Zanaco-Bank Performance in 2013

Zambia National Commercial Bank Plc
Bank Performance in 2013: A
Presentation to Institutional Investors
Bruce Dick
Managing Director
Zambia National Commercial Bank Plc.
April 2nd, 2014
Contents
Zanaco Overview
Zanaco On A Page
Operating Environment
Zambian Political Economic Overview
Banking Sector Performance
Zanaco Strategic Orientation, Financial Performance, Dividends & Share Price
Strategy On A Page
Financial Performance
Dividends
Share Price & ROI Development
Closing
2
How Well Do You Know Your Bank?
Zanaco on a Page (Past→Present)
 Previously, state-owned; subsequently sold 49% , Management
Rights to Rabobank 2007
 IPO in 2008: Rabobank 46%; Government 25%; ZNFU 3%, Public 26%
 Strong Retail Bank franchise, relatively new Corporate, some Treasury
capabilities
 Largest Bank in Zambia; Top 1 - 3 positions (19 banks)
 # 1: Clients, Distribution, Cards, Total Assets, Deposits
 # 2: Capitalization, Profits; #3: Lending
 Full product range in payments, collections, cash management,
trade, lending, & account services
 First to market; ATM’s, Mobile Banking (Xapit), SMS banking
 Distribution: 64 Branches & Agencies (62in2012), 160 Zanaco Agents (SME Agents)
 Largest customer base: > 750,000; Largest Card base: > 947,000
 170 ATMs and 699 POS terminals
 1,324 employees & 167 Direct Sales Agents; >3,500 shareholders
 2013 PAT: ZMW 186 mn, Equity: ZMW 867 mn, Assets: ZMW 7.0 bn
Source: Internal MIS & IFRS Fin as at 31 Dec
3
Political-Economic Overview
Generally favorable environment but pressure in the short term
Stable political environment
Strong historic macro-economic trends:
 GDP real growth rate 6% (estimate) 2014 GRZ
target >7%
 2013 end of year Inflation was 7.5%; 2014 GRZ
target is <6.5%
 Kwacha under pressure (depreciating trend)
 2013 fiscal deficit high; interest rate trending up
 Agriculture is still key to economic diversification;
focus area for Zanaco
Commission of Inquiry: Update
No further developments on Commission of Inquiry
status
Monthly Cautionary Statements being published as
per LuSE requirements
Recent developments
Kwacha under massive pressure; 13% depreciation in 3 months
MPR up 175 bp (10.25%12.00%)
Statutory reserve ratio increased (9%14%): tightening credit environment to manage inflation
expectations
Suspension of SI 33 & 55 in order to reduce pressure on Kwacha
Source: BOZ
4
Banking Sector Performance
Growing market with CAGR of assets, loans, & deposits in the mid
20%
(Kwacha
(USD million)
million)
41,953
7,656
2013
Total assets
Net Loans & Advances
Deposits
Non-Performing Loan
NPL ratio
Provisions
2012
Total assets
Net Loans &
Advances
Deposits
NonPerforming
Loan
NPL ratio
Provisions
17,884
30,907
1,320
7.0%
206
3,264
5,640
241
7.0%
37.6
(Kwacha
(USD million)
million)
34,276
6,581
16,617
3,190
25,162
4,831
1,246
258
8.1%
126
8.1%
24.2
Strong Industry growth driven by general economic
performance and increasing banking penetration
Industry NPL ratio continue to improve
Source: Bank of Zambia
5
Banking Sector Soundness
Sound banking sector with high upside potential
2006 2007 2008 2009 2010 2011 2012 2013
Capital adequacy
Regulatory capital to risk-weighted assets
20.4% 18.9% 18.6% 22.3% 22.1% 19.2% 19.4% 26.8%
Regulatory Tier 1 capital to risk-weighted assets
18.0% 16.2% 15.7% 18.9% 19.1% 16.8% 19.4% 24.5%
Asset composition and quality
Large loan exposure to regulatory capital
NPLs to gross loans excluding accrued interest
140.8% 133.7% 126.3% 114.0% 134.4% 180.9% 145.0% 97.6%
11.3%
8.8%
7.2% 12.6% 14.8% 10.4%
8.1% 7.0%
5.2%
4.7%
3.6%
3.9% 3.4%
Performance
Return On Assets (ROA)
Return On Equity (ROE)
30.6% 35.1% 20.8%
2.1%
2.5%
3.7%
9.4% 12.1% 25.5% 23.4% 18.2%
Liquidity
Liquid assets to total assets
34.2% 31.3% 34.0% 38.5% 43.7% 40.3% 36.0% 38.9%
Liquid assets to total deposits & short term liabilities
37.5% 38.1% 40.9% 47.0% 52.3% 48.6% 44.4% 49.3%
Source: BOZ
6
Our Strategic Ambitions by 2015
Strategic targets vs. achievements on a page
Customers
✔
✔
✔
✔
Retail
Food and Agriculture
Government
SME’s
1,000,000 customers
# 1 in loans and # 1 in customers
# 1 in share of wallet
25% market share customers, transactions, deposits
(>750,000 Dec ’13)
(# 2 and # 1 Dec ’13)
(# 1 Dec ‘13)
(18 - 22% Dec ‘13 )
Service
✗
Most Improved Bank, based on Customer feedback
(Lagging)
Most Innovative Bank, based on Customer feedback; New Product Development
(To review)
Innovation
Financials
✔
✗
Return on Equity
Cost / Income Ratio
25%
55%
✔
✔
Financial Literacy
Health
50,000 persons trained
Water Projects
CSR
(23.5% Dec’13)
(65% Dec’ 13)
(>35,000 reached)
(>6,000 reached)
Source: Internal MIS
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Distribution
M
Distribution is key to our business model; thus we are present in 89
of the 102 Zambian districts
Zanaco Branches & Agencies; 64
Zanaco ATM’s; 170
Zanaco Xpress (SME Agents); (160)
Source: Internal MIS
8
Financial Performance 2012 vs. 2013
Good financial performance with opportunities to improve efficiency
Financial Highlights
(ZMW Million)
Revenues
Operating expenses
PBT
Impairment
Tax charge/ (credit)
PAT
Deposits
Assets
L & A (net)
Equity
Operational C/ I
Dividend/share in ZMW
EPS in ZMW
ROA
ROE
Actual ‘12 Actual ‘13
720
838
476
542
238
264
6
32
82
78
156
186
4,315
5,522
5,812
6,972
2,639
2,988
713
868
66%
65%
0.005
0.005
0.018
0.022
2.9%
2.9%
24.1%
23.5%
Change
16%
14%
11%
461%
-5%
19%
28%
20%
13%
22%
-2%
3%
20%
-1%
-2%
Revenue 16% up
Impairment higher than normal due to
decision to fully provide for two large
loans; no sector concentration, recoveries
on course
Deposits 28% up
Loans & advances 13% up
Equity 22% up
Cost/Income ratio down but still higher
than desired
ROE on track with our medium term
target of 25%
Source: IFRS Financials as at 31 Dec
9
Key Performance Ratios
Strong funding & capital, but assets need to sweat more
 Asset Quality:
 Non-Performing Loans / Loans:
2012
2013
2.63%
4.4%
 Efficiency:
 Cost / Income Ratio:
 Loans/Deposit Ratio
67.0%
61.0%
65.0%
53.0%
3.0%
24.1%
2.9%
23.5%
 Profitability:
 Return on Average Total Assets:
 Return on Average Equity:
 Capital Adequacy:
 Capital = min 10% of Risk Weighted Assets
19.0%
20.0%
Source: IFRS Financials as at 31 Dec
10
Financial Performance
Stable & sticky funding
 Balance sheet is 82% funded by deposits
(95% in domestic currency)
 Strong savings balances & “sticky”
transaction deposits
 Low cost of funds
 Above the market & sustainable net
interest margins (NIMs)
 Shareholders funds key for further growth
Source: IFRS Financials as at 31 Dec
11
Financial Performance
(cont’d)
Liquid balance sheet directed to support growth in key areas
 Liquid balance sheet
 Primary asset focus in Food & Agriculture & Personal banking
Source: IFRS Financials as at 31 Dec
12
Financial Performance: 7 Years CAGR
Thus demonstrating strong 7 years growth & performance record
Financial Highlights
(ZMW’ million)
Revenues
Operating expenses
PBT
Impairment
Tax charge/ (credit)
PAT
Deposits
Assets
L & A (net)
Equity
Operational C/ I
Dividend/share in ZMW
Normalised
divided/share ZMW
EPS in ZMW
Normalised EPS in ZMW
ROA
ROE
Actual ‘06 Actual ’07
Actual ‘08
242
183
59
19
11
29
1,494
1,706
487
159
76%
0.010
299
234
45
19
-5
51
1,799
2,124
800
202
78%
0.010
399
281
86
32
34
52
2,325
2,915
1,001
322
70%
0.016
0.010
0.030
0.030
2.0%
18.0%
0.010
0.052
0.052
2.7%
28.3%
0.016
0.052
0.052
2.1%
19.8%
Actual ‘09
Actual ‘10
Actual ‘11
Actual ‘12
Actual ‘13
CAGR
497
305
126
66
47
82
2,292
3,042
1,163
398
61%
0.021
568
361
173
34
60
113
2,591
3,520
1,726
477
64%
0.028
626
421
185
20
64
121
3,412
4,717
1,891
583
67%
0.028
720
476
238
6
82
156
4,315
5,812
2,639
713
66%
0.005
838
542
264
32
78
186
5,522
6,972
2,988
868
65%
0.005
19%
17%
24%
8%
32%
30%
21%
22%
30%
27%
-2%
N/A
0.021
0.071
0.071
2.8%
22.8%
0.028
0.098
0.098
3.4%
25.8%
0.028
0.104
0.104
2.9%
22.8%
0.036
0.018
0.135
3.0%
24.1%
0.038
0.022
0.162
2.9%
23.5%
20%
N/A
27%
6%
4%
Source: IFRS Financials as at 31 Dec
13
Future Proofing Profitability-Major Systems Initiatives
Rationale
 Since privatization Zanaco’s business has grown significantly
 As part of improving capacity & business efficiency , we embarked on upgrading our core banking system with a view to;
 Improving system capacity
 Building data validation capabilities in order to prevent common errors in bank records
 Improving customer experience at every customer touch point
 Improving customer interfacing processes
 Improving overall bank efficiency
Status
 We have since invested over US $ 13 million in the project, covering System Upgrade, tier 3 Data Centre, and process
changes/improvements; One of the highest single IT investment in Zambia
 We have built the best Data Centre in Africa; targeted to meet your bank’s future growth ambitions
 What is happening now?
 We migrated to the new core banking platform in January 2014
 We are facing post implementation challenges, which we recognize has adversely affected all our customers in many
ways as they use our banking services
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Future Proofing Profitability-Major Systems Initiatives
(cont’d)
 Has had negative impact on availability of our banking services and functions
 What are we doing about it?
 We have deployed dedicated resources with specific targets to resolve the issues within
the next 4 weeks
 We have on site our system support team, Oracle, to assist us resolve the post
implementation challenges
Going Forward
 What are we promising our stakeholders & customers?
 Improved availability of our banking systems and functions
 Improved and user friendly functionalities
 Improved way of serving our customers
 Improved systems & service reliability
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Dividends & Dividend Decisions
2013 proposed bonus relatively flat. Your bank requires capital to meet growth
aspirations, & maintain suitable level of capital in order to meet regulatory
requirements…..
Impact of
bonus share
issue
* Dividend per share for 2012 & 2013 (ZMW 0.005) is equal to ZMW 0.038 at pre-bonus share issue
(normalised). Bonus share issue rate was 13 new shares for every 2 held `
Source: Financials as at 31 Dec
16
Share Price & ROI Development
……Thus we want to build a strong basis for sustainable future capital growth
and share price performance
Source: SBZ Coverage Report
17
Closing
Thank you for your attention
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Disclaimer
Zambia National Commercial Bank PLC, (hereafter “Zanaco”) has taken all reasonable care to ensure that to the best of its knowledge this presentation is true and correct in
all material respects, does not contain any untrue statement of a material fact, is not misleading and does not omit to state any material fact, the result of which would make
the statements, opinions and intentions herein, in the context in which they are made, misleading in any material respect. This presentation and any other information
supplied is not intended to provide the basis of any evaluation, and should not be considered as a recommendation by Zanaco. Any recipient of this presentation, or of any
other information supplied in connection with this presentation should make its own independent investigation of the financial condition and affairs, and its own appraisal, of
Zanaco, including the merits and risks involved. This presentation does not constitute an offer to sell or the solicitation of an offer to buy any Zambia National Commercial
Bank PLC, ordinary shares in any jurisdiction to any person. Zanaco does not represent that this presentation may lawfully be distributed, or that any Zambia National
Commercial Bank PLC, ordinary shares may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an
exemption available there under, or assumes any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by Zanaco that would
permit a public offering of any Zambia National Commercial Bank PLC ordinary shares or distribution of this document in any jurisdiction where action for that purpose is
required. Accordingly, this presentation may not be re-distributed or re-published in any jurisdiction, except with the express approval of Zanaco.
Forward-looking statements
This presentation may include “forward-looking statements” which include all statements other than statements of historical facts, including, without limitation, those
regarding Zambia National Commercial Bank PLC’s financial position, profit and revenue forecasts, business strategy, plans and objectives of management for future
operations (including development plans and objectives relating to Zambia National Commercial Bank PLC’s products and services) and any statement preceded by, followed
by or that includes the word “projects”, “estimates”, “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could” or “seeks” or any similar
expression or the negative thereof. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other
important factors beyond Zambia National Commercial Bank PLC’s control that could cause the actual results, performance and/or achievements of Zambia National
Commercial Bank PLC, to be materially different from future results, performance and/or achievements expressed or implied by such forward-looking statements. Forecasts or
projections made in this presentation are based on assumptions that may or may not materialize. While such forecasts or projections have been prepared with due care and
objectivity, no representation, warranty or undertaking, express or implied is made and no responsibility is accepted for the reasonableness of any forecast or projection.
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