
0
5
10
15
20
25
30
35
40
2002 2003
%
Normal tax STC VAT
Tax charge
The STC on the special dividend will reduce EPS in 2004 by 12,5 cents
Underwriting margin and costsOperating costs – Cost to income ratio
36,6
42,3
33,0
45,8
31,3
36,2
0
5
10
15
2025
30
35
40
45
50
African Bank Retail Specialised Lending ABIL
%
2002 2003
Asset quality – NPLs and provisions
September September R million 2003 2002
ADVANCES Performing 3 688,8 4 176,9 Non-performing 2 625,3 2 989,7 TOTAL 6 314,1 7 166,6
NPLs as a % of total advances 41,6% 41,7%
Total provisions as % of NPLs (NPL cover) 74,7% 79,5%
Total provisions and reserves as % of total advances 31,1% 33,2%
I/S charge for bad debt as % of average gross advances 8,2% 10,6%
Bad debt write-offs as % of average gross advances 13,1% 12,2%
Bad recoveries as a % of write-offs 8,5% 6,8%
Asset quality – NPLs and provisions
Asset quality – NPLs and provisionsNPLs
243252 280
1 381 1 433 1 372 1 334 1 289
1 382 1 2291 157 1 100
1 048
228
288
0
500
1 000
1 500
2 000
2 500
3 000
3 500
Sept 02 Dec 02 Mar 03 Jun 03 Sept 03
R m
illio
n
African Bank Saambou PLB Specialised Lending
2 990 2 9052 781 2 714 2 625
Specific R million NPLs provisions
Balance as at 30 September 2002 2 989,6 2 122,8
Bad debts written off (875,0) (875,0)
Gross increase for the period 510,6 545,6
Balance as at 30 September 2003 2 625,3 1 793,5
Increase in specific provisions as a % of increase in NPLs 106,9%
Asset quality – NPLs and provisionsAnalysis of NPL and provision movements
Asset quality – NPLs and provisionsVintage chart for African Bank Retail
0
5
10
15
20
4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
No
n-p
erf
orm
ing
loa
ns
as
% o
f o
rig
ina
l pri
nc
ipa
l de
bt
200101 200103 200105 200107 200109
200111 200201 200203 200205 200207
200209 200211 200301 200305 200307
Vintages have declined steadily over the past two years
Asset quality – NPLs and provisionsAfrican Bank (excl Saambou) – NPLs spread by loan start date
0
10
20
30
40
50
60
70
80
90
100J
an
00
Ma
r 0
0
Ma
y 0
0
Ju
l 00
Se
p 0
0
No
v 0
0
Ja
n 0
1
Ma
r 0
1
Ma
y 0
1
Ju
l 01
Se
p 0
1
No
v 0
1
Ja
n 0
2
Ma
r 0
2
Ma
y 0
2
Ju
l 02
Se
p 0
2
No
v 0
2
R m
illio
n
Decision to reducePersal exposure
Saambou and Uniferaggressive lending
Saambou and Uniferexit lending
Loans not yet mature to full extent of
NPLs
Asset quality – NPLs and provisions
►Steadily improving collection rates
►R358,1 million collected in African Bank Retail in 2003►13% of balance outstanding or►65% of net NPLs after provisions
►Average collection rate on Saambou PLB 69,3%
►Recoveries of bad debts written off almost doubled in 2003, to R74,5 million
Collections
Black empowerment
Black empowerment
0
10
20
30
40
50
Senior Middle Junior
%
ABIL 2003 Financial Sector Charter by 2008
Total management
0
2
4
6
8
10
12
14
16
Senior Middle Junior
%
ABIL 2003 Financial Sector Charter by 2008
Women in management
First in TRAINING and DEVELOPMENT in 2003 National Lender competition1,4 million client base 90% PDI
INDIRECT SHAREHOLDING 10% – 12%DIRECT SHAREHOLDING progress in 2004
Black empowerment
BEE used for 50% of PROCUREMENT SOCIAL INVESTMENT in excess of the target
Black people at board and executive levels
0
5
10
15
20
25
30
35
40
45
Board Board – blackwomen
Executive Executiveblack women
Ce
nts
ABIL 2003 Financial Sector Charter by 2008
Looking ahead
Looking ahead
►Sales to remain robust – should largely compensate for decline in the paydown books
►Continued refining of credit underwriting – emphasis on the further development of behavioural scorecards to reward good customers
►Collection process – making progress on the rehabilitation of clients in distress
►Exploring new products and markets – establishment of the Innovation centre
Mindset for growth
Looking ahead
►Harmonising of governance structures across the group
►Further progress in the employment equity objectives
►The integration of sustainability objectives across the group
Building on sustainability
Looking ahead
►Gross margins to continue to increase based on changes to portfolio mix
►Bad debt charges steady at current levels
►Continued focus on reducing operating costs
►Potential earnings per share to be reduced by 12,5 cents STC for six months to 31 March 2004
The outlook for both RoA and RoE are positive.
Profitability
Thank you