19 March 2019 WELCOME Christopher Gilmour INTRODUCTION Roy - PowerPoint PPT Presentation

19 March 2019

WELCOME Christopher Gilmour INTRODUCTION Roy Andersen FINANCIAL REVIEW Angela Pillay PILLAR REVIEWS Michael Sassoon PROSPECTS Michael Sassoon QUESTIONS 2

Christopher Gilmour Investment Analysts Society of South Africa

Roy Andersen Independent Non-Executive Chairman

Angela Pillay Group Financial Director

The following accounting changes have been made: • Adoption of IFRS 9 • We now own approximately 29% of the Efficient Group resulting in the investment being equity accounted 6

Headline earnings growth of 59.89% to R80.531m (Dec 2017: R50.367m) attributable to: • • Impairments: 30.47% improvement Total income: 5.78% increase • • Credit loss ratio improved from 200bps Increased contribution from associate to 123bps income • • Taxation: 36.11% improvement Costs: 12.31% increase following once off tax adjustments in › ATFS costs in the business from April 2018 › Continued investment in the business › Increased bonus provisions › Cost growth anticipated to reduce by year end 7

120 000 R 000 20 722 49 882 100 000 33 275 2 386 80 531 6 513 80 000 17 150 60 000 50 367 40 000 20 000 0 Dec 17 Total Impairments Operating Tax Associates Other Dec 18 headline income costs P/L headline earnings earnings 8

Growth Key indicators Dec 2018 Dec 2017 % ▲ Headline earnings per ordinary share (cents) 250.12 157.56 58.75 ▲ Headline earnings for the period ( R’m ) 59.89 80.531 50.367 ▲ Dividends per ordinary share (cents) 6.33 49.86 46.89 ▲ Total assets ( R’bn ) 13.572 13.159 3.14 ▼ Cash and cash equivalents ( R’bn ) 47.25 1.113 2.110 ▲ Negotiable securities ( R’bn ) 71.02 2.762 1.615 ▲ Gross loans and advances ( R’bn ) 7.455 6.857 8.72 ▲ Total funding base (including prefs) ( R’bn ) 7.80 9.911 9.194 ▲ Deposits from customers ( R’bn ) 3.48 4.491 4.340 ▲ Total equity ( R’bn ) 1.511 1.477 2.30 ▼ Total assets under management and advice (excl admin) ( R’bn ) 5.57 37.219 39.413 ▼ Credit loss ratio (bps) 77 bps 123 200 ▲ Group cost-to-income ratio (%) 73.96 70.40 356 bps ▲ Return on average shareholders' equity (%) 369 bps 10.53 6.84 ▲ Return on average assets (%) 37 bps 1.15 0.78 ▼ Group capital adequacy (%) (unaudited) 16.479 17.657 118 bps 9

Dec 2018 Dec 2017 Growth Financial position - assets R’000 R’000 % ▼ Cash and cash equivalents 1 112 997 2 110 006 47.25 ▲ Negotiable securities 71.08 2 762 151 1 614 519 ▲ Net Loans and advances 7 034 682 6 589 574 6.75 ▼ Trading assets 1 214 157 1 510 965 19.64 Investment securities ▲ 12.21 622 282 554 555 Interest in associates ▲ 109 388 – 100.00 ▼ Other receivables 361 970 455 087 20.46 Investment property, property, plant and equipment, taxation, ▲ 354 440 324 737 9.15 intangible assets and goodwill Total 13 572 067 13 159 443 3.14 10

Dec 2018 Dec 2017 Growth Financial position – liability and equity R’000 R’000 % ▲ Funding under repurchase agreements and interbank 1 914 259 1 175 693 62.82 ▼ Trading liabilities 20.61 1 232 400 1 552 340 ▲ Current taxation liabilities 25 692 23 829 7.82 ▼ Other payables 769 881 775 653 0.74 ▲ Deposits from customers 3.50 4 491 425 4 339 574 ▼ Debt securities issued 2 752 700 3 113 037 11.58 ▲ Long-term loans 564 368 377 605 49.46 ▼ Deferred tax liability 117 632 133 795 12.08 ▲ Total liabilities 11 868 357 11 491 526 3.28 Ordinary share capital and reserves ▲ 1 510 742 1 476 532 2.32 Preference share capital and share premium 188 086 188 086 – ▲ Non-controlling interest 4 882 3 299 47.98 Total liabilities and equity ▲ 3.14 13 572 067 13 159 443 11

Dec 2018 Dec 2017 Growth Financial performance R’000 R’000 % Net interest income 249 397 229 275 Non-interest income 359 157 346 004 ▲ Total income 608 554 575 279 5.78 ▼ Impairment charges on loans and advances (47 275) (67 997) 30.47 ▲ Net income after impairments 561 279 507 282 10.64 Operating costs ▲ (454 933) (405 051) 12.31 ▲ Staff costs (255 288) (219 016) 16.56 ▲ Other operating expenses (193 590) (180 202) 7.43 Goodwill and Intangible asset impairments (6 055) (5 833) ▲ Profit from operations 106 346 102 231 4.03 Share of net profit/(loss) from associates 6 563 50 ▼ Income tax expense 36.11 (30 344) (47 494) Profit for the year 82 565 54 787 Preference shareholders (7 441) (7 682) Non-controlling interest (648) (1 046) Headline adjustable items 6 055 4 308 ▲ Headline earnings 80 531 50 367 59.89 12

180 000 18% 17.00% R 000 14.00% 150 000 15% 12.23% 120 000 12% 10.53% 90 000 9% 6.84% 60 000 6% 30 000 3% 106 137 81 033 86 142 50 367 80 531 0 0% Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Group headline earnings Return on equity (%) 13

800 76% R’m 73.96% 72.08% 72.05% 600 72% 70.92% 70.40% 400 68% 200 64% 0 60% Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Total income Total cost Cost to income ratio 14

8 000 6% R’m 5.63% 7 455 5% 6 857 3.91% 6 403 6 000 5 935 4% 3.44% 2.54% 4 357 4 000 3% 2.52% 2.00% 2% 1.23% 2 000 0.92% 1.21% 1% 0.51% 0 0% Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 • Increase in portfolio provisions, improving Gross loans and advances the coverage ratio to 5.63% (2017: 3.91%) Group credit loss ratio • NPLs have increased by 41.79% Total provisions on total book 15

12 000 R’m 9 911 10 000 9 194 8 174 8 000 7 316 4 491 4 340 5 928 4 056 6 000 3 459 2 979 4 000 2 753 3 113 2 496 2 345 565 1 583 2 000 377 482 486 1 914 590 1 176 952 831 577 0 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Preference shares Funding under repurchase and Interbank Long term funding Debt securities Deposits 16

10 000 25% R’m 21.971% 19.027% 8 000 20% 18.323% 17.657% 16.479% 6 000 15% 12.750% 13.125% 12.375% 12.000% 12.000% 4 000 10% 2 000 5% 5 821 6 851 8 178 8 860 9 658 0 0% Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Risk weighted assets Minimum regulatory (%) Total capital adequacy (%) 17

58.108m 35.644m 25.780m 23.801m (1.039m) (3.494m) (0.284m) (1.164m) Dec 2018 Dec 2017 R82.565m R54.787m Bank pillar Wealth pillar Capital pillar Group services 18

Michael Sassoon Group Chief Executive Officer

• Global markets over the past 12 months have been characterised by pressured US equity markets, partially as a result of rising US interest rates, a continued slowdown in Europe underpinned by the uncertainty around Brexit, and moderate Chinese growth • The South African economy has continued to underperform the rest of the world, with its economic growth outlook having weakened since the 2018 medium-term budget. On the back of a fragile recovery in household spending and moderate fixed investment spending, National Treasury had to revise its GDP growth expectations down to 1.5% for 2019, from its previous estimate of 1.8% in the 2018 National Budget • Sasfin recognises that the South African economy critically needs growth in savings and investment from households on the one hand and growing entrepreneurial businesses on the other 20

• Credit environment remains challenging • Decent revenue growth largely due to growth in Asset Finance via ATFS acquisition and Capital Equipment Finance supported by good revenue growth in Transactional Banking (albeit off a low base) • Limited growth in business finance and foreign exchange • Large improvement in impairments and tax • Costs continue to grow due to investment • Upgraded B\\YOND – digital business banking • Powered Hello Paisa banking • Asset Finance and Foreign Exchange IT projects on track 22

Dec 2018 Dec 2017 Growth Business segments - Bank R’000 R’000 % Total income ▲ 402 782 370 515 8.71 ▼ Impairment charges on loans and advances (44 861) (66 559) 32.60 ▲ Net income after impairments 357 921 303 956 17.75 ▲ Operating costs 16.52 (277 373) (238 046) ▲ Profit before tax 80 548 65 910 22.21 Taxation (22 440) (30 266) ▲ Profit/(loss) for the period 58 108 35 644 63.02 ▲ Gross loans and advances 7 338 813 6 674 716 9.95 23

5 000 R’m 4 000 3 000 2 000 1 000 2 979 3 459 4 056 4 340 4 491 0 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 24