Investor Presentation 1 Presentation Outline Page 01 - - PowerPoint PPT Presentation

3rd Quarter Ended September 2014 3rd Quarter Ended September 2014

Investor Presentation

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Presentation Outline

Page 01 Introduction of Speakers 3 02 Operating Environment 4 03 Income Statement 5 04 Balance Sheet 6 05 Facts behind the Figures 7 06 Outlook 11

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Speakers

Prince Kofi Amoabeng

Chief Executive Officer

Pearl Esua-Mensah John Ackom

General Manager Wholesale Banking & Investor Relations

Pearl Esua-Mensah

Deputy Managing Director

3

Operating Environment

• Emerging

markets and the Eurozone experienced a slowdown due to geopolitical concerns

• China

also showed signs of softening as the property market downturn negatively affected lending and investment activity

• The US economy however retained momentum in its recovery
• Real GDP growth slowed to 5.3% in the second quarter, compared to 6.5% in

the first quarter ; Provisional GDP growth for 2014 estimated at 6.9% down from a revised 7.6%

GLOBAL

from a revised 7.6%

• Inflation of 16.5% for September, outside the target bandwidth of 9+/- 2%
• The Bank of Ghana’s survey showed a mild improvement in consumer

confidence while business confidence worsened

• S&P downgraded Ghana to B- (negative outlook) from B
• Number of banks increased to 28 with the licensing of First Capital Plus
• Increased competition, particularly in attracting deposits
• Industry continued to view Technology as a key game-changer
• Industry interest rates tread higher on the back of higher Policy and Treasury-

Bill rates

LOCAL INDUSTRY

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Income Statement

……Operating Profit before impairment increased by 44%

161

• 110

66 118

• 76

42

• 30

12 3 9

• 20

40 60 80 100 120 140 160

Interest Income Interest Expense Non-funded Income Operating Income Operating Expenses Profit before Impairment Charges Impairment Charges Profit before Tax Tax Profit after Tax +20% +61% +32% +28% +73% +17% 3%

• 23%

+20% +44% Charges

Key earnings drivers were:

• Increased revenue from alternative business areas
• Restrained growth in interest expenses despite the all-round growth in interest rates in the

industry

• Operating and non-operating cost containment

On the other hand, the following factors negatively impacted our performance

• Slowdown in lending in order to concentrate on improving asset quality
• Fierce competition for cheap deposits, high treasury rates drove interest expense higher
• Difficult economic conditions contributed to rise in Non-performing loans

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Balance Sheet

……total asset growth of 34% year-on-year

GHS’m 3Q14 3Q13 %CHG Assets Net Loans and Advances 1,185 831 43% Investment Securities 123 85 45% Other Assets 229 221 3% Fixed Assets 45 48

• 6%

Total Assets 1,582 1,184 34%

• Loans and advances grew by 43%

largely due to Cedi depreciation

• GHS loan book grew by 15%
• USD loan book 119% (70% of growth

explained by currency depreciation)

• Investments securities grew by 45% due

Key Notes

`

Total Assets 1,582 1,184 34% Liabilities and Shareholders’ Equity Customer Deposits 881 796 11% Short Term Borrowings 312 136 130% Term Debt 214 92 133% Other Liabilities 39 34 15% Shareholders’ Equity 136 127 8%

• Investments securities grew by 45% due

to a conscious effort to improve balance sheet liquidity

• Increase in term debt principally

explained by FX translations;

• Currency depreciation accounted for 67%
• f growth
• received additional funds from the African

Development Bank for trade finance 6

• Lower Fees and commission from loans down by 13%

as the bank slowed down loan disbursement to focus

• n improving asset quality
• The decline was however mitigated by growing

transactional banking income and commission which was up 34% year-on-year

Total Revenue Growth

…Growth in non-funded income essential to overall income growth

20% 51% 10 20 30 40 2013 2014

trade

• thers

Other Operating Income – Exchange Gain

Other Operating Income: Fx gains from trade transactions accounted for ~50% of exchange gain Fee and commission income down by 10% due to: 2013 2014

46% 13% 16% 25%

Loans Transactional banking Money transfer Others

Breakdown in Fees and Commission Income

44% 19% 16% 21%

Loans Transactional banking Money transfer Others 2013 2014 7

Stable cost of funds

……inspite of rising interest rates

23% 21% 19% 24% 24% 12% 12% 11% 12% 12%

0% 10% 20% 30%

3Q2013 4Q2013 1Q2014 2Q2014 3Q2014

91-Day T-Bill UTB Cost of Funds (QTRLY) Cost of funds less volatile than interest rates

3Q2013 4Q2013 1Q2014 2Q2014 3Q2014

Liability mix 2013 2014 % of Total Avg Cost of Funds % of Total Avg Cost of Funds Demand 29% 2% 22% 1% Term Deposits 49% 16% 40% 16% Borrowings 22% 8% 37% 10% 100% 100%

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Cost growth contained

……resulting in reduced cost to income ratio

69% 65%

62% 64% 66% 68% 70%

2013 2014

Cost to Income Ratio Total income growth plus lower growth in expenditure resulted in lower CIR

• Rising indirect staff cost
• Rising establishment costs
• Branch opening costs

– Two new branches opened; in East Legon and Industrial Area

Key contributors to Opex growth

2013 2014

Slowdown in growth of operating expenses despite increasing cost of doing business

36% 44% 20%

0% 10% 20% 30% 40% 50%

2012 2013 2014 OPEX Growth Non-food Inflation Inflation 9

Rising Impairments

……the ripple effect of tough economic conditions

10% 14% 5% 6% 0% 5% 10% 15% 2013 2014

NPL Ratio Cost of risk

Impairments rise as tough economic condition tighten incomes Prudence required us to increase loan loss reserve, by charging extra provisions to the Income Statement 10% 14%

0% 5% 10% 15%

2013 2014 2013 2014 ....Leading to a marginal improvement in profitability 2013 2014 8% 1% 9% 1% 0% 2% 4% 6% 8% 10% ROaE ROaA

2013 2014

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Outlook

• Grow cheap deposits
• On track to meet the target set for 100 for 100,000 promotion
• Harness alternative distribution channels to improve reach
• Grow public sector business

Funding

• Increase trade related businesses
• Strengthen retail banking
• Deploy mobile money platform
• Launch women’s market

Revenue Generation

• Continuous improvement in risk and credit processes
• Strengthen recoveries team
• Raise GHS 100m to strengthen our balance sheet, increase Capital

Adequacy in order to support asset growth

• Sweat the balance sheet to improve profitability
• Improve liquidity

Asset Quality Balance Sheet

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Thank You Thank You

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