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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 and people centred organisationSimple, streamlined Group for customer delivery
Balance sheet optimisation and proactive risk managementSustainable growth in targeted markets
• 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
Customer and people centred organisationSimple, streamlined Group for customer delivery
Balance sheet optimisation and proactive risk managementSustainable growth in targeted markets
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 and people centred organisationSimple, streamlined Group for customer delivery
Balance sheet optimisation and proactive risk managementSustainable growth in targeted markets
• 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
Main distribution channels
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
Main distribution channels
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
Customer and people centred organisationSimple, streamlined Group for customer delivery
Balance sheet optimisation and proactive risk managementSustainable growth in targeted markets
• 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
Customer and people centred organisationSimple, streamlined Group for customer delivery
Balance sheet optimisation and proactive risk managementSustainable growth in targeted markets
• 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
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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
Balance sheet optimisation and proactive risk managementSustainable growth in targeted markets
• Corporate Bank Model
• Africa
• Capital Optimization• Cash Equities
• Equity Capital Markets
• Prime Services
• Front-to-back FX
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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
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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
?
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