interim results presentation
DESCRIPTION
Interim results presentation. For the period ended 31 March 2003. Features. Headline earnings per share of 67,6 cents Net asset value per share of 545,6 cents per share Risk-adjusted revenue up 30% to R1 231 million Interim dividend up 108% to 25 cents - PowerPoint PPT PresentationTRANSCRIPT
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Interim results presentationFor the period ended 31 March 2003
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Headline earnings per share of 67,6 cents Net asset value per share of 545,6 cents per share Risk-adjusted revenue up 30% to R1 231 million Interim dividend up 108% to 25 cents R209,5 million reduction in NPLs in six months Group capital ratio at 44% and R1 billion in cash ROA at 10,3% ROE at 25,8%
Features
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Market conditions
Economic landscape positive• Tax relief for individuals announced• Inflation declining• Interest rate cuts expected
Credit bubble working through Lending remains cautious Competitive landscape benign with limited competition Financial services charter development on track Usury act review should result in a robust regulatory
framework
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Headline earnings and dividends
67,6
58,8
45,6
67,260,9
25,018,0
12,010,015,0
0
10
20
30
40
50
60
70
80
Mar '01 Sep '01 Mar '02 Sep '02 Mar '03
Earnings per share Dividends per share
Cents
59,2
45,2
Restatement effect
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RoE/RoA model
Interest marginAssurance marginOther income
Bad debts to advances
Risk adjusted margin
Costs to advancesFinancing to advances
Tax
Advances/total assets
RETURN ON ASSETS
GEARING
RETURN ON EQUITY
6 months ended 31 March 2003
40,3%4,1%6,3%
50,7%
(7,7%)
Bad debts/Margin
equals
19,0%
Rsk adj cost/Inc
less
37,4%43,07%
Cost/Income
44,1%less(19,0%)
(5,9%)equals 18,3%
multiply63%
11,54%multiply89,0%
=10,27%multiply
2,5=
25,8%
6 months ended 31 March 2002
39,4%4,9%7,3%
51,6%
(11,9%)
Bad debts/Margin
equals
30,2%
Rsk adj cost/Inc
less
35,9%39,73%
Cost/Income
46,6%less(18,5%)
(6,3%)equals 15,0%
multiply62%
9,25%multiply84,9%
=7,85%
multiply2,8
=21,9%
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Portfolio trends
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Portfolio trends
Flat advances book:• Saambou and Persal run down• Write-offs• Cautious advances growth as credit criteria
are relaxed incrementally• Continuing deliberate swing from payroll
to retail business Saambou acquisition doing well
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Jun'00
Sep'00
Dec'00
Mar'01
Jun'01
Sep'01
Dec'01
Mar'02
Jun'02
Sep'02
Dec'02
Mar'03
Payroll Retail
* Persal consolidations
Portfolio trendsThe move from payroll to debit order products
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Portfolio trendsGross advances portfolio mix
704880
204209229209
2 6013 037
3 4523 5793 6024 383
2721 5241 181
1 881
1 9762 396
0
1000
2000
3000
4000
5000
6000
7000
8000
Sep '00 Mar '01 Sep '01 Mar '02 Sep '02 Mar '03
SMME Payroll business Retail/debitorder business PLB
Rand million
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Portfolio trendsAfrican Bank walk forward analysis
R760 million portfolio reduction
Cash build-up
R millions Core lending Persal Saambou Total books PLB
Gross advances as at 30 September 2002 3 084 305 731 559 2 396 266 6 212 131New loans granted 1 005 944 0 0 1 005 944Net receipts (721 532) (107 105) (289 889) (1 118 526)Interest & charges accrued 538 752 60 943 279 114 878 809Gross cash receipts (1 260 284) (168 048) (569 003) (1 997 335)Bad debts written off (188 095) (44 376) (130 152) (362 623)
Balance as at 31 March 2003 3 180 622 580 078 1 976 226 5 736 926
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Portfolio trendsExtending the market for unsecured credit
Over-borrowed segment
Performing segment
(ABIL’s main market)
Under-serviced segment
Collections and rehabilitation
New products and channels
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Credit quality
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Credit quality
Leading credit indicators all positive Overextension to last 18 months Overall NPLs to come down slowly Collections making steady progress in all its activities Persal cancellations down to 348 (March 2003)
from 3 464 (March 2002) New admin orders down to 1 452 (March 2003)
from 2 114 (March 2002)
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Credit qualityCoverage ratios
Mar 03 Sept 02
R 000’s R 000’sAdvancesPerforming 3 882 333 4 176 978Non-performing 2 780 139 2 989 662Total 6 662 472 7 166 640
Total provisions and reserves 2 190 141 2 375 905% %
Total provisions and reserves 32,9 33,2NPLs 41,7 41,7NPL coverage 78,8 79,5I/S charge for bad debts 7,7 10,6Bad debt write-offs 12,2 12,2
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243
1 3721 4331 381
1 1561 2991 382
252228
0
500
1000
1500
2000
2500
3000
3500
Sep '02 Dec '02 Mar '03
African Bank PLB Specialised Lending
2 990 2 9052 780
Credit qualityNPLs declining steadily
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Credit qualityNPL and provisioning movements
Represents:• Increased provisions for new NPLs
• Provision movements for remaining NPLs
Equals 5,3% of performing loans
SpecificNPLs provisions
Balance at 30 September 2002 2 990 2 123
Balance at 31 March 2003 2 780 1 957
(210) (166)
Bad debts write-offs (422) (422)
Movement for the period 212 256
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Credit qualityThe movement in NPLs
New NPLs Interest and charges
NPLs
Write-offs Cash received and curing
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Credit qualityLeading indicators point to lower risk
0
5
10
15
20
25
4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
2001 '01
2001 '03
2001 '05
2001 '07
2001 '09
2001 '11
2002 '01
2002 '03
2002 '05
2002 '07
2002 '09
2002 '11
Months on book
Vintage analysisNon-performing capital as a percentage of original principal debt (%)
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Collections
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CollectionsImpact growing
3,2
3,4
7,6
2,9
6,6
9,711,5
12,5
17,1
16,5
20,3
17,1
0
5
10
15
20
25
Apr'02
May'02
Jun'02
Jul'02
Aug'02
Sep'02
Oct'02
Nov'02
Dec'02
Jan'03
Feb'03
Mar'03
Percentage missed 1st instalments on payroll book(%)
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CollectionsImpact growing
Number of PTPs honoured
0
2000
4000
6000
8000
10000
12000
14000
May'02
Jun'02
Jul'02
Aug'02
Sep'02
Oct'02
Nov'02
Dec'02
Jan'03
Feb'03
Mar'03
PTPs honoured
Num
ber
% collection rate 66,7% March 2003 (59,4% September 2002)
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CollectionsNPL analysis
Specific March Septemberprovision 2003 2002
% R 000’s R 000’sAfrican BankCall centre 66 341 304 562 069Administration orders 61 498 529 381 711Legal book 72 1 687 965 1 818 275Pre-legal work in progress 85 861 452 1 318 818Legal collection order in place 59 826 513 499 457
70 2 527 798 2 762 055Specialised lending 73 252 341 227 607Total NPLs 70 2 780 139 2 989 662
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CollectionsImpact growing
Legal collections portfolioRand million
51%
73%
49%
27%
200400600800
100012001400160018002000
Sep '02 Mar '03
Pre-legal work in progress Legal collection order in place
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CollectionsCapital management
Mar ‘03 Sept ’02 Mar ‘03 Sept ‘02% % % %
Tier 1 36,4 31,3Tier 2 2,3 2,7
Total 38,7 34,0 43,6 38,1Cash reserves (R million) 1 048 835
Dividend increased by >100% to 25 cents Cautious approach to RoE optimisation Funding stability paramount
African Bank ABIL group
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Yield on advances
5,84,68,1 5,9
9,7
19,017,918,514,013,1
10,6
0,16,9
7,79,8
18,314,825,0
23,7
25,8
1999 (12 Mths) 2000 (12 Mths) 2001 (12 Mths) 2002(12 Mths) 2003 (6Mths)
Financial expense ratio Operating expense ratio Charge for bad & doubtful debt Gross overall yield
% of gross interest-bearing advances58,4
52,7
48,2 49,050,7
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Cost-to-income ratio
37,4%37,3%35,9%
38,7%
0
10
20
30
40
50
Sep '01 Mar '02 Sep '02 Mar '03
%
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Business restructuring
Theta restructuring gaining momentum• CI and MCG to be divisionalised
• TSF 80% holding sold for R1,3 million to previous management
• BVI 80% holding sold for R20,7 million to previous management
Collections business doing well Integration of collections effort between
African Bank and Saambou a priority
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Advances measured at cost; accounted for on cost amortisation basis
PLB accounted for as business combination, i.e. as if African Bank originated the loans – Sep 2002
Provisions purely based on recoveries from debtor = PV of future recoveries
General provision of R44.5 million as per SARB requirement Provisioning methodology largely consistent with previous
method = no material change; movements included in IS charge No hedges or other financial instruments
AC 133
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Empowerment
5 pillars:
1. Representativity and human resource development – PDI representivity at Board level 40%, executive level 17%, senior management 32%, middle management 57%
2. Equity ownership – equity participation for management,amongst others
3. Access to financial services – >80% of ABIL’s business from the
marginalised community. Broaden these services even more in the future.
4. Procurement policy – Empowerment companies used for approximately 60% of discretionary procurement.
5. Community investment – African Bank Foundation
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General
Credit legislation review Changes to the ABIL board:
• Oshy Tugendhaft, Chairman of Moss Morris
• David Gibbon, retiring partner at Deloitte & Touche
• Ramani Naidoo, attorney and author of the book “Corporate Governance:
An essential guide for South African Companies”
• Brian Steele, previously Chief Group Financial Manager of Barloworld
• Günter Steffens – previously Dresdner Bank’s Group Representative for
Southern Africa and Geographic Head
• Tami Sokutu, currently managing director of retail banking at African Bank
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Outlook for 2003
Lower risk environment Challenge: to maintain and grow the good customers Rehabilitation of market Further development of collections business Develop underwriting competency deeper into the market Cautious opening up of advances growth Capital management Medium term targeted cost to income ratio below 35% Targeted RoA of 10%, RoE of 30%
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Thank you