investor presentation · 7 9 months 2013: key highlights revenue grew by 34.8% (9m’13 vs....
TRANSCRIPT
1
INVESTOR
PRESENTATION 3rd Quarter 2013 |
Financial Performance
2
Agenda
Operating Environment
Results Overview
Performance Trends: 3rd Quarter 2013
Summary
3
Operating Environment
4
No major changes… lower growth ahead
2013: Structural issues to restrain global growth, hampered by high debt, sovereign crisis and political
holdups. MENAT to outperform G3 with higher expected growth levels...
Global GDP | Average growth (%) MENAT GDP | Average growth (%)
G3: below-potential growth. High debt and unemployment to
constrain prospects.
Subdued growth will hinder demand for commodities
especially in developing countries.
MENAT growth as expected is slower, while there is an
urgent need to create jobs.
GCC: Low demand and high supply are likely to keep oil
prices low throughout the year hindering economic
performance, but public spending will support demand.
MENAT banking: is adequately capitalized and enjoys a
higher profitability when compared to G20 countries.
Key takeaways
Source: IMF 2013 Data base, World Bank & Burgan Bank Economic Research 2013.
0
2
4
6
8
10
12
14
16
182003-2010
2011-2018
0
2
4
6
8
10
12
14
16
182003-2010
2011-2018
MENAT employment and growth (2001 = 100)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
% % MENA
5
Algeria Foreign Exchange Regulations
Source: Burgan Bank Economic Research.
WHAT
HAPPENED?
According to new regulations, banks will NOT be able to charge an extra spread for
the FX transactions and will have to cover these operations at the effective
coverage rate set by the CBA.
The measure mostly impacts the foreign trade operations as all other FX operations
of banks are limited.
WHY IT
HAPPENED?
WHAT IS THE
IMPACT ON
SYSTEM?
April 2013: Central Bank of Algeria (CBA) issued new regulations and laws regarding the
Foreign Exchange Operations
The CBA is increasing regulation on banks, standardizing banking products, and
reducing profitability by setting pricing limits.
This set of measures is expected to increase the development of the local economy
by fostering banks’ lending in local currency.
From the domestic economy’s standpoint, as a result of the new measure, banks
are losing profitability while importers are gaining it, de facto a wealth transfer from
banks to importers.
6
Results Overview
7
9 Months 2013: Key Highlights
REVENUE GREW BY 34.8% (9M’13 VS. 9M’12) REACHING KD 187.3M
NIM’S ADVANCED TO REACH 2.61%(1), HIGHEST UNDERLYING LEVELS
OPERATING PROFIT REACHING KD 105.4M GROWING BY 21.5% (9M’13 VS. 9M’12)
NET INCOME REACHING KD 65.0M GROWING BY 23.0%(2) (9M’13 VS. 9M’12)
ENHANCED ASSET QUALITY; WITH IMPROVED NPA RATIO AND BETTER COVERAGE RATIO
BUILD UP ADDITIONAL PRECAUTIONARY RESERVE OF KD 47.5M (GENERAL PRECAUTIONARY RESERVE KD 42.5M & SPECIFIC PRECAUTIONARY RESERVE KD 5M)
NPA RATIO DECLINED FROM 8.8% IN 9M’12 TO 4.7% IN 9M’13
COVERAGE RATIO(3) IMPROVED FROM 55% TO 101%
MAINTAINED GROWTH YOY & QOQ IN BALANCE SHEET; SUPPORTED BY INTERNATIONAL
OPERATIONS PERFORMANCE
LOANS GROWING BY 27.6% YOY & 4.3% QOQ
DEPOSITS GROWING BY 29.2% YOY & 4.9% QOQ
OPTIMIZING BALANCE SHEET WITH SOUND LIQUIDITY LEVELS AND STABLE CAPITAL
BUFFER WITH CAR AT 17.6%
Solid Operating
Performance enabled us to accelerate
reserves build up
Healthy Balance
Sheet generating resilient
stream of earnings
Asset Quality in comfortable levels with
effective risk
management
(1) NIM’s excluding 1 off’s items. (2)Excl. additional precautionary reserves of KD 47.5m for 9m’13. (3)Total Provisions(General + Specific) to NPA’s.
8
Performance Trends –
3rd Quarter 2013
9
15.2
2.5
31.0
17.7
Q3'12 Q3'13
Net Profit | KD million(1)
Cost of Credit | KD million(1) Revenue | KD million(1)
Strong Financial and Operating Performance…
Key Indicators(1)
Burgan Bank Group 9M’12 9M’13
Revenue Growth (YoY) 11.1% 34.8%|17.3%(2)
Operating Profit Growth (YoY) 10.3% 21.5%|21.9%(2)
Cost to Income Ratio 37.5% 43.7%|35.1%(2)
Jaws Ratio (YoY) (1.5%) (22.2%)|6.0%(2)
Loans to Cust. Deposits 83.6% 82.6%|76.4%(2)
Liquidity Ratio(3) 34.8% 32.2%|35.8%(2)
NPA Ratio 8.8% 4.7%
NPA net of Collateral Ratio 3.7% 1.8%
ROE | ROE ex. Additional Provisions 14.1%|16.1% 4.8%|18.1%
ROTE | ROTE ex. Additional Provisions 23.1%|26.4% 7.5%|28.6%
130.8
167.6
8.1
19.6
138.9
187.2
9M'12 9M'13
(1)Figures are reported after consolidation adjustments, (2)Excl. BBT contribution in Q3’13 (3)Liquid assets comprises of Cash & Cash eq., Treasury bills & bonds and Due from Banks & OFIs.
Additional precautionary reserves.
∆ 34.8%
45.3
54.3 2.9
5.9
48.2
60.3
Q3'12 Q3'13
∆ 25.2%
1 offs Revenues items.
15.9 16.7
6.5
47.5
22.4
64.2
9M'12 9M'13
2,894 3,673
6.4 8.6 2.5
31.0
8.9
39.5
Q3'12 Q3'13
Gross Loans in KD million. Additional precautionary reserves
46.4
17.6
6.5
47.5
52.9
65.0
9M'12 9M'13(10.3)
20.7
10
…with improved underlying Net Interest
Income
30.6 29.7
35.2 38.0
39.3
0.2 0.5
(0.2)
5.0 2.8
30.8 30.2
35.0
43.0 42.2
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
25.6 28.0
28.7 29.9
26.8
30.8
23.5
30.2
104.6
118.9
FY 11 FY 12
Q2 Q2
Q1 Q1
2.64% 2.45% Net Interest
Margins(1)
2.58% 2.18%
2.49% 2.91% 2.80%
Ne
t In
tere
st
Inc
om
e | K
Dm
n
(1)FY NIM’s figures calculated based on the average of LTM of Interest Earning Assets.
Q3
Q3
1 offs Revenues items.
2.57%
2.15% 2.50% 2.57% 2.61%
Net Interest Margins. Net Interest Margins ex. 1 offs items.
11
…and Non-Interest Income
9.3 10.1 10.3 11.9
10.6
4.8 4.6
6.3
8.0
2.1
0.1 0.1
0.7
1.6
0.0
0.7 0.2
0.9
2.6
4.2
2.5
5.9
2.7
3.8
1.2 17.4
21.1 21.0
27.9
18.1
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
38.1 38.1
7.8
17.6 1.6
2.2
6.2
2.0 5.1
6.7 58.8
66.6
FY 11 FY 12
36.0% 35.9% 36.1% 35.3% 37.4% 39.4% 30.0%
No
n-I
nte
res
t In
co
me
| K
Dm
n(1
)
Fees & Commissions FX Income Dividend Security Gains Other Income Non-Interest Income
Non-Interest
Income(1) to
Revenues
(1)Q4 2012 excludes KD4.6m one off consolidation gains on BBT reported in Non Interest Income.
2.7 5.7 2.3 6.6 3.1
1 off’s items in KD million.
12
Strengthen / Diversified Balance Sheet
2,211 2,218 2,298 2,407 2,485
1,119
1,677 1,670
1,694 1,819
3,330
3,895 3,968
4,101
4,303
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
2,029 2,054 2,048 2,055 2,130
755
1,331 1,318 1,351 1,422
2,783
3,384 3,366 3,406
3,553
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
27.1% 39.3% 39.1% 39.7%
40.0%
Cu
sto
me
r L
oa
ns
| K
Dm
n
Cu
sto
me
r D
ep
os
its
| K
Dm
n
83.6% 86.9% 84.8%
83.1% 82.6%
33.6%
42.3%
International
Contribution
Loans to
Deposits
Kuwait International Customer Loans Kuwait International Customer Deposits
Customer loans and Customers deposits figures after consolidation adjustments.
13
…and effectively managed risk position
8.8%
5.6% 5.6%
4.2% 4.7%
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
NPA’s to Gross Facilities NPA’s net of collateral to Gross Facilities
3.7%
1.8% 1.8% 1.9% 1.8%
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
NPL KPIs
Indicators Q3’12 Q2’13 Q3’13
Gross Loans 2,894 3,536 3,673
NPL’s 253 188 219
NPL Ratio 8.8% 5.3% 6.0%
NPL, net of
collateral 2.5% 2.1% 2.1%
NPL Coverage, net
of collateral 154% 175% 157%
Non Performing Assets (KD million) and Coverage Ratio
341 267 277
206 237
143 86 90 92 94
188 194 202 226 238
131%
226%
226% 246%
254%
55% 73% 73%
110% 101%
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
NPA NPA net of collateral Total provisions Coverage net of collateral Coverage Ratio
14
ROE(1) ROTE(1)
13.8% 7.9%
13.4% 10.0%
(8.1%)
2.4% 9.9%
4.5% 10.0%
25.8%
16.2% 17.8% 17.9%
20.0%
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
22.4% 12.5%
21.5% 15.6%
(12.3%)
4.0% 16.1%
7.5% 16.3%
40.8%
26.4% 28.6% 29.0%
31.9%
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
… with stable shareholder returns
(1) Quarterly ROE & ROTE are Annualized.
Quarterly Net Profit | KD million
Additional precautionary reserves Additional precautionary reserves
16.1 9.2
17.5 13.6 15.2
7.9 4.0 2.5
16.1 17.1 17.5 17.6 17.7
15.2 9.2
15.6 12.3
(10.3)
2.5 10.8
5.0 11.5
31.0
17.7 20.0 20.6
23.8
2011 Quarterly Net Profits 2012 Quarterly Net Profits 2013 Quarterly Net Profits Additional precautionary
reserves
Q3’11 Q3’12 Q4’11 Q4’12 Q1’12 Q1’13 Q2’12 Q2’13 Q3’12 Q3’13
20.7
17.7% 28.5%
15
Burgan Bank –
By Country
16
Healthy balance sheet growth driving
Franchisees performance……
71.8
86.9
9M'12 9M'13
31.0
33.3
9M'12 9M'13
24.5
28.6
9M'12 9M'13
9.5
12.6
9M'12 9M'13
2.5
4.8
9M'12 9M'13
Kuwait
Jordan
Algeria
Iraq
Tunisia
24.3
9M'12 9M'13Turkey
2,029
2,130
9M'12 9M'13
520
521
9M'12 9M'13
209
263
9M'12 9M'13
30
49
9M'12 9M'13
5
8
9M'12 9M'13
592
9M'12 9M'13
2,211
2,485
9M'12 9M'13
596
663
9M'12 9M'13
243
324
9M'12 9M'13
212
319
9M'12 9M'13
68
86
9M'12 9M'13
427
9M'12 9M'13
Revenue(1) Loans Deposits
(1)Figures are reported before consolidation adjustments; Sub debt cost allocated to subsidiaries.
17 (1)Reported contribution excluding consolidated adjustments, with Sub Debt cost allocated to subsidiaries. (2)Net profit to BB Share Excluding Additional Precautionary Reserve of KD 47.5mn for 9M’13. (3)Turkey 9M’13 Net Profit Non Meaningful.
Burgan Bank Contribution Summary 9M’13(1)
71.3%
54.0%
45.6%
57.7%
59.8%
59.0%
6.1%
18.4%
17.5%
15.4%
14.6%
14.0%
16.4%
17.7%
15.0%
7.5%
7.4%
6.5%
0.4%
12.8%
9.9%
16.6%
12.6%
4.3%
6.5%
6.6%
7.4%
1.4%
5.5%
1.8%
2.9%
2.5%
2.0%
0.2%
2.5%
Net Profit
OperatingProfit
Revenue
CustomerDeposits
CustomerLoans
Total Assets
Kuwait Jordan Algeria Turkey Iraq Tunisia
Diversification Benefits Burgan Balance
Sheet / P&L…
(2)(3)
18
Kuwait Operations
19 (1)Excluding Corporate office figures from contribution.
Total Assets | KD billion(1)
Q3'12 Q3'13
Wholesale Retail Private Treasury & Investment
3.7 4.2
Burgan Bank Kuwait – Business Contribution
Total Assets
KDmn
Revenues | KD million(1)
9M'12 9M'13
Wholesale Retail Private Treasury & Investment
68.8 79.4
Operating Profit | KD million(1)
Revenues
KD mn
9M'12 9M'13
Wholesale Retail Private Treasury & Investment
44.8 53.6
Operating
Profit KD mn
Ke
y A
ch
ieve
me
nts
Corporate Banking granted credit facilities limits to 21 new
clients with total limits of KD 47.6M. 1
Wholesale assets grew by 1.6% and revenues grew by
8.4%. 2
Private Banking assets grew by 24.0% and revenues grew
by 62.2%. 3
Treasury & Investment assets grew by 16.1% and revenues
grew by 38.3%. 4
65%
13%
11% 12%
57%
17%
14%
13%
64%
8%
16%
13%
78%
(2%)
13% 11%
42%
10%
14%
35%
45%
10%
12%
33%
20
Revenue | KD million Operating Profit(1) | KD million
Retail Operating Performance
3.0 3.3 4.2 4.1
5.2 0.4 0.7
0.7 1.0
0.6
3.3 4.0
4.9 5.1 5.9
2.6% 2.9% 3.4% 3.1% 5.2%
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 (0.1)
0.4
1.8 1.5
2.2
0.0% 11.1%
36.9% 29.0%
37.9%
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
Operating ProfitOperating Profit Margins
Net Interest Income Non Interest Income
Revenues NIMs
(1)Operating Profit Margins: Q3 2012 Figures are Non Meaningful.
BB Kuwait Retail - Portfolio Vintage Lines
342
344 336
349
362
Q3'12 Q4'12 Q1'13 Q2'13 Q3'13
Re
tail
Re
va
mp
ed
Str
ate
gy Shift to Higher Income salaried & SME Banking. 1
Auto Loans / Fleet Car business launched since
May ’13. 2
Expansion of Credit cards portfolio via Co Branded
cards. (Q4 ‘13). 3
Retail Banking received an award in Q2’2013 for
Best Domestic Retail Bank of Year Asian Banking &
Finance Magazine 2013.
5
Retail Banking staff realigned to the requirement of
Retail Bank strategy to Balanced Business growth.
Enhancing staff skills via Training workshops &
Role Plays under “Driven by You”.
4
Total Assets | KD million
-1%
0%
1%
2%
3%
4%
5%
6%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
2007 2008 2009 2010 2011 2012 2013
21
Performance vs. Peers
22
27.6%
9.3%
3.5%
7.2%
3.6%
BB
NBK
GBK
CBK
ABK
29.2%
16.0%
4.2%
15.6%
-1.4%
34.8%
-3.7%
-7.0%
6.9%
-4.7%
7.5%
15.8%
7.2%
1.9%
6.6%
21.0% 28.6%
Customer Deposits
Growth %
Customer Loans
Growth % ROTE(1)(2) %
Revenue
Growth %
…Outperforming Peers – Both Local (9M 2013 vs. 9M 2012)
(1)Burgan Bank ROTE exclude additional precautionary reserves of KD 47.5m for 9M’13. (2)Annualized ROTE based on Open Equity.
Burgan Bank Additional precautionary reserves impact
23
…and Regional (9M 2013 vs. 9M 2012)
27.6%
27.4%
10.3%
9.3%
10.1%
45.7%
5.9%
5.7%
33.3%
BB
QNB
ENBD
NBK
SFB
Audi
AUB
Blom
CBQ
29.2%
23.3%
6.8%
16.0%
6.9%
17.6%
19.5%
4.2%
38.4%
34.8%
28.9%
13.9%
-3.7%
1.5%
0.1%
9.5%
3.0%
8.1%
33.8%
11.8%
16.4%
18.5%
13.1%
12.7%
15.8%
11.4%
20.7%
7.5%
14.1%
21.0%
11.8%
16.4%
32.6%
13.1%
12.7%
15.8%
11.4%
20.7%
28.6%
Customer Deposits
Growth %
Customer Loans
Growth % ROTE(1)(2) %
Revenue
Growth %
(1)Burgan Bank ROTE exclude additional precautionary reserves of KD 47.5m for 9M’13. (2)Annualized ROTE based on Open Equity.
46.3%
AUB adjusted for 1 off gain of US$ 212.9mn in Q1’13
from Sale of its stake in Ahli Bank of Qatar.
Burgan Bank Additional precautionary reserves impact
24
Summary
25
… In Summary
MACRO No major changes with lower growth and weak fundamentals still
persist; new FX regulation and law in place in Algeria
GROWTH
NIM’S
ASSET
QUALITY
RETURNS
Healthy Balance Sheet maintained growth YoY & QoQ with
International operations contributed 40.9% of Total Assets
Advanced to reach 2.61%(1) backed by exposure to high growth
markets delivering resilient underlying operating performance
In Comfortable Levels, NPA ratio at 4.7% & provisions coverage at 101%
Maintaining high underlying returns with 9M’13 ROE at 18.1%(2) &
ROTE at 28.6%(2)
(1)NIM’s excluding 1 off’s items. (2)ROE & ROTE exclude additional precautionary reserves. Note: Annualized ROE & ROTE based on Open Equity.
26
Thank You
27
The information contained in this document has been provided on the basis of current
knowledge, assumptions and expectations. In the event that any information is incorrect or
any party misrepresented, Burgan Bank and its consultants cannot be held responsible for
this. Various factors could cause future results, performance or events to differ materially from
those given in this document. No obligation is undertaken to update this document or the
statements / information contained in it. The information contained in this document should by
no means be interpreted as an invitation to making any investment decision based on the
same. Our continuous advice is that every investor must rely on his/her own advisor and
resources to ensure the correctness of the information presented to him/her and then makes
his/her investment decision accordingly.
Disclaimer