ABC Holdings Ltd
Interim Results to June 2009
0
HIGHLIGHTS
BWP
Attributable profits (‘000s)
Basic EPS (thebe)
Dividend per Share ( thebe)
Cost to income ratio (%)
June 09 % change
June 08
Dec 08
36,494
50%
73,638
85,818
25.4
50 %
51.2
60.3
-
8.00
8.00
22 % 
50%
59%
72%
Net asset value (‘000s)
505,281
22 %
412,852
437,654
NAV per share (thebe)
3.51
22 %
2.87
3.04
4,083,081
22 %
Total assets (‘000s)
1
3,338,641 3,967,938
HIGHLIGHTS
• African Banking Corporation successfully re-branded to BancABC
across all operating territories
• Total income 9% up to BWP 235 m (H108: BWP 215 m)
• Cost to income ratio increased to 72% (H108: 50%)
 Retail banking development
 Dollarisation of the Zimbabwe economy and costs iro strengthening
the existing operations
• Attributable profit of BWP 36.5 m (H108: BWP 73.6 m), and EPS
of 25.4 thebe (H108: 51.2 thebe)
• Strong operational and financial performance in Mozambique
entrenches BancABC’s positioning in that market
• Retail banking development progressing well - branch network to
be rolled out H209.
2
ECONOMIC OVERVIEW
3
ECONOMIC OVERVIEW
8
Dot-com
Crisis
Asian
Crisis
%
GLOBAL GDP GROWTH
6
4
2
0
-2
Differential between SSA and World Growth
Source: IMF
4
World Growth
SSA Growth
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-4
ECONOMIC OVERVIEW
KEY INDICATORS
• Global economy is projected to decline by 1.4% in 2009
• SSA economic growth suffering from the negative impact of global
recession but still projected to grow at 1.5% in 2009, outperforming
global economy
• Negative growth in Botswana
• Zimbabwe expected to registered GDP growth for the first time in 10 yrs
• Commodity prices weakened significantly in sympathy with the global
economic downturn resulting in weak export earnings
• Inflation pressures have generally been low on the backdrop of weak
global demand and subdued oil prices
• Zimbabwe burst the inflation bubble following the adoption of multi-currency
system – hyperinflation turned to deflation
5
ECONOMIC OVERVIEW
GDP
COUNTRY OPPORTUNITY
Banking
Deposits
(USDm)
Banking
Credit
(USDm)
Banking
Assets
(USDm)
Jun 2009
Jun 2009
Jun 2009
(USDm)
GDP
Growth rate
2009
2009 est
Botswana
12,200
-10.4%
4,883
2,573
6,580
1.8
12
Mozambique
10,380
4.3%
2,876
1,962
4,109
21.2
12
Tanzania
21,854
2.5%
4,739
4,626
6,770
40.6
36
Zambia
13,931
4.0%
2,059
1,535
2,942
12.9
14
Zimbabwe
3,498
3.7%
706
263
1,009
12.6
28
Country
Source: Central Banks, Ministries of Finance and Central Statistical Offices
6
Population
2009 est
(m)
No. of
banks
ECONOMIC OVERVIEW
COUNTRY OPPORTUNITY
• SSA currencies are recovering from significant declines against the USD
experienced in Q408 and Q109
• Volatility in forex markets higher than previously experienced
• Zimbabwe presents great growth opportunity despite low asset base
• Depreciation of ZMK has reduced deposit base
• Banking assets however continued to grow, albeit at a slower pace
7
ECOMOMIC OVERVIEW
Country
Inflation Rate
June-2009
Avg. TB Yield
Rate June-2009
Avg. Prime
Lending Rates
2009
Avg. Prime
Lending Rates
2008
Zimbabwe*
0.6%
---
9.6 %
3,700%
Botswana
7.0 %
11.4 %
15.5 %
16.6%
Mozambique
2.7 %
11.5 %
16.4 %
20.1%
Zambia
14.4 %
14.0 %
20.9 %
25.2%
Tanzania
10.7 %
11.6 %
13.5 %
13.6%
*Monthly inflation
8
INFLATION AND INTEREST RATES
COUNTRY OVERVIEW
9
COUNTRY OVERVIEW
BWP’000s
BancABC Botswana
ATTRIBUTABLE PROFIT
%
%
%
June 09 contribution June 08 contribution Dec 08 contribution
5,959
41%
5,968
12%
13,193
23%
BancABC Mozambique
17,475
120%
7,340
15%
16,644
29%
BancABC Tanzania
1,678
12%
2,666
7%
10,096
17%
ABC Zambia*
(12,669)
-87%
4,710
10%
(7,223)
-13%
BancABC Zimbabwe
2,133
14%
27,613
56%
25,338
44%
100%
48,297
100%
58,048
100%
Banking operations 14,556
H.O. and other
21,938
25,341
27,770
TOTAL
36,494
73,638
85,818
*includes Microfin Africa
10
COUNTRY OVERVIEW BOTSWANA
• Economy severely impacted by declining diamond prices
• Loan book declined by 9% from Dec 08 but up 17% from June 08
• Impairments contained at prior year levels
• Total income increased by 15% to BWP 39.1 m
• Net interest income marginally down to BWP 16.9 m (H108: BWP 18.2m)
• Other income increased significantly to BWP 22.3 m (H108: BWP 15.8m),
predominantly foreign exchange trading income
• Retail expansion and staffing costs impacted profitability
• Attributable profit stable at BWP 6.0m
11
COUNTRY OVERVIEW MOZAMBIQUE
• Impressive performance with attributable profit up 140% to
BWP 17.5 m
• Net interest income up 57% to BWP 21.5m
• Loan book grown by 25% from Dec 08 and 75% from June 08
• Other income up 162% to BWP 28.6 m
• Increase in business volumes
• Higher margins owing to high volatility
• Foreign exchange trading income
• Low levels of impairments due to economy’s lesser dependence on
commodity prices
• Banc ABC’s strong niche position in market place reinforced
12
COUNTRY OVERVIEW TANZANIA
• Net interest income increased to BWP 14.2 m (H108: BWP 11.6 m)
• Loan book grew 43% YOY but declined 14% since Dec 08
• Other income grew by 32% to BWP 11.9 m
• Impairments significantly higher at BWP 5.6 m (H108: BWP 1.0 m)
• Attributable profit lower at BWP 1.7 m (H108: BWP 2.7 m)
13
COUNTRY OVERVIEW ZAMBIA
• Zambian economy very hard hit by slump in copper prices during
2008, significant lag effect into broader economy and support
sectors
• High levels of impairments of BWP 22m due to resulting economic
impact
• Net interest income stable at BWP 32.4 m, but other income
declined due to limited liquidity
• Management changes implemented
• Merger of Microfin and ABC Zambia operations expected to produce
synergistic cost savings
14
COUNTRY OVERVIEW ZIMBABWE
• Overall income down vs. H108, but improved from H208
• Net interest income BWP 2.6 m (H108: BWP 8.6m)
• Other income BWP 12.8m (H108: BWP 32.1m) due to reduced
investment property income and tight liquidity
• Attributable profit of BWP 2.1 m (H108: BWP 27.6 m)
• Significant cost increase due to dollarisation
• Decision taken to divest of investment portfolio to fund banking
operations
• Promising signs of banking sector recovery in Zimbabwe
• Stabilising Zimbabwe economy presents great growth opportunities
off a very low base
15
FINANCIAL OVERVIEW
16
FINANCIAL OVERVIEW INCOME STATEMENT
• Net interest income up 11% to BWP 78.7m
• Non interest income up 8% to BWP 156.5m, driven by forex income
• Total income up 9% to BWP 235 m (H108: BWP 215 m);
• Net interest income contribution to total income stable at 33%
• Cost to income ratio increased to 72% (H108: 50%) due to the retail
banking development, dollarisation of the Zimbabwe economy and
strengthening of human capital across the Group
• Net interest income covered 47% of costs
• Basic EPS 25.4 thebe (H108: 51.2 thebe);
• Average return on equity remains positive at 16% (H108: 39%);
17
FINANCIAL OVERVIEW INCOME SPLIT
40%
60%
June 05
61%
67%
67%
67%
39%
33%
33%
33%
June 06
June 07
June 08
June 09
Net interest income
Other income
• Income composition consistent for last three years
• Interest income to contribute proportionally more going forward
• Expected return to stability in the global markets
• Redeployment of capital from non-core assets to interest earning assets
18
FINANCIAL OVERVIEW
OTHER INCOME
%
BWP’000s
June 09
June 08
change
Gains from investment activities
71,569
59,040
21%
Dividends received
21
1,444
-99 %
Fee and commission income
37,033
26,982
37 %
Fx trading income and currency revaluation
44,046
17,015
159 %
Fair value gains on investment properties
(12,478)
32,901
-138 %
Fair value adjustment: derivative instruments
9,762
(4,254)
329 %
Rental and other income
Total
6,589
156,542
11,693
144,821
-44 %
8%
• Significant growth in foreign exchange trading volume, especially in
Mozambique and Botswana
19
FINANCIAL OVERVIEW
5 YEAR EARNINGS
• Trend shows effect of inflation adjusted accounting in Zimbabwe
• Bar Zambia, all banking operations remain profitable
20
FINANCIAL OVERVIEW
21
BALANCE SHEET
•
Deposits increased by 4% from Dec 08 and 26% from June 08 to BWP 1.9
billion
•
Region’s high exposure to commodities impacted significantly on business
growth and debt servicing
•
Group impairments as a result increased by 215% to BWP 41m, with
Tanzania and Zambia increasing by 340% and 460% respectively
•
Strengthening of Group credit department and systems ongoing
•
Group balance sheet grew by 24% from June 08 and 4% from December
08 to BWP 4.1 billion
•
Loans and advances up by 38% to BWP 2.2 billion compared to June 08,
but declined by 4% since December 08 due to deliberate policy to curtail
lending
•
NAV per share increased by 15% from December 2008 and 22% from
June 2008, to 3.51 thebe per share;
FINANCIAL OVERVIEW
DEPOSIT GROWTH
1,338
1,012
704
556
450
429
204
Botswana
Mozambique
Tanzania
June 09
276
Zambia
124 113
Zimbabwe
June 08
• 26% growth in deposits
• Botswana, Mozambique and Tanzania grew by over 30%
• Zambia recorded a decline
22
FINANCIAL OVERVIEW
Zambia
7%
Tanzania
19%
Mozambique
24%
23
DEPOSIT BOOK SPLIT
Zimbabwe
4%
Botswana
46%
FINANCIAL OVERVIEW
LOAN BOOK GROWTH
676
581
530
455
361
354
260
336
100
0
Botswana
Mozambique
Tanzania
June 09
Zambia
Zimbabwe
June 08
• Net loans increased by 38% from June 08
• All subsidiaries registered significant growth with the
exception of Zambia which grew marginally
24
FINANCIAL OVERVIEW
Zambia
17%
Tanzania
25%
25
LOAN BOOK SPLIT
Zimbabw e
5%
Botsw ana
32%
Mozambique
21%
FINANCIAL OVERVIEW
26
5 YEAR NAV TREND
•
NAV per share increased 22%
•
Consistent NAV growth over the last 5 years
•
Zimbabwe operations positive contribution to capital in 2009
FINANCIAL OVERVIEW
CAPITAL
Capital*
FCTR
Capital*
FCTR
June 09
June 09
CAR
June 08
June 08
BancABC Botswana
119,950
-
17%
105,810
-
BancABC Mozambique
157,288
(5,514)
20%
113,533
(1,379)
BancABC Tanzania**
130,045
(10,603)
14%
104,044
3,790
ABC Zambia***
65,596
(2,968)
14%
146,484
26,900
BancABC Zimbabwe
92,922
(197)
45%
103,105 (157,058)
BWP’000
*including Tier II
** including TDFL
***including Microfin
27
FINANCIAL OVERVIEW
CAPITALISATION
• Mutually agreed not to draw down the proposed US$25 m
investment by CVCI
• Zimbabwe investment portfolio of equity and real estate assets to
be liquidated to fund banking operations – original capital
preservation strategy for Zimbabwe no longer necessary
• The proceeds are expected to meet the Group’s funding needs
• Planned rights issue postponed
• IFC to disburse 50% of US$13.5 m convertible loan
• Balance to be drawn down over the next 12 months
28
RETAIL BANKING
• Significant investment in retail banking made in systems and
human capital
• BWP 22 m in direct expenses
• Investment in IT systems of US$3.2 m
• Retail Banking head office now appropriately staffed, but
contributed to overall higher employee costs
• 9 branches to be opened by the end of 2009
• Costs expected to continue to increase as project rolls out
• Retail banking expected to contribute meaningfully in 2nd half of
2010
• Branch profitability estimated at between 18 to 24 months
29
OUTLOOK CHALLENGES
• Economies across the region beginning to show signs of recovery
• Strengthening commodity prices especially copper, nickel and
diamonds
• Expected improvement in incidence of bad debts
• Major thrust continues to be consolidation and ensuring modest
growth notwithstanding high costs as a result of retail banking
• Continued proactive management of the loan book
• Merger of Zambia operations should result in cost savings and turn
around
• Deposit mobilization remains a key focus area for the group,
particularly in Zambia
• Dollarisation of the Zimbabwe economy brings liquidity challenges,
but presents huge opportunities
30
THANK YOU
31
APPENDICES
32
33
0
Source: World Bank
0
Apr-09
Jan-09
200
Oct-08
100
Jul-08
400
Apr-08
200
Jan-08
600
400
Oct-07
500
Jul-07
300
800
Maize Price, US$/t
International Grain Prices
Apr-07
400
Maize
Wheat
Rice
Rice, US$/mt
500
Jan-07
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Maize & Wheat, US$/t
ECONOMIC ENVIRONMENT
GRAIN PRICES
Regional Grain Prices
1000
World
Moz
Kenya
Tanz
Zambia
300
200
100
0
34
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
90
80
70
Appreciation
130
Jan-08
140
Oct-07
Jul-07
Apr-07
Jan-07
Exch. Rate Index, Jan 07=100
MZN/USD
TZS/USD
BWP/USD
120
Depreciation
ECONOMIC ENVIRONMENT
EXCHANGE RATES
150
ZMK/USD
110
100
ECONOMIC ENVIRONMENT
GDP GROWTH
8
6
4
2
0
2007 '08 '09
Botswana
2007 '08 '09
Mozambique
2007 '08 '09
Tanzania
2007 '08 '09
2007 '08 '09
-2
-4
Zambia
-6
-8
-10
Initial Projections
Revised Projections
35
-12
Zimbabwe
-14
ECOMOMIC ENVIRONMENT
To 1 BWP
30 Jun-09
31 Dec-08
30 June-08
United States Dollar
0.15
0.13
0.15
Mozambique Metical
3.95
3.38
3.96
South African Rand
1.14
1.25
1.20
Tanzania Shilling
193
174
180
Zambian Kwacha
765
636
494
Zimbabwe Dollar
-
88 Quad*
24.9 billion*
•ZWD Old Mutual implied rate
•ZWD revalued in 2008
36
EXCHANGE RATES
ECOMOMIC ENVIRONMENT
To 1 US dollar
30 Jun-09
31 Dec-08
30 June-08
Botswana Pula
7.76
7.54
6.53
Mozambique Metical
27.13
25.50
24.05
South African Rand
7.71
9.40
7.83
Tanzania Shilling
1 303
1 315
1 173
Zambian Kwacha
5 170
4 795
3 225
-
665 Quad*
162.6 billion*
Zimbabwe Dollar
•ZWD Old Mutual implied rate
•ZWD revalued in 2008
37
EXCHANGE RATES
FINANCIAL PERFORMANCE: NET INTEREST
INCOME
Ave.
Yield on Ave. Cost
IEA
38
Spread
Spread
2009
2008
ABC Botswana
12.3%
11.3%
1.0%
1.3%
ABC Mozambique
10.8%
5.1%
5.7%
5.4%
ABC Tanzania
10.9%
7.2%
3.7%
3.7%
ABC Zambia
14.4%
9.3%
5.1%
4.9%
ABC Zimbabwe
21.4%
3.7%
17.7%
20.5%
Microfin Zambia
67.6%
22.3%
45.3%
43.9%
ECONOMIC OVERVIEW COMMODITY PRICES
Oil
Copper
Nickel
Platinum
Palladium
Soyabeans
Coffee (Arabica)
Gold
Wheat
Maize
Cotton (A-Index)
Rice
Aluminum
Coal
71.3
64.5
54.6
45.9
39.9
39.3
26
15.9
15.9
13.4
10.4
7.7
5.7
-8.7
-20
-10
%
0
10
20
30
40
50
60
70
• Commodity prices have recovered significantly from Dec-08 prices
Source: World Bank
39
80
MARKET CAPITALISATION
Mkt Cap as of 9-Mar-09
Mkt Cap as of 4-Aug-09
US$ Bn
INTERNATIONAL BANKS
187
250
200
157
150
100
82
59
6
60
18
46
45
10
49
56
25
40
50
18
7
0
Citigroup
HSBC
JP Morgan
RBS
BNP
Paribas
Barclays
Deutsche
Bank
Morgan
Stanley
• Modest recovery in banks mkt cap indicates that the worst of the
banking crisis could be behind us
40
INTERNATIONAL EQUITY MARKET CAP
Tokyo
SE
14,413
4,043
9,200
3,100
15,600
4,300
London
SE
3,175
2,400
4,000
NASDAQ
NYSE
US$ BILLIONS
3,309
1,800
3,800
2,106
Mkt Cap: Jun-09
1,400
Mkt Cap: Dec-08
3,700
Mkt Cap: Dec-07
Shanghai
SE
• International equity markets also showing signs of recovery
41
STOCK MARKET CAPITALIZATION
10,792
4,168 3,902
3,702
SSA Countries US$ m
1,480
Mkt Cap: Jul 2009
54,004
10,985
3,745
4,106
3,541
1,303
Mkt Cap: Dec 2008
67,790
Kenya
Zim Zambia
Botswana Tanzania
Nigeria
• JSE capitalisation up from US$485bn in Dec 08 to US$667bn in July 09
42