BancABC Interim Financial Results 2010

25 August 2010

HIGHLIGHTS

Financial Highlights

› Total income up 29% to BWP251 mill (H109: BWP194 mill)

› Net operating income up 80% to BWP45 mill (H109: BWP25 mill)

› Attributable profit of BWP28 mill (H109: BWP36 mill)– Share of associate loss– Tax charge in H110 vs. tax credit in H109

› Impairments down 59% to BWP17 mill (H109: BWP41 mill)

› Cost : income down from 82% at year end to 77% (H109: 72%)

› Deposits up 41% and 23% compared to H109 and H209› Total assets increased to BWP5.1 billion, 25% and 16%

up from H109 and H209› Average return on equity positive at 14% (H109: 16%)3

Operational Highlights

› Six Retail Banking branches opened in Dar es Salaam, Gaborone, Bulawayo, Harare and Chimoio

› Looking at opening an additional eight new branches before year end

› Zimbabwe head count right sized› BancABC Zambia now profitable and Microfin

merger yielding synergistic benefits› Improved credit risk management reduces

impairments

4

ECONOMIC OVERVIEW

Economic Overview

› IMF projects global GDP growth to reach 4.2% in 2010 (09: -0.8%):– Growth driven primarily by Asia– Western economies remain sluggish

› Economic and business environment in SADC region has improved, growth mainly driven by recovery in commodity prices

› Down-side risks to global economic recovery still exist due to:– Sovereign debt crisis in Europe and Middle-East– Austerity measures reducing demand in developed

economies– Asset price bubbles in some emerging markets

6

Economic Growth Trends

7

200708 09 10 200708 09 10 200708 09 10 200708 09 10 200708 09 10

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

Average Gr...

%

BotswanaMozam-bique

Tanza-nia Zambia

Zimbabwe

Source: IMF

2010 Monthly Inflation Trends

8

› Relatively stable inflation other than in Mozambique where rate worsened rapidly from 5% at start of the year to 14.5% by mid-year.

Source: Central Banks, Ministries of Finance and Central Statistics Offices

Bots Tanz Moz Zamb Zimb SA

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

Jan Feb Mar Apr May Jun

BancABC PRESENTATION 10 MARCH 2010

Interest Rate Profiles

9

Jan-

06

May-

06

Sep-

06

Jan-

07

May-

07

Sep-

07

Jan-

08

May-

08

Sep-

08

Jan-

09

May-

09

Sep-

09

Jan-

10

May-

10

6

8

10

12

14

16

18

Bank rate Prime rate 3m BoBC

Botswana

Source: Respective Central Banks

Jan-

06Ma

y-06

Sep-

06

Jan-

07Ma

y-07

Sep-

07

Jan-

08Ma

y-08

Sep-

08

Jan-

09Ma

y-09

Sep-

09

Jan-

10Ma

y-10

4

8

12

16

2091 day TB Overnight

Jun-

06

Oct-0

6

Feb-

07

Jun-

07

Oct-0

7

Feb-

08

Jun-

08

Oct-0

8

Feb-

09

Jun-

09

Oct-0

9

Feb-

10

Jun-

10

0

4

8

12

16

20Overnight rate 91-dy Tbill

Jan-

06Ma

y-06

Sep-

06Ja

n-07

May-

07Se

p-07

Jan-

08Ma

y-08

Sep-

08Ja

n-09

May-

09Se

p-09

Jan-

10Ma

y-10

0

5

10

15

20

25

30

B.o.Z Rate 91-dy tb

Mozambique

Tanzania Zambia

Exchange Rate Developments

10

› Local currencies in our markets have generally depreciated against the USD and BWP during the period

› Mozambican Meticais had the worst depreciation of 25% against the USD and 19% against the BWP

› This had some adverse impact on reported results for the subsidiary

› Against the USD, the Zambian Kwacha depreciated 11%, Tanzanian Shilling depreciated by 5% and the Botswana Pula by 6%

› Against the BWP, the Tanzanian Shilling marginally appreciated by 1% whilst the Zambian Kwacha depreciated by 5%

Banking Sector Deposits and Loans

11

Banking Sector Total Deposits (US$m)

Banking Sector Loans to the Private Sector (US$m)

Bots Moz Tanz Zam Zim

Dec-07 5,214 2,460 4,211 2,435 580

Dec-08 5,046 2,835 4,702 2,354 313

Dec-09 5,574 3,418 5,476 2,680 1,381

May-10 5,464 3,024 5,537 2,745 1,832

Bots Moz Tanz Zam Zim

Dec-07 2,236 1,306 2,594 1,351 99

Dec-08 2,281 1,795 3,559 1,635 140

Dec-09 2,963 2,597 3,763 1,586 636

May-10 2,908 2,363 3,832 1,524 1,012

Source: Respective Central Banks

› The markets continue to be attractive and have generally been growing in the recent past

› Opportunities exist to enter new market segments in each country

› The Tanzania and Botswana markets continued being the largest

› Zimbabwe has rapidly grown in the 2009-2010 period

FINANCIAL REVIEW

Income Statement

13

BWP’000s H1-2010 % ∆

H1-200

9 FY-2009Net interest income 146,815 87% 78,684 178,394Impairment of loans

& advances -16,996 59% -40,969 -51,218Net interest income after impairments 129,819 244% 37,715

127 176

Non interest income 121,622 -22% 156,542 265,017

Total income 251,441 29%194,25

7 392,193

Operating expenditure -205,967 -22%

-169,21

1 -365,694Net income from

operations 45,474 82% 25,046 26,499Share of (loss)/profits of associates -11,479 -1157% -913 16,164Profit before tax 33,995 41% 24,133 42,663Tax -5,269 -141% 12,757 15,768Profit for the year 28,726 -22% 36,890 58,431Attributable to: - Ordinary

shareholders 28,076 -23% 36,494 58,117 - Minorities 650 64% 396 314

EPS (thebe) 19.5 -23% 25.4 40.4

› Performance primarily driven by growth in net interest income and reduction in impairments

› Opex increased mainly because of Zimbabwe post dollarisation

› Zimbabwe costs up 138% and accounts for 17% of the 22% YoY increase in expenses

Income Statement (USD)

14

USD’ 000’s H1-2010 % ∆

H1-200

9 FY-2009Net interest income 21,241 98% 10,703 25,176Impairment of loans

& advances (2,459) 56% (5,573) (7,228)Net interest income after impairments 18,782 266% 5,130 17,948Non interest income 17,597 -17% 21,294 37,402Total income 36,379 38% 26,424 55,350Operating

expenditure (29,800) -29% (23,018) (51,610)Net income from

operations 6,579 93% 3,406 3,740Share of (loss)/profits of associates (1,661) -1240% (124) 2,281Profit before tax 4,918 50% 3,282 6,021Tax (762) -144% 1,735 2,225Profit for the year 4,156 -17% 5,017 8,246Attributable to: - Ordinary

shareholders 4,062 -18% 4,964 8,202 - Minorities 94 77% 53 44

EPS (cents) 2.8 -20% 3.5 5.7

› Performance primarily driven by growth in net interest income and reduction in impairments

› Opex increased mainly because of Zimbabwe post dollarisation

› Zimbabwe costs up 138% and accounts for 17% of the 22% YoY increase in expenses

Attributable Profit Trends

› Lower profit after tax in current year not reflective of real performance– Disposal of profitable investments reduces income from

associates– Prior year tax credit15

Jun-06 Jun-07 Jun-08 Jun-09 Jun-100

1020304050607080

0%5%10%15%20%25%30%35%40%45%

31 23

74

36 28

28%

18%

39%

16%14%

Attributable profit (BWP m) and ROE (%)

Attributable profit (BWP m) ROE (%)

BWP

m

Income Statement – Segmental Analysis

16

Attributable Profit

BWP 000’s 2010 % Cont 2009 % Cont

% chang

e

BancABC Botswana 11,147 40% 5,939 16% 88%BancABC

Mozambique 13,350 47% 17,475 48% (24%)

BancABC Tanzania 5,893 21% 1,678 5% 251%

BancABC Zambia 7,547 27% (12,669) -35% 160%

BancABC Zimbabwe 7,374 26% 2,133 6% 246%Banking

operations 45,311 161% 14,556 40% 211%

Head office(17,235

) -61% 21,938 60% (179%)

TOTAL

28,07

6 100% 36,494 100% (23%)

Income Statement – Segmental Analysis (USD)

17

Attributable Profit

USD 000’s 2010 % Cont 2009 % Cont

% chang

e

BancABC Botswana 1,613 40% 816 16% 98%BancABC

Mozambique 1,932 47% 2,402 48% -20%

BancABC Tanzania 853 21% 231 5% 270

BancABC Zambia 1,092 27% (1,742) -35% 163%

BancABC Zimbabwe 1,067 26% 293 6% 264%Banking

operations 6,556 161% 2,001 40% 228%Head office (2,494) -61% 3,016 60% -183%

TOTAL 4,062 100% 5,017 100% -19%

Income Statement – Net Interest Income

› Positive trend in net interest income driven by increased margins, better liquidity and increased balance sheet size

› Recovering economic environment and improved credit risk management reduced impairments

› Zimbabwe contribution to net interest income growing (12% vs 3% in H1:09) 18

Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 -

50,000

100,000

150,000

200,000

0.0%2.0%4.0%6.0%8.0%10.0%

Net Interest Margin

BWP

'000

Income Statement – Segmental Analysis

19

Net Interest Income

2010 2009 % change

BancABC Botswana 23,076 16,871 37%

BancABC Mozambique 15,575 21,475 (27%)

BancABC Tanzania 22,416 14,189 58%

BancABC Zambia 32,512 32,377 0.4%

BancABC Zimbabwe 18,015 2,630 585%

Banking operations 111,594 87,542 27%Head office 35,221 -8,858 398%

TOTAL 146,815 78,684 87%

Income Statement – Impairments & NPLs

› Trend of impairments and credit loss ratio is declining› Net NPLs covered by collateral› Overall NPLs have now stabilised

20

2006 2007 2008 2009 20100%2%4%6%8%

10%12%

0.0%0.5%1.0%1.5%2.0%2.5%3.0%

NPL and Credit Loss Ratios

Gross NPL ratio Net NPL ratio Credit loss ratio

NPL

ratio

s

Cred

it lo

ss ra

tio

Income Statement – Non-Interest Income

› Bulk of equity investments disposed of in 2009, hence no mark-to-market gains

› Overall quality of non-interest income improving – greater portion of earnings are now recurring

› Trading, fee and commission income increasing whilst gains on equity investments are declining21

Jun-06 Jun-07 Jun-08 Jun-09 Jun-100%

20%40%60%80%

100%

Fees & comms Forex trading Gains on investments FV gains - Inv Prop

Income Statement – Cost to Income Ratio

22

› Cost to income ratio declining with retail costs stabilising and other expenses stabilising in Botswana, Mozambique and Tanzania and declining in Zambia

› Zimbabwe costs up post dollarisation - now normalising; hyper-inflation in the past

› Head office no longer charging management fees from 2009› Retail costs were 13% or BWP27 mill of total expenses (09:10% or BWP18

mill)› Going forward, Retail Banking to contribute positively, decreasing C:I

ratio› Target C:I ratio remains 50%

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

40%50%60%70%80%90%

49% 49% 47% 47% 50%59%

72%82%

77%

Income Statement – Staff Costs

23

› Total head count in 2010 of 612 vs 561 in 2009› Growth in staff numbers in last 12 months mainly

attributable to retail expansion› BancABC Zambia staff numbers declined from 147 in June

2009 to 125 in June 2010 following Microfin merger

Jun 20

06

Dec 20

06

Jun 20

07

Dec 20

07

Jun 20

08

Dec 20

08

Jun 20

09

Dec 20

09

Jun 20

10 -

100 200 300 400 500 600 700

Staff Complement

Wholesale Retail

Retail Banking Capex

24

› Group has incurred bulk of costs on retail roll-out› All IT systems expected to be in place by year end› Incremental capital expenditure to be driven by number of

branches opened in subsequent periods

USD ‘000 BWP ‘000Branch capital expenditure 5,768 40,780Systems roll-out 4,449 31,454Data centre centralisation 3,478 24,589

13,695 96,823

Balance Sheet

25

BWP '000s Jun-2010 Jun-2009%

change Dec-2009Cash and short term funds 717,669 615,471 17% 881,884 Financial assets held for trading 1,423,014 748,819 90% 880,740 Financial assets designated at fair value 4,133 72,033 -94% 17,905 Loans and advances 2,341,744 2,163,487 8% 1,995,325 Property and equipment 302,612 185,245 63% 278,975 Other assets 332,351 298,026 12% 362,916

TOTAL ASSETS 5,121,523 4,083,081 25%

4,417,745

Deposits 4,132,382 2,924,733 41% 3,355,118 Borrowed funds 471,634 553,789 -15% 543,822 Other liabilities 81,101 82,457 -2% 103,026

Total liabilities 4,685,117 3,560,979 32%

4,001,966 Equity attributable to ordinary shareholders 420,189 505,281 -17% 399,069 Minority interest 16,217 16,821 -4% 16,710

Total equity 436,406 522,102 -16%

415,779

TOTAL EQUITY AND LIABILITIES 5,121,523 4,083,081 25%

4,417,745

Balance Sheet (USD)

26

USD '000s Jun-2010 Jun-2009%

change Dec-2009Cash and short term funds 101,514 91,028 12% 132,194Financial assets held for trading 201,285 110,750 82% 132,023Financial assets designated at fair value 585 10,654 -95% 2,684Loans and advances 331,240 319,980 4% 299,099Property and equipment 42,805 27,398 56% 41,818Other assets 47,012 44,079 7% 54,401TOTAL ASSETS 724,441 603,889 20% 662,219

Deposits 584,525 432,568 35% 502,932Borrowed funds 66,713 81,905 -19% 81,519Other liabilities 11,473 12,197 -6% 15,443Total liabilities 662,711 526,670 26% 599,894

Equity attributable to ordinary shareholders 59,436 74,731 -20% 59,820Minority interest 2,294 2,488 -8% 2,505Total equity 61,730 77,219 -20% 62,325TOTAL EQUITY AND LIABILITIES 724,441 603,889 20% 662,219

Balance Sheet – Overview

27

› Deposits up 41% and 23% relative to H109 and H209 respectively› Growth across all the markets› BancABC Zimbabwe had highest rate of growth off a low

base› Loans and advances up 8% and 17% relative to H109 and

H209 respectively› Growth significantly from Zimbabwe as economy stabilised› Cautious approach to lending was exercised in other

markets› Lending in Mozambique constrained by interest rate

movements during the period› Total assets of BWP5.1 billion, an increase of 25% and

16% relative to H109 and H209 respectively,

Balance Sheet – Loans and Advances

28

› BancABC Botswana continued being largest contributor to Group’s loan book

› BancABC Zimbabwe’s contribution grew rapidly on back of economic stability

› Loan book is stable

Bots:28%

Moz:15%Tnz

21%

Zam 11%

Zim 15%

ABCH 10%

Jun-06 Jun-07 Jun-08 Jun-09 Dec-09 Jun-10 -

500 1,000 1,500 2,000 2,500

766 1,084

1,621 2,163 1,995

2,342 Net Loans and Advances

Balance Sheet – Deposits

29

› Growth in deposits across footprint

› Additional funds generated invested mostly in short-term financial instruments

› BancABC Botswana still the largest contributor

› BancABC Zimbabwe’s contribution to deposits growing

Jun-06 Jun-07 Jun-08 Jun-09 Dec-09

Jun-10 -

1,000 2,000 3,000 4,000 5,000

1,380 1,800 2,281

2,925 3,355 4,132

Deposits (BWP m)

Bots 43%

Moz18%

Tnz 19%

Zam 6%Zim14%

Balance Sheet – Capital Adequacy

30

Total capital (BWP m)

Capital Adequacy Ratio

Subsidiary Jun 10 Jun 09 Min 2010 2009BancABC Botswana 166 120 15% 22% 17%BancABC Mozambique 135 157 8% 18% 22%BancABC Tanzania 133 130 12% 14% 12%BancABC Zambia 83 59 10% 30% 14%BancABC Zimbabwe 113 98 10% 14% 31%› All entities are adequately capitalised› Zambia re-capitalised by injection of US $6 mill in

tier II capital and conversion of US $5 mill of existing tier II into tier I capital

OPERATIONAL OVERVIEW

Botswana

› Economy stabilising and is now growing following recovery in diamond prices

› PAT improved 84% to BWP11 mill› Positive performance driven by increased net

interest margins, on a larger balance sheet coupled with reduction in impairment charge

› Non-interest income declined by 22% to BWP17 mill following reduction in forex trading volumes and margins

› Operating expenses were flat on prior year

32

Mozambique

› Economy experienced high volatility in interest and exchange rates during the period

› PAT declined by 24% to BWP13 mill on account of increased tax rate from 16% to 32% following expiry of fiscal benefits

› Interest rate volatility negatively affected interest margins leading to reduction in net interest income by 27% to BWP16 mill

› However, forex trading income increased on the back of increased volume of transactions

› Operating expenses increased by 7% to BWP29 mill in line with retail expansion

33

Tanzania

› High exchange rate volatility experienced towards period end, but economy is stable

› BancABC Tanzania’s liquidity position continued to improve leading to higher net interest income

› Non-interest income also increased 59% to BWP19 mill from increased forex transactions and bond trading

› Impairment charge increased 77% to BWP10 mill following classification of a few but large accounts

› Expenses increased 24% to BWP23 mill mostly from retail expansion related costs

› PAT none-the-less increased 165% to BWP7 mill34

Zambia

› BancABC Zambia has now stabilised and is profitable

› Subsidiary was re-capitalised during the period› Recorded a PAT of BWP7.5 mill compared to a loss

of BWP13 mill in prior year› Impairments declined to BWP3 mill from BWP22

mill in the prior period. › Operating expenses declined by BWP4 mill as a

result of synergies arising out of the merger of the bank and microfinance unit

› Subsidiary is now on strong footing to grow business going forward

35

Zimbabwe

› Economy growing following end of hyper-inflation in Feb 2009

› Subsidiary has been able to grow its income by 195% to BWP59 mill

› Both loans and deposits increased markedly› However, expenses increased 138% to BWP49 mill

largely due to an increase in staff costs› PAT increased 246% to BWP7 mill

36

Retail Banking Update

› Six new branches opened up to half-year– One each in Botswana, Mozambique and Tanzania– Three in Zimbabwe

› Expecting to open a further 8 branches by year-end

› All IT systems to be fully operational by year-end› Retail has started contributing to the Group’s

income stream

37

OUTLOOK

Outlook

39

› Economies generally stable in operating countries› Both Retail and Wholesale units expected to do

well in the second half› Head Office costs continue to be a challenge

although stabilising› Impairments now under control which bodes well

for the Group going forward› Would like to start paying dividends in the near

term

APPENDIX

BancABC PRESENTATION 10 MARCH 2010

Exchange Rate Developments

41

Movement in Exchange Rates vs. the USD (End Period)

Movement in Exchange Rates vs. Botswana Pula (End Period)

Bots Moz Tanz Zam RSABWP/US$

MZN/US$

TZS/US$

ZMK/US$ ZAR/US$

Dec-07

6.01 23.66 1,147 3,845 6.80

Dec-08

7.52 25.09 1,280 4,832 9.36

Dec-09

6.67 27.51 1,326 4,641 7.40

Mar-10

6.79 27.79 1,345 4,704 7.37

Apr-10 6.80 34.16 1,358 4,743 7.34May-10

7.05 33.73 1,390 5,002 7.61

Jun-10 7.06 34.51 1,394 5,156 7.64

Moz Tanz Zam RSABWP/MZN BWP/TZS BWP/ZMK ZAR/BWP

Dec-07 3.94 190.85

639.77 0.88

Dec-08 3.34 170.21

642.55 0.80

Dec-09 4.12 198.80

695.80 0.90

Mar-10 4.09 198.09

692.78 0.92

Apr-10 5.02 199.71

697.50 0.93

May-10 4.78 197.16

709.50 0.93

Jun-10 4.89 197.45

730.31 0.92

Source: BancABC

BancABC PRESENTATION 10 MARCH 2010

Banking Sector Deposits and Loans

42

Banking Sector Total Deposits(US$m)

Banking Sector Loans to the Private Sector (US$m)

Bots Moz Tanz Zam ZimDec-07

5,214 2,460 4,211 2,435 580

Dec-08

5,046 2,835 4,702 2,354 313

Mar-09

4,429 2,754 4,739 2,059 400

Jun-09 5,417 2,931 4,902 2,217 710Sep-09

5,601 3,066 5,300 2,496 970

Dec-09

5,574 3,418 5,476 2,680 1,381

Jan-10 5,462 3,485 5,582 2,663 1,406Feb-10

5,336 3,455 5,608 2,690 1,546

Mar-10

5,461 3,469 5,608 2,783 1,689

Apr-10

5,678 3,004 5,758 2,873 1,752

May-10

5,464 3,024 5,537 2,745 1,832

Bots Moz Tanz Zam ZimDec-07 2,23

61,306 2,594 1,351 99

Dec-08 2,281

1,795 3,559 1,635 140

Mar-09 2,283

1,856 3,498 1,535 118

Jun-09 2,636

1,987 3,585 1,544 267

Sep-09 2,861

2,229 3,675 1,668 455

Dec-09 2,963

2,597 3,763 1,586 636

Jan-10 2,937

2,639 3,732 1,555 759

Feb-10 2,947

2,627 3,759 1,533 802

Mar-10 3,076

2,682 3,810 1,541 940

Apr-10 3,115

2,299 3,929 1,534 937

May-10

2,908

2,363 3,832 1,524 1,012

Source: Respective Central Banks

BancABC PRESENTATION 10 MARCH 2010

Income Statement – Net Interest Margins

43

2006 2007 2008 2009 20100.0%2.0%4.0%6.0%8.0%

10.0%BancABC Mozambique

NIM before impairmentsNIM before impairmentsNIM after impairments

2006 2007 2008 2009 20100.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%

BancABC Tanzania

NIM before impairmentsNIM before impairments

2006 2007 2008 2009 20100.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%

BancABC Botswana

NIM before impairmentsNIM before impairments

2006 2007 2008 2009 20100.0%5.0%

10.0%15.0%20.0%25.0%

BancABC Zambia

NIM before impairmentsNIM before impairments

2006 2007 2008 2009 20100%

10%

20%

30%

40%

BancABC Zimbabwe

NIM before impairmentsNIM before impairments

2006 2007 2008 2009 20100.0%2.0%4.0%6.0%8.0%

10.0%Consolidated

NIM before impairmentsNIM before impairments

BancABC PRESENTATION 10 MARCH 2010

Income Statement – Opex by Operation

44

Botsw

ana

Mozambiq

ue

Tanza

nia

Zambia

Zimba

bwe

Head O

ffice -

10,000

20,000

30,000

40,000

50,000

60,000

Jun-06 Jun-07 Jun-08 Jun-09 Jun-10

BWP

'000